AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2004
DELAWARE 5499 72-1575168
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE REGISTRATION FEE
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8 1/2% Senior Subordinated Notes due 2010.... $215,000,000 100% $215,000,000(1) $27,240.50
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Guarantees related to the 8 1/2% Senior
Subordinated Notes due 2010................ N/A N/A N/A N/A(2)
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(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) promulgated under the Securities Act of 1933, as amended.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATE AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
(continued on next page)
TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL
INCORPORATION OR CLASSIFICATION I.R.S. EMPLOYER
NAME OF ADDITIONAL REGISTRANT* FORMATION CODE NUMBER IDENTIFICATION NO.
------------------------------ ---------------- ------------------- ------------------
General Nutrition Companies, Inc. Delaware 5499 04-3056351
General Nutrition Corporation Pennsylvania 5499 25-1124574
General Nutrition Distribution Company Delaware 5122 51-0343436
General Nutrition Distribution, L.P. Pennsylvania 5122 23-2946511
General Nutrition Government Services, Inc. Delaware 5499 25-1797015
General Nutrition, Incorporated Pennsylvania 5499 25-1027307
General Nutrition Investment Company Arizona 6794 51-0313878
General Nutrition International, Inc. Delaware 6794 51-0314976
General Nutrition Sales Corporation Arizona 5499 52-2103619
General Nutrition Systems, Inc. Delaware 5499 51-0393924
GNC (Canada) Holding Company Delaware 5499 25-1787452
GNC Franchising, LLC
(f/k/a GNC Franchising, Inc.) Pennsylvania 6794 25-1560212
GNC, Limited Delaware 5499 25-1787453
GNC US Delaware, Inc. Delaware 6794 36-4345801
GN Investment, Inc. Delaware 5499 52-2081543
Informed Nutrition, Inc. Florida 5499 52-2005781
Nutra Manufacturing, Inc. (f/k/a Nutricia
Manufacturing USA, Inc.) South Carolina 2834 52-1456779
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* Address and telephone number of principal executive offices are the same as General Nutrition Centers, Inc.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 15, 2004
PROSPECTUS
(GNC LOGO)
GENERAL NUTRITION CENTERS, INC.
OFFER TO EXCHANGE $215,000,000 OF ITS OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
-- , 2004, UNLESS WE EXTEND THE EXCHANGE OFFER IN OUR SOLE AND ABSOLUTE
DISCRETION.
Terms of the exchange offer:
- We will exchange the new notes for all outstanding old notes that are validly tendered and not withdrawn pursuant to the exchange offer.
- You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer.
- The terms of the new notes are substantially identical to those of the outstanding old notes, except that the transfer restrictions and registration rights relating to the old notes will not apply to the new notes.
- The exchange of old notes for new notes will not be a taxable transaction for U.S. federal income tax purposes. You should see the discussion under the heading "Material United Stated Federal Income Tax Considerations" for more information.
- We will not receive any cash proceeds from the exchange offer.
- We issued the old notes in a transaction not requiring registration under the Securities Act, and as a result, transfer of the old notes is restricted. We are making the exchange offer to satisfy your registration rights, as a holder of the old notes.
There is no established trading market for the new notes or the old notes.
Each broker-dealer that receives new notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed, that for a period of 180 days after the consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF RISKS YOU
SHOULD CONSIDER PRIOR TO TENDERING YOUR OUTSTANDING OLD NOTES FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is -- , 2004
TABLE OF CONTENTS
PAGE
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Where You Can Find More Information......... i
Industry and Market Data.................... ii
Trademarks.................................. ii
Forward-Looking Statements.................. ii
Summary..................................... 1
Risk Factors................................ 15
Use of Proceeds............................. 28
Ratio of Earnings to Fixed Charges.......... 28
Capitalization.............................. 29
Selected Consolidated Financial Data........ 30
Unaudited Pro Forma Consolidated Financial
Data...................................... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 36
Business.................................... 52
Management.................................. 70
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PAGE
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Executive Compensation...................... 76
Security Ownership of Certain Beneficial
Owners and Management..................... 80
Certain Relationships and Related Party
Transactions.............................. 82
The Exchange Offer.......................... 83
Description of Senior Credit Facility....... 90
Description of the New Notes................ 91
Material United States Federal Income Tax
Considerations............................ 136
Material ERISA Considerations............... 137
Plan of Distribution........................ 138
Legal Matters............................... 139
Experts..................................... 139
Index to Consolidated Financial
Statements................................ F-1
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In this prospectus, unless the context requires otherwise, "we," "us," "our" or "GNC" refer to General Nutrition Centers, Inc. and its consolidated subsidiaries, and "guarantors" or "subsidiary guarantors" means our subsidiaries that will guarantee the payments due under the new notes as described under the caption "Description of the New Notes." References to "our stores" refer to our company-owned stores and our franchised stores. References to "our locations" refer to our stores and our "store-within-a-store" locations at Rite Aid(R). References to "fiscal" and a particular year herein refer to our fiscal year ended on the last day of December of such year. On December 5, 2003, we acquired 100% of the outstanding equity interests of General Nutrition Companies, Inc. from Numico USA, Inc., a subsidiary of Royal Numico N.V., and merged General Nutrition Companies, Inc. with and into us. The selected financial data for the period from January 1, 2003 to December 4, 2003 represents the period in 2003 that General Nutrition Companies, Inc. was owned by Royal Numico, N.V. The selected financial data for the 27 days ended December 31, 2003 represents the period of operations in 2003 subsequent to the Acquisition.
The "old notes" consisting of the 8 1/2% Senior Subordinated Notes due 2010 that were issued on December 5, 2003 and the "new notes" consisting of the 8 1/2% Senior Subordinated Notes due 2010 offered pursuant to this prospectus are sometimes collectively referred to in this prospectus as the "notes."
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we have filed with the SEC under the Securities Act. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the new notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement.
We are not currently subject to the periodic reporting and other informational requirements of the Exchange Act. The indenture governing the notes requires that we file reports under the Exchange Act with the SEC and furnish information to the trustee and holders of the notes. See "Description of the New Notes -- Covenants -- SEC Reports and Reports to Holders." Information may be obtained from us at 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222, Attention: Chief Legal Officer. To ensure timely delivery, please make your request as soon as practicable and, in any event, no later than five business days prior to the expiration of the exchange offer.
Upon the effectiveness of the registration statement, we will become subject to the information and periodic reporting requirements of the Exchange Act and, accordingly, will file periodic reports and other information with the SEC. Such periodic reports and other information will be available for inspection and copying at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and through the SEC's Internet site at http://www.sec.gov. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
INDUSTRY AND MARKET DATA
This prospectus includes market and industry data that we obtained from industry publications and surveys. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein.
TRADEMARKS
We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. Our service marks and trademarks include the GNC(R) name. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder. Use or display by us of other parties' trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship by us of, the trademark, trade name or service mark owner.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, and other information that is not historical information. Many of these statements appear, in particular, under the headings "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." When used in this prospectus, the words "believes," "anticipates," "plans," "expects," "intends," "estimates," "projects" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but we may not realize our expectations and our beliefs may not prove correct. Important factors that could cause our actual results to differ materially from the forward-looking statements are set forth in this prospectus, including under the heading "Risk Factors" and include, among others:
- the incurrence of material products liability and products recall costs;
- significant competition in our industry;
- unfavorable publicity or consumer perception of our products;
- costs of compliance with governmental regulations;
- our failure to keep pace with the demands of our customers for new products and services;
- the lack of long-term experience with human consumption of some of our products with innovative ingredients;
- increases in the frequency and severity of insurance claims, particularly claims for which we are self-insured;
- the failure of our franchisees to conduct their operations profitably;
- our inability to attract new franchisees or limitations from franchise regulations; and
- economic, political and other risks associated with our international operations.
All forward-looking statements included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this prospectus.
SUMMARY
This summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of the information that you may consider important in making your investment decision, we encourage you to read this entire prospectus, and the documents to which we refer you. Before making an investment decision, you should carefully consider the information set forth under the heading "Risk Factors" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus.
GENERAL NUTRITION CENTERS, INC.
We are the largest global specialty retailer of nutritional supplements, which include sports nutrition products, diet products, vitamins, minerals and herbal supplements (VMHS) and specialty supplements. We derive our revenues principally from product sales through our company-owned stores, franchise activities and sales of products manufactured in our facilities to third parties. We sell products through a worldwide network of 5,745 locations operating under the GNC(R) brand name. The GNC brand name is one of the most widely recognized brands in the nutritional supplements industry. An estimated 84% of the U.S. population recognizes GNC as a source of health and wellness products. Our product mix, which is focused on high-margin, value-added nutritional products, is sold under our GNC proprietary brands, including Pro Performance(R), Total Lean(TM) and Preventive Nutrition(R), and under nationally recognized third-party brands, including Atkins(R), Muscletech(R) and EAS(R).
The following charts illustrate, for the year ended December 31, 2003, the percentage of our net revenues generated by our three business segments and the percentage of our net U.S. retail supplement revenues generated by our four product categories:
NET REVENUES BY SEGMENT NET U.S. RETAIL SUPPLEMENT REVENUES
BY PRODUCT CATEGORY
(PIE CHART) (PIE CHART)
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BUSINESS OVERVIEW
Retail Locations
Our retail network represents the largest specialty retail store network in the nutritional supplements industry. As of December 31, 2003, there were 5,098 GNC locations in the United States and Canada and 647 franchised stores operating in other international locations under the GNC name. Of our U.S. and Canadian locations, 2,748 were company-owned stores, 1,362 were franchised stores and 988 were GNC "store-within-a-store" locations under our strategic alliance with Rite Aid(R). Our retail network in the United States was over nine times larger than that of our nearest specialty retail competitor as of December 31, 2003. Most of our U.S. stores are between 1,000 and 2,000 square feet and are located in shopping malls and strip shopping centers. In the fourth quarter of 2002, we completed a $23.5 million store reset and upgrade program, $6.1 million of which was funded by our franchisees. As a result, many of our stores have a modern and customer-friendly layout and promote our GNC Live Well theme.
Franchise Activities
As of December 31, 2003, we had 1,362 franchised stores in the United States and Canada and 647 international franchised stores. We generate income from franchise activities primarily through product sales to franchisees, royalties on franchise retail sales and franchise fees. To assist our franchisees in the successful operation of their stores and to protect our brand image, we offer a number of services to franchisees including training, site selection, construction assistance and accounting services. We believe that our franchise program enhances our brand awareness and market presence and will enable us to expand our store base internationally with limited capital expenditures by us. We enjoy strong relationships with our franchisees, as evidenced by our franchisee renewal rate of over 98% between 2000 and 2003. Our franchise program has been recognized numerous times by several publications as one of the top franchise programs in the country.
"Store-Within-a-Store" Locations
To increase brand awareness and promote access to customers who may not frequent specialty nutrition stores, we entered into a strategic alliance with Rite Aid to open our GNC "store-within-a-store" locations. As of December 31, 2003, we had 988 stores-within-a-store locations. Through this strategic alliance, we generate revenues from sales to Rite Aid of our products at wholesale prices, the manufacture of Rite Aid private label products and retail sales of consignment inventory. We are Rite Aid's sole supplier for the PharmAssure(R) vitamin brand and a number of Rite Aid private label supplements.
Products
We offer a wide range of high-quality nutritional supplements sold under our GNC proprietary brand names, including Pro Performance, Total Lean and Preventive Nutrition, and under nationally recognized third-party brand names, including Atkins, Muscletech and EAS. Sales of our proprietary brands at our company-owned stores represented approximately 42% of our net retail product revenues for the year ended December 31, 2003. We develop our proprietary products independently at our own facilities and through collaborative efforts with our suppliers. We believe that new products are a key driver of customer traffic and purchases, and we are committed to developing new and innovative products for the nutritional supplements industry. During the year ended December 31, 2003, we launched 37 new proprietary products, and we currently have over 50 new products under development for launch during 2004.
Marketing
We market our proprietary brands of nutritional products through an integrated marketing program that includes television, print and radio media, storefront graphics, direct mailings to members of our Gold Card program and point of purchase materials. Our Gold Card program is a key component of our marketing strategy and entitles members to discount offers and other benefits. With 4.8 million Gold Card members as of December 31, 2003, we believe that our Gold Card program builds customer loyalty and serves to make us a destination retailer. We also benefit from product advertising paid for entirely by third-party vendors that promotes their products and identifies our stores as a place to purchase their products.
Manufacturing and Distribution
With our state-of-the-art manufacturing and distribution facilities supporting our retail stores, we are a low-cost, vertically integrated producer and supplier of high-quality nutritional supplements. We operate two manufacturing facilities in South Carolina and three distribution centers located in Pennsylvania, South Carolina and Arizona. Although we utilize our facilities primarily for the production of our proprietary products that are sold at GNC locations, we have available capacity to produce products for sale to third-party customers. By controlling the production and distribution of our proprietary products, we can protect product quality, monitor delivery times and maintain appropriate inventory levels.
INDUSTRY OVERVIEW
The U.S. nutritional supplements retail industry is large and highly
fragmented, with no single industry participant accounting for more than 10% of
total industry retail sales in 2002. Participants include specialty retailers,
supermarkets, drugstores, mass merchants, multi-level marketing organizations,
mail order and a variety of other smaller channels. The nutritional supplements
sold through these channels are divided into four major product categories:
sports nutrition products, diet products, VMHS and specialty supplements. Most
supermarkets, drugstores and mass merchants have narrow product offerings
limited primarily to simple vitamins and herbs, and their share of the
nutritional supplements market over the last five years has remained relatively
constant.
During the 1990s, our industry underwent a period of rapid expansion. From 1990 to 2002, industry retail sales grew at a compound annual growth rate of 10.0%, with the most rapid growth in the early 1990s. Total retail sales in the industry reached approximately $18.8 billion in 2002 and are estimated to grow at a compound annual growth rate of 3.7% between 2002 and 2008. During this same period, the diet products and specialty supplements categories are estimated to grow at compound annual growth rates of 8.8% and 5.9%, respectively, driving overall industry growth. Additionally, several demographic, healthcare and lifestyle trends are expected to drive the continued growth of the nutritional supplements industry. These trends include:
- Increasing Focus on Fitness: The number of Americans belonging to health clubs has grown 23% from 29.5 million in 1998 to 36.3 million in 2002, according to a 2002 trend report published by the International Health, Racquet & Sportsclub Association. We believe that fitness-oriented consumers are interested in taking sports nutrition products to increase energy, endurance and strength during exercise.
- Increasing Incidence of Obesity: Diet products are growing in popularity. According to a 2002 study by the National Heart, Lung and Blood Institute, 61% of adults ages 20-74 are either overweight or obese. An estimated 46% of adults in the United States are currently dieting, according to a 2003 Gallup Study of Dieting and the Market for Diet Products and Services.
- Aging Population: The average age of the U.S. population is increasing. U.S. Census Bureau data indicates that the number of Americans age 55 or older is expected to increase by 19% from 2003 to 2010. According to a 2001 Simmon Market Research Bureau data report, consumers over the age of 55 are significantly more likely to use VMHS products than younger persons.
- Rising Healthcare Costs and Use of Preventive Measures: Healthcare related costs have increased substantially in the United States. According to a leading healthcare provider, private health insurance premiums increased an average of 13.9% from 2002 to 2003, with an average premium for family coverage of $9,068 in 2003. To reduce medical costs and avoid the complexities of dealing with the healthcare system, many consumers take preventive measures, including alternative medicines and nutritional supplements.
COMPETITIVE STRENGTHS
Our strengths include:
UNMATCHED SPECIALTY RETAIL FOOTPRINT. Our retail network in the United States was over nine times larger than that of our nearest specialty retail competitor at December 31, 2003. The size of our retail network provides us with advantages within the fragmented nutritional supplements industry. For instance, our scale helps us to attract industry-leading vendors to sell their products in our locations, often on a preferred basis. Our extensive retail footprint in established territories also provides us with broad distribution capabilities that are difficult to replicate. Through our multiple store formats located across the United States, large franchise operations and extensive international store base, we are not dependent on any single format or geographic location.
STRONG BRAND RECOGNITION. We have strong brand recognition within the nutritional supplements industry. According to a September 2003 Parker Awareness Tracking Study Report, an estimated 84% of the U.S. population recognized the GNC brand name as a source of health and wellness products. We utilize extensive marketing and advertising campaigns through television, print and radio media, storefront graphics, Gold Card membership communications and point of purchase materials to strengthen our established brand name and reinforce our broad consumer recognition.
EXTENSIVE PRODUCT SELECTION. We offer an extensive mix of brands and products, including approximately 2,100 SKUs across multiple categories. This variety provides our customers with a vast selection of products to fit their specific needs and provides us with an advantage over drugstores, supermarkets and mass merchants who offer a more limited product selection. Our products include powders, bars, tablets, meal replacements, shakes and teas. With a broad range of products, our success does not depend on any one specific product or vendor. During the year ended December 31, 2003, no single product accounted for more than 4.7% of our company-owned store sales.
WELL POSITIONED IN HIGH-GROWTH CATEGORIES. We believe that we are well positioned in the diet products and specialty supplements categories, the two fastest growing categories within the nutritional supplements industry. Although the diet products and specialty supplements categories represent only 26% of the nutritional supplements industry's 2002 retail sales, our sales of products within these categories represented 42% of our net U.S. retail product revenues in 2002. Industry sales of these categories are expected to grow at compound annual growth rates of 8.8% and 5.9%, respectively, from 2002 to 2008, exceeding the overall industry's estimated compound annual growth rate of 3.7% for the same period.
INNOVATIVE NEW PRODUCT DEVELOPMENT. We believe that new products are a key driver of customer traffic and purchases. Interactions with our customers and raw materials vendors help us identify changes in consumer trends that, in turn, influence our development, manufacturing and marketing of new products. Our dedicated development teams conduct extensive market research and formulate new products utilizing scientific methods and third-party product testing. The key areas of our development focus are the diet products category and the specialty supplements category, which includes products that are geared to specific nutritional concerns. During the year ended December 31, 2003, we launched 37 new proprietary products, which generated $38.0 million of our net revenues during this period. We currently have over 50 new products under development for launch during 2004, of which 27 are expected to be diet products or specialty supplements.
GOLD CARD PROGRAM CUSTOMER BASE. Our Gold Card program, with 4.8 million members as of December 31, 2003, has been a core promotional program for over ten years and continues to be a key driver of customer sales. During the year ended December 31, 2003, 56% of U.S. company-owned store sales were generated from purchases by customers using Gold Cards. The Gold Card program also gives us access to a large database of nutritional supplement consumers and allows us to match and analyze consumers' product buying patterns. We cultivate customer loyalty through a combination of discount offers and targeted marketing efforts aimed toward our Gold Card members. We believe that our Gold Card program serves to make us a destination retailer.
VALUE-ADDED CUSTOMER SERVICE. Our sales associates are trained to provide guidance to customers with respect to the broad selection of products sold in GNC stores. We believe this level of customer service provides us with an advantage over supermarkets, drugstores and mass merchants. Our sales associates are prepared to educate customers about product features and direct them to products that will address their specific requests. In 2002, we instituted the "GNC University," an online training program for our sales associates at our company-owned stores and for sales associates at participating franchised locations. We provide additional education and training materials through a monthly newsletter detailing new products and through interactive training modules. We also provide a wide range of nutritional information in numerous forms, including signage, brochures, and touch screen computers enabling customers to make informed purchases.
VERTICALLY INTEGRATED OPERATIONAL CAPABILITIES. Our vertically integrated manufacturing, distribution and retail capabilities differentiate us from many of our competitors. Our state-of-the-art manufacturing facilities
and distribution centers, combined with our retail footprint, enable us to better control costs and protect product quality. We are also able to monitor delivery times and to maintain appropriate inventory levels for our proprietary products by controlling production scheduling and distribution.
EXPERIENCED MANAGEMENT TEAM AND EQUITY SPONSOR. Our senior management team is comprised of experienced retail executives who have, on average, been employed with us for over 15 years. Our equity sponsor is an affiliate of Apollo Management, L.P., which is among the most active private investment firms in the United States and has considerable experience investing in retail companies. In addition, our board of directors is comprised of executives with significant experience in the retail industry. As of February 10, 2004, our senior management and our directors owned approximately 2.3% in the aggregate, and have options to purchase an additional 5.6%, in the aggregate, of the fully diluted common equity of our parent company.
BUSINESS STRATEGY
We have implemented a series of initiatives geared toward improving our operating and financial performance. As part of these initiatives, we have:
- revised pricing through the elimination of BOGO (Buy One Get One half price) and created an every day competitively priced structure to drive customer traffic;
- re-established an independent research and development effort to improve our proprietary product offerings;
- reset and upgraded our stores, creating a more modern and customer-friendly layout;
- improved efficiencies through fixed operating cost reductions and rationalization of our store base; and
- launched ephedra-free products such as Total Lean to capitalize on opportunities in the rapidly growing diet products category.
We believe these initiatives have helped to improve our recent business performance. Our company-owned same store sales increased by 0.1% for the year ended December 31, 2003 and by 11.0% for the three-months ended December 31, 2003. Similarly, U.S. franchised same store sales increased by 0.8% for the year ended December 31, 2003 and by 10.0% for the three-months ended December 31, 2003. We cannot assure you that we will continue to achieve same store sales growth at the levels experienced in the fourth quarter of 2003.
To increase our future revenues and to drive profitability and cash flow generation, we intend to continue to:
- focus on higher-growth categories, such as diet products and specialty supplements;
- forge direct relationships with raw material suppliers and third-party product vendors in order to position ourselves to be first-to-market with new and innovative proprietary and third-party products;
- utilize our extensive customer database to improve customer loyalty, facilitate direct marketing, and increase cross-sell and up-sell opportunities;
- shift our product mix to emphasize higher-margin proprietary products, particularly diet products and specialty supplements;
- close approximately 104 underperforming stores (68 of which have been closed as of March 31, 2004) and aggressively promote nearby stores to maximize revenue transfer;
- increase third-party manufacturing to improve capacity utilization;
- improve inventory management to reduce levels of discontinued inventory and increase inventory turns at both the store and distribution center levels; and
- leverage our strong franchise operations by expanding internationally, which will require limited capital expenditures by us.
THE ACQUISITION
On December 5, 2003, we acquired 100% of the outstanding equity interests of General Nutrition Companies, Inc. from Numico USA, Inc., a subsidiary of Royal Numico N.V., and merged General Nutrition Companies, Inc. with and into us. The aggregate purchase price for the acquisition was $747.4 million, consisting of $733.2 million in cash payable at closing and the assumption of $14.2 million of mortgage indebtedness. Subject to certain limitations, Royal Numico N.V. and Numico USA agreed to indemnify us for losses arising from, among other things, breaches of representations and warranties, breaches of covenants and certain liabilities relating to the business of General Nutrition Companies, Inc. arising prior to the closing date as well as certain losses payable in connection with certain litigation, including claims related to products containing ephedra or Kava Kava sold prior to December 5, 2003. Simultaneously with the closing of the acquisition, we entered into a new senior credit facility with a syndicate of lenders. The senior credit facility consists of a $285.0 million term loan facility and a $75.0 million revolving credit facility. We borrowed the full $285.0 million under the term loan facility to fund a portion of the acquisition purchase price, but made no borrowings under the revolving credit facility. Our obligations under the senior credit facility are guaranteed by our parent company, General Nutrition Centers Holding Company, and our domestic subsidiaries. See "Description of Senior Credit Facility" for a more detailed description of our senior credit facility. We also used the net proceeds from the offering of the old notes to fund a portion of the acquisition purchase price. In addition, our parent company received an equity contribution of $277.5 million in exchange for the issuance of its common and preferred stock and contributed the full amount of the equity contribution to us to fund a portion of the acquisition. Our parent initially issued all of its common stock and preferred stock to GNC Investors, LLC, which we refer to in this prospectus as our equity sponsor, and certain members of our management. Apollo Management V, L.P., an affiliate of Apollo Management, L.P., and other institutional investors own all of the equity interests of our equity sponsor, with Apollo as the controlling holder. GNC Investors subsequently resold all of our parent's preferred stock to other institutional investors. The preferred stock is nonvoting and exchangeable at our parent's option under specified circumstances for its senior subordinated indebtedness, the terms of which are similar to the old notes. In addition, subsequent to the acquisition, our parent sold additional shares of its common stock to certain of our directors and members of our management.
In connection with the acquisition, we closed 68 underperforming stores as of March 31, 2004 and plan to close approximately 36 additional underperforming stores during 2004. The acquisition and related fees and expenses were, and the expenses expected as a result of the store closures will be, financed with the net proceeds from the old notes offering, the initial borrowings under our senior credit facility and the initial equity contribution by our equity sponsor, certain of our directors and members of our management, as described above.
As used in this prospectus, the "Acquisition" refers to the acquisition of General Nutrition Companies, Inc. from Numico USA, Inc. in December 2003 described above.
EQUITY SPONSOR
Our equity sponsor is an affiliate of Apollo Management, L.P. Apollo was founded in 1990 and is among the most active private investment firms in the United States in terms of both number of investment transactions completed and aggregate dollars invested. Since its inception, Apollo has managed the investment of an aggregate of approximately $14 billion in equity capital in a wide variety of industries, both domestically and internationally, and has considerable experience investing in retail companies. As of December 31, 2003, Apollo indirectly owned 73% of the equity interests of our equity sponsor, and other institutional investors and members of our management own the remaining equity interests.
THE EXCHANGE OFFER
Old Notes..................... 8 1/2% Senior Subordinated Notes due 2010,
which we issued December 5, 2003.
New Notes..................... 8 1/2% Senior Subordinated Notes due 2010, the
issuance of which has been registered under the
Securities Act of 1933. The form and the terms
of the new notes are identical in all material
respects to those of the old notes, except that
the transfer restrictions and registration
rights relating to the old notes do not apply
to the new notes.
Exchange Offer................ We are offering to issue up to $215,000,000
aggregate principal amount of the new notes in
exchange for a like principal amount of the old
notes to satisfy our obligations under the
registration rights agreement that we entered
into when the old notes were issued in a
transaction consummated in reliance upon the
exemption from registration provided by Rule
144A under the Securities Act.
Expiration Date; Tenders...... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2004, unless
extended in our sole and absolute discretion.
By tendering your old notes, you represent to
us that:
- you are not our "affiliate," as defined in
Rule 405 under the Securities Act;
- any new notes you receive in the exchange
offer are being acquired by you in the
ordinary course of your business;
- at the time of the commencement of the
exchange offer, neither you nor, to your
knowledge, anyone receiving new notes from
you, has any arrangement or understanding
with any person to participate in the
distribution, as defined in the Securities
Act, of the new notes in violation of the
Securities Act;
- if you are a broker-dealer, you will receive
the new notes for your own account in
exchange for old notes that were acquired by
you as a result of your market making or
other trading activities and that you will
deliver a prospectus in connection with any
resale of the new notes you receive. For
further information regarding resales of the
new notes by participating broker-dealers,
see the discussion under the caption "Plan of
Distribution"; and
- if you are not a participating broker-dealer,
you are not engaged in, and do not intend to
engage in, the distribution of the new notes,
as defined in the Securities Act.
Withdrawal; Non-Acceptance.... You may withdraw any old notes tendered in the
exchange offer at any time prior to 5:00 p.m.,
New York City time, on , 2004. If we
decide for any reason not to accept any old
notes tendered for exchange, the old notes will
be returned to the registered holder at our
expense promptly after the expiration or
termination of the exchange offer. In the case
of the old notes tendered by book-entry
transfer into the exchange agent's account at
The Depository Trust Company, which we
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sometimes refer to in this prospectus as DTC, any withdrawn or unaccepted old notes
will be credited to the tendering holders'
account at DTC. For further information
regarding the withdrawal of the tendered old
notes, see "The Exchange Offer -- Terms of the
Exchange Offer; Period for Tendering Old Notes"
and "The Exchange Offer -- Withdrawal Rights."
Conditions to the Exchange
Offer......................... We are not required to accept for exchange or
to issue new notes in exchange for any old
notes, and we may terminate or amend the
exchange offer if any of the following events
occur prior to our acceptance of the old notes:
- the exchange offer violates any applicable
law or applicable interpretation of the staff
of the Securities and Exchange Commission;
- an action or proceeding shall have been
instituted or threatened in any court or by
any governmental agency that might materially
impair our or our guarantors' ability to
proceed with the exchange offer;
- we do not receive all the governmental
approvals that we believe are necessary to
consummate the exchange offer; or
- there has been proposed, adopted, or enacted
any law, statute, rule or regulation that, in
our reasonable judgment, would materially
impair our ability to consummate the exchange
offer.
We may waive any of the above conditions in our
reasonable discretion. See the discussion below
under the caption "The Exchange
Offer -- Conditions to the Exchange Offer" for
more information regarding the conditions to
the exchange offer.
Procedures for Tendering Old
Notes......................... Unless you comply with the procedure described
below under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures," you
must do one of the following on or prior to the
expiration or termination of the exchange offer
to participate in the exchange offer:
- tender your old notes by sending the
certificates for your old notes, in proper
form for transfer, a properly completed and
duly executed letter of transmittal and all
other documents required by the letter of
transmittal, to U.S. Bank National
Association, as exchange agent, at one of the
addresses listed below under the caption "The
Exchange Offer -- Exchange Agent"; or
- tender your old notes by using the book-entry
transfer procedures described below and
transmitting a properly completed and duly
executed letter of transmittal, or an agent's
message instead of the letter of transmittal,
to the exchange agent. In order for a
book-entry transfer to constitute a valid
tender of your old notes in the exchange
offer, U.S. Bank National Association, as
exchange agent, must receive a confirmation
of book-entry transfer of your old notes into
the exchange agent's account at DTC prior to
the expiration or termination of the exchange
offer. For more information regarding the use
of book-entry transfer procedures, including
a description of the required
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agent's message, see the discussion below
under the caption "The Exchange
Offer -- Book-Entry Transfers."
Guaranteed Delivery
Procedures.................... If you are a registered holder of old notes and
wish to tender your old notes in the exchange
offer, but
- the old notes are not immediately available;
- time will not permit your old notes or other
required documents to reach the exchange
agent before the expiration or termination of
the exchange offer; or
- the procedure for book-entry transfer cannot
be completed prior to the expiration or
termination of the exchange offer;
then you may tender old notes by following
the procedures described below under the
caption "The Exchange Offer -- Guaranteed
Delivery Procedures."
Special Procedures for
Beneficial Owners............. If you are a beneficial owner whose old notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your old notes in the
exchange offer, you should promptly contact the
person in whose name the old notes are
registered and instruct that person to tender
them on your behalf. If you wish to tender in
the exchange offer on your own behalf, prior to
completing and executing the letter of
transmittal and delivering your old notes, you
must either make appropriate arrangements to
register ownership of the old notes in your
name, or obtain a properly completed bond power
from the person in whose name the old notes are
registered.
Material United States Federal
Income Tax Considerations..... The exchange of the old notes for new notes in
the exchange offer will not be a taxable
transaction for United States federal income
tax purposes. See the discussion below under
the caption "Material United States Federal
Income Tax Considerations," for more
information regarding the United States federal
income tax consequences to you of the exchange
offer.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer.
Exchange Agent................ U.S. Bank National Association is the exchange
agent for the exchange offer. You can find the
address and telephone number of the exchange
agent below under the caption, "The Exchange
Offer -- Exchange Agent."
Resales....................... Based on interpretations by the staff of the
SEC, as set forth in no-action letters issued
to third parties, we believe that the new notes
issued in the exchange offer may be offered for
resale, resold or otherwise transferred by you
without compliance with the registration and
prospectus delivery requirements of the
Securities Act as long as:
- you are acquiring the new notes in the
ordinary course of your business;
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- you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate,
in a distribution of the new notes; and
- you are not an affiliate of ours.
If you are an affiliate of ours, are engaged in
or intend to engage in or have any arrangement
or understanding with any person to participate
in the distribution of the new notes:
(1) you cannot rely on the applicable
interpretations of the staff of the SEC;
and
(2) you must comply with the registration
requirements of the Securities Act in
connection with any resale transaction.
Each broker or dealer that receives new notes
for its own account in exchange for old notes
that were acquired as a result of market-
making or other trading activities must
acknowledge that it will comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any offer, resale, or other
transfer of the new notes issued in the
exchange offer, including information with
respect to any selling holder required by the
Securities Act in connection with any resale of
the new notes.
Furthermore, any broker-dealer that acquired
any of its old notes directly from us:
- may not rely on the applicable interpretation
of the staff of the SEC's position contained
in Exxon Capital Holdings Corp., SEC
no-action letter (April 13, 1988), Morgan,
Stanley Co. Inc., SEC no-action letter (June
5, 1991) and Shearman Sterling, SEC no-
action letter (July 2, 1983); and
- must also be named as a selling noteholder in
connection with the registration and
prospectus delivery requirements of the
Securities Act relating to any resale
transaction.
Broker-Dealers................ Each broker-dealer that receives new notes for
its own account pursuant to the exchange offer
must acknowledge that it will deliver a
prospectus in connection with any resale of
such new notes. The letter of transmittal
states that by so acknowledging and delivering
a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
prospectus, as it may be amended or
supplemented from time to time, may be used by
a broker-dealer in connection with resales of
new notes received in exchange for old notes
which were received by the broker-dealer as a
result of market making or other trading
activities. We have agreed that for a period of
up to 180 days after the consummation of this
exchange offer, we will make this prospectus
available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution" beginning on page 137 for more
information.
Registration Rights
Agreement..................... When we issued the old notes in December 2003,
we entered into a registration rights agreement
with the initial purchasers of the
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old notes. Under the terms of the registration
rights agreement, we agreed to:
- cause the exchange offer registration
statement to be filed with the Securities and
Exchange Commission on or prior to 150 days
after the closing date of the offering of the
old notes;
- use all commercially reasonable efforts to
have the exchange offer registration
statement declared effective no later than
250 days after the closing date of the
offering;
- use all commercially reasonable efforts to
consummate the exchange offer within 30
business days after the date on which the
exchange offer registration statement is
declared effective;
- use all commercially reasonable efforts to
file a shelf registration statement for the
resale of the old notes if we cannot effect
an exchange offer within the time periods
listed above and in certain other
circumstances; and
- if we fail to meet our registration
obligations, we will pay liquidated damages
in an amount equal to 0.25% per annum of the
principal amount of old notes held by a
holder for each day that we default on our
registration obligations, increasing by an
additional 0.25% per annum of the principal
amount of old notes for each subsequent
90-day period our registration obligations
are not met, up to a maximum of liquidated
damages equal to 1.00% per annum of the
principal amount of old notes.
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RISK FACTORS
Investing in the notes involves a number of material risks. For a discussion of certain risks that should be considered in connection with an investment in the notes, see "Risk Factors" included elsewhere in this prospectus.
ADDRESS AND TELEPHONE NUMBER
Our principal executive office is located at 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222, and our telephone number is (412) 288-4600.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your old notes in the exchange offer, you will continue to be subject to the restrictions on transfer described in the legend on the certificate for your old notes. In general, you may offer or sell your old notes only:
- if they are registered under the Securities Act and applicable state securities laws;
- if they are offered or sold under an exemption from registration under the Securities Act and applicable state securities laws; or
- if they are offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.
We do not currently intend to register the old notes under the Securities Act. Under some circumstances, however, holders of the old notes, including holders who are not permitted to participate in the exchange offer or who may not freely sell new notes received in the exchange offer, may require us to file, and to cause to become effective, a shelf registration statement covering resales of the old notes by these holders. For more information regarding the consequences of not tendering your old notes and our obligations to file a shelf registration statement, see "The Exchange Offer -- Consequences of Exchanging or Failing to Exchange Old Notes" and "Description of New Notes -- Registration Rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes and those of the outstanding old notes are substantially identical, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes. For a more complete understanding of the new notes, see "Description of New Notes" in this prospectus.
Issuer........................ General Nutrition Centers, Inc.
Securities Offered............ $215,000,000 in aggregate principal amount of
8 1/2% Senior Subordinated Notes due 2010.
Maturity Date................. December 1, 2010.
Interest Payment Dates........ June 1 and December 1 of each year, commencing
June 1, 2004.
Guarantees.................... The new notes will be fully and unconditionally
guaranteed on a senior subordinated basis by
all of our existing and future material
domestic subsidiaries. Our foreign subsidiaries
and our immaterial domestic subsidiaries have
not guaranteed the old notes and will not
guarantee the new notes. Our non-guarantor
subsidiaries accounted for less than 4.6% of
our net revenues for the year ended December
31, 2003, and less than 5.2% of our total
assets as of December 31, 2003. See
"Description of the New Notes -- Guarantees."
Ranking....................... The old notes are, and the new notes will be,
unsecured senior subordinated obligations.
Accordingly, they will be:
- subordinated in right of payment to all of
our and the guarantors' existing and future
senior debt, including indebtedness under our
senior credit facility;
- equal in right of payment to our and the
guarantors' existing and future senior
subordinated debt;
- senior in right of payment to all of our and
the guarantors' existing and future
subordinated debt; and
- structurally subordinated to all obligations
of our non-guarantor subsidiaries.
In addition, as of December 31, 2003, we and
our subsidiaries had an aggregate of $299.2
million of secured indebtedness outstanding
(excluding $5.4 million of letters of credit,
$4.4 million of which were cash collateralized)
and an additional $74.0 million available for
borrowing on a secured basis under our senior
credit facility, after giving effect to the use
of $1.0 million of the revolving credit
facility to secure letters of credit. In the
event that our secured creditors exercise their
rights with respect to our pledged assets, the
proceeds of the liquidation of those assets
will first be applied to repay obligations
secured by the first priority liens and then to
repay other secured indebtedness before any
unsecured indebtedness, including the notes, is
repaid. For more information on the ranking of
the new notes, see "Description of the New
Notes -- Ranking."
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Optional Redemption........... On or after December 1, 2007, we may redeem
some or all of the notes at the redemption
prices set forth under "Description of the New
Notes -- Optional Redemption."
Prior to December 1, 2006, we may redeem up to
35% of the aggregate principal amount of the
notes issued in this offering with the net
proceeds of certain equity offerings at the
redemption price set forth under "Description
of the New Notes -- Optional Redemption."
Offer to Purchase............. If we experience a change of control or we or
any of our restricted subsidiaries sell certain
assets, we may be required to offer to purchase
the notes at the prices set forth under
"Description of the New Notes -- Certain
Covenants -- Change of Control" and
"-- Limitation on Sales of Assets."
Covenants..................... The indenture governing the old notes will also
govern the new notes. The indenture limits our
ability and the ability of the guarantors to:
- incur additional indebtedness and issue
preferred stock;
- make restricted payments;
- allow restrictions on the ability of certain
subsidiaries to make distributions;
- sell assets;
- enter into certain transactions with
affiliates; and
- create liens.
Each of the covenants is subject to a number of
important exceptions and qualifications. See
"Description of the New Notes -- Certain
Covenants."
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RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before tendering your old notes in the exchange offer. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment.
RISKS RELATING TO THE NOTES
SOME HOLDERS WHO EXCHANGE THEIR OLD NOTES MAY BE DEEMED TO BE UNDERWRITERS, AND THESE HOLDERS WILL BE REQUIRED TO COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS IN CONNECTION WITH ANY RESALE TRANSACTION.
If you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.
THERE IS NO ESTABLISHED TRADING MARKET FOR THE NEW NOTES, AND YOU MAY FIND IT DIFFICULT TO SELL YOUR NEW NOTES.
There is no existing trading market for the new notes. We do not intend to apply for listing or quotation of the new notes on any exchange. Therefore, we do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be, nor can we make any assurances regarding the ability of new note holders to sell their new notes, the amount of new notes to be outstanding following the exchange offer or the price at which the new notes might be sold. As a result, the market price of the new notes could be adversely affected.
HOLDERS WHO FAIL TO EXCHANGE THEIR OLD NOTES WILL CONTINUE TO BE SUBJECT TO RESTRICTIONS ON TRANSFER.
If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or are offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. Furthermore, we have not conditioned the exchange offer on receipt of any minimum or maximum principal amount of old notes. As old notes are tendered and accepted in the exchange offer, the principal amount of remaining outstanding old notes will decrease. This decrease will reduce the liquidity of the trading market of the old notes. We cannot assure you of the liquidity, or even the continuation, of the trading market for the outstanding notes following the exchange offer. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions "The Exchange Offer -- Consequences of Exchanging or Failing to Exchange Old Notes" and "Material United States Federal Income Tax Considerations."
YOU MUST COMPLY WITH THE EXCHANGE OFFER PROCEDURES IN ORDER TO RECEIVE NEW, FREELY TRADABLE NOTES.
Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following:
- certificates for old notes or a book-entry confirmation of a book-entry transfer of old notes into the exchange agent's account at DTC, New York, New York as a depository, including an agent's message if the tendering holder does not deliver a letter of transmittal;
- a completed and signed letter of transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message in lieu of the letter of transmittal; and
- any other documents required by the letter of transmittal.
Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time or the procedure for book entry transfer to be completed prior to the expiration or termination of the exchange offer. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the Registration Rights Agreement will terminate. See "The Exchange Offer -- Procedures for Tendering Old Notes" and "The Exchange Offer -- Consequences of Exchanging or Failing to Exchange Old Notes."
As used in this prospectus, the term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant stating that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce such letter of transmittal against such participant.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES AND OTHERWISE ADVERSELY IMPACT OUR BUSINESS AND GROWTH PROSPECTS.
As of December 31, 2003, our total indebtedness was approximately $514.2 million (of which $215.0 million consisted of the old notes, $285.0 million consisted of borrowings under our senior credit facility (excluding $5.4 million of letters of credit, $4.4 million of which were cash collateralized) and approximately $14.2 million consisted of other secured indebtedness) and we had an additional $74.0 million available for borrowing on a secured basis under our senior credit facility after giving effect to the use of $1.0 million of the revolving credit facility to secure letters of credit.
Our substantial indebtedness could have important consequences to you. For example, it could:
- require us to use all or a large portion of our cash to pay principal and interest on the notes, our senior credit facility and our other indebtedness, which could reduce the availability of our cash to fund working capital, capital expenditures and other business activities;
- increase our vulnerability to general adverse economic and industry conditions;
- limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
- restrict us from making strategic acquisitions or exploiting business opportunities;
- make it more difficult for us to satisfy our obligations with respect to the notes;
- place us at a competitive disadvantage compared to our competitors that have less debt; and
- limit our ability to borrow additional funds, dispose of assets or pay cash dividends.
Furthermore, all of our indebtedness under our senior credit facility bears interest at variable rates. If these rates were to increase significantly, our ability to borrow additional funds may be reduced and the risks related to our substantial indebtedness would intensify. See "Description of Senior Credit Facility."
If we are unable to meet our indebtedness obligations, we could be forced to restructure or refinance our obligations, seek equity financing or sell assets. We may be unable to restructure or refinance these obligations, obtain equity financing or sell assets in a timely manner on terms satisfactory to us or at all. If we are unable to restructure or refinance our obligations, we may default under our obligations. Upon an
acceleration of such indebtedness, we may not be able to make payments under our indebtedness, including the notes.
ABILITY TO SERVICE DEBT -- WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures, product development efforts and other business activities, will depend on our ability to generate cash in the future. This is subject, to a certain extent, to general economic, financial, competitive, legislative, regulatory and other factors, many of which are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule, or that future borrowings will be available to us under our senior credit facility or otherwise in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. If we do not have sufficient liquidity, we may need to refinance or restructure all or a portion of our indebtedness, including the notes, 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.
ABILITY TO INCUR ADDITIONAL INDEBTEDNESS -- DESPITE OUR AND OUR SUBSIDIARIES' CURRENT SIGNIFICANT LEVEL OF INDEBTEDNESS, WE MAY STILL BE ABLE TO INCUR MORE INDEBTEDNESS.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although our senior credit facility and the indenture governing the notes each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, indebtedness incurred in compliance with these restrictions could be substantial. For example, as of December 31, 2003, approximately $74.0 million was available for additional borrowings under our senior credit facility, after giving effect to the use of $1.0 million of the revolving credit facility to secure letters of credit, all of which were secured and senior to the notes. If additional indebtedness is added to our or our subsidiaries' current levels of indebtedness, the substantial risks described above would intensify.
THE NOTES ARE UNSECURED -- THE NOTES AND THE GUARANTEES ARE OUR AND THE GUARANTORS' GENERAL UNSECURED OBLIGATIONS. IF OUR OR THE GUARANTORS' SECURED CREDITORS EXERCISE THEIR RIGHTS WITH RESPECT TO OUR PLEDGED ASSETS, THE PROCEEDS OF THE LIQUIDATION OF THOSE ASSETS WILL FIRST BE APPLIED TO REPAY OBLIGATIONS SECURED BY THE FIRST PRIORITY LIENS AND THEN TO REPAY OTHER SECURED INDEBTEDNESS BEFORE ANY UNSECURED INDEBTEDNESS, INCLUDING THE NOTES, IS REPAID.
The notes and the guarantees are general unsecured obligations. As of December 31, 2003, we and our subsidiaries had an aggregate of $299.2 million of secured indebtedness outstanding (excluding $5.4 million of letters of credit, $4.4 million of which were cash collateralized), including indebtedness outstanding under our senior credit facility, which was secured by liens on substantially all of our assets and the assets of the guarantors. In the event that our secured creditors exercise their rights with respect to the pledged assets, the proceeds of the liquidation of those assets will first be applied to repay obligations secured by first priority liens and then to repay other secured indebtedness before any unsecured indebtedness, including the notes, is repaid. Holders of the notes will participate ratably in our remaining assets with all holders of our unsecured indebtedness deemed to be of the same class as the notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes. As a result, holders of notes may receive less, ratably, than holders of secured indebtedness. In addition, we and the guarantors may incur additional secured indebtedness in the future. Depending on the amount of our future secured indebtedness, including borrowings under our senior credit facility, the availability of our assets to satisfy our payment obligations on the notes may be further limited.
NOTES AND GUARANTEES ARE JUNIOR TO EXISTING DEBT -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS.
The notes and the guarantees rank behind all of our and the guarantors' existing indebtedness (other than trade payables) and all of our and their future borrowings (other than trade payables), except any future indebtedness that expressly provides that it ranks equal with, or subordinated in right of payment to, the notes and the guarantees. As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of our senior indebtedness and of the guarantors' senior indebtedness will be entitled to be paid in full before any payment may be made with respect to the notes or the guarantees.
In addition, all payments on the notes and the guarantees will be blocked in the event of a payment default on senior indebtedness and may be blocked for up to 179 of 360 consecutive days in the event of certain non-payment defaults on senior indebtedness.
In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors, holders of the notes will participate with trade creditors and all other holders of our and the guarantors' subordinated indebtedness in the assets remaining after we and the guarantors have paid all of our senior indebtedness in full. However, because the indenture governing the notes requires that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid to holders of senior indebtedness instead, holders of the notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, we and the guarantors may not have sufficient funds to pay all of our creditors, and holders of notes may receive less, ratably, than the holders of our senior indebtedness.
As of December 31, 2003, the old notes and the guarantees were subordinated to $299.2 million of senior indebtedness (excluding $5.4 million of letters of credit, $4.4 million of which were cash collateralized) and approximately $74.0 million of senior indebtedness was available for borrowing under our senior credit facility, after giving effect to the use of $1.0 million of the revolving credit facility to secure letters of credit. We will be permitted to borrow substantial additional indebtedness, including senior indebtedness, in the future under the terms of the indenture.
NOT ALL SUBSIDIARIES ARE GUARANTORS -- BECAUSE THE NOTES ARE STRUCTURALLY SUBORDINATED TO THE INDEBTEDNESS OF OUR NON-GUARANTOR SUBSIDIARIES, YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE.
Holders of notes do not have any claim as creditors of our subsidiaries that are not guarantors of the notes. None of our foreign subsidiaries or future immaterial subsidiaries will guarantee the notes. The notes are structurally subordinated to any existing and future preferred stock, indebtedness and other liabilities of any of our subsidiaries that do not guarantee the notes. This is so even if such obligations do not constitute senior indebtedness. In addition, subject to limitations, the indenture permits our non-guarantor subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities that may be incurred by these subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of preferred stock, indebtedness and other liabilities will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. In addition, the ability of the non-guarantor subsidiaries to pay dividends or distributions to us is subject to applicable local laws, tax laws and other restrictions.
HOLDING COMPANY -- WE ARE A HOLDING COMPANY AND THEREFORE DEPEND ON OUR SUBSIDIARIES TO SERVICE OUR DEBT.
We have no direct operations and no significant assets other than the stock
of our subsidiaries. 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 the notes. 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.
The
earnings from, or other available assets of, these operating subsidiaries may not be sufficient to make distributions to enable us to pay interest on our debt obligations, including the notes, when due or the principal of such debt at maturity.
LIMITATIONS UNDER OUR INDEBTEDNESS -- OUR INDEBTEDNESS IMPOSES RESTRICTIONS ON US THAT MAY AFFECT OUR ABILITY TO SUCCESSFULLY OPERATE OUR BUSINESS AND OUR ABILITY TO MAKE PAYMENTS ON THE NOTES.
The senior credit facility and the indenture governing the notes include certain covenants that, among other things, restrict our ability to:
- incur additional indebtedness and issue preferred stock;
- make restricted payments;
- allow restrictions on the ability of certain subsidiaries to make distributions;
- sell assets;
- enter into certain transactions with affiliates; and
- create liens.
We are also required by our senior credit facility to maintain certain financial ratios, including, but not limited to, fixed charge coverage and maximum total leverage ratios. All of these covenants may restrict our ability to expand or to fully pursue our business strategies. Our ability to comply with these and other provisions of the indenture and the senior credit facility 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 indebtedness, which could cause those and other obligations to become due and payable. If we default under indebtedness that is senior to the notes, we could be prohibited from making payments with respect to the notes until the default is cured or all indebtedness that is senior to the notes is paid in full. If any of our indebtedness is accelerated, we may not be able to repay it.
FUNDING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon certain "change of control" events, as that term is defined in the indenture, 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 and liquidated damages, if any, to the date of repurchase. The source of funds for any such repurchase would be our available cash or cash generated from operations or other sources, including borrowings, sales of equity or funds provided by a new controlling person or entity. We cannot assure you that sufficient funds will be 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 indenture, which could lead to a cross-default under the terms of our senior credit facility and our other indebtedness. In addition, our senior credit facility will prohibit us from making any such required repurchases, and any future senior indebtedness may contain similar prohibitions. Accordingly, prior to repurchasing the notes upon a change of control event, we must either repay outstanding indebtedness under our senior credit facility and such future indebtedness or obtain the consent of the lenders thereunder. If we were unable to obtain the required consents or repay our outstanding indebtedness that is senior to the notes, we would remain effectively prohibited from offering to repurchase the notes. See "Description of the New Notes -- Change of Control." We cannot assure you that we would be able to refinance or obtain consents on terms acceptable to us or at all.
FRAUDULENT TRANSFER MATTERS -- UNDER CERTAIN CIRCUMSTANCES, A COURT COULD CANCEL THE NOTES OR THE GUARANTEES OF OUR SUBSIDIARIES. THE SUBSIDIARY GUARANTEES MAY NOT BE ENFORCEABLE.
Our issuance of the notes and the issuance of the guarantees by certain of our subsidiaries may be subject to review under federal or state fraudulent transfer law. If we become a debtor in a case under the
United States Bankruptcy Code or encounter other financial difficulty, a court might avoid (that is, cancel) our obligations under the notes. The court might do so if it found that, when we issued the notes, (a) we received less than reasonably equivalent value or fair consideration, and (b) we either (i) were or were rendered insolvent, (ii) were left with inadequate capital to conduct our business, or (iii) believed or reasonably should have believed that we would incur debts beyond our ability to pay. The court might also avoid the notes, without regard to factors (a) and (b), if it found that we issued the notes with actual intent to hinder, delay, or defraud our creditors.
Similarly, if one of our subsidiaries who guarantees the notes becomes a debtor in a case under the Bankruptcy Code or encounters other financial difficulty, a court might cancel its guarantee, if it found that when the subsidiary issued its guarantee (or in some jurisdictions, when payments became due under the guarantee), factors (a) and (b) above applied to the subsidiary, or if it found that the subsidiary issued its guarantee with actual intent to hinder, delay, or defraud its creditors.
A court would likely find that neither we nor any subsidiary guarantor received reasonably equivalent value or fair consideration for incurring our obligations under the notes and guarantees unless we or the subsidiary guarantor benefited directly or indirectly from the notes' issuance. In other instances, courts have found that an issuer did not receive reasonably equivalent value or fair consideration if the proceeds of the issuance were used (as here) to finance the Acquisition, although we cannot predict how a court would rule in this case.
The test for determining solvency for purposes of the foregoing will vary depending on the law of the jurisdiction being applied. In general, a court would consider an entity insolvent either if the sum of its existing debts exceeds the fair value of all its property, or if its assets' present fair saleable value is less than the amount required to pay the probable liability on its existing debts as they become due. For this analysis, "debts" includes contingent and unliquidated debts.
The indenture limits the liability of each subsidiary guarantor on its guarantee to the maximum amount that the subsidiary can incur without risk that the guarantee will be subject to avoidance as a fraudulent transfer. We cannot assure you that this limitation will protect the guarantees from fraudulent transfer attack or, if it does, that the remaining amount due and collectible under the guarantees would suffice, if necessary, to pay the notes when due.
If a court avoided our obligations under the notes and the obligations of all the subsidiary guarantors under their guarantees, you would cease to be our creditors or creditors of the guarantors and likely have no source from which to recover amounts due under the notes.
Even if the guarantee of a subsidiary guarantor is not avoided as a fraudulent transfer, a court may subordinate the guarantee to that subsidiary guarantor's other debt. In that event, the guarantees would be structurally subordinated to all the subsidiary guarantor's other debt.
VOLATILITY -- THE TRADING PRICE OF THE NOTES MAY BE VOLATILE.
Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. Any such disruptions could adversely affect the prices at which you may sell your notes. In addition, the new notes may trade at a discount from the initial offering price of the old notes, depending on prevailing interest rates, the market for similar notes, our performance and other factors.
RISKS RELATING TO OUR BUSINESS AND OPERATIONS
PRODUCTS LIABILITY -- WE MAY INCUR MATERIAL PRODUCTS LIABILITY AND PRODUCTS RECALL COSTS.
As a retailer, distributor and manufacturer of products designed for human consumption, we are subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of vitamins, minerals, herbs and other ingredients that are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. We have in the past, and may in the future
be, subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. For example, as of March 15, 2004, we have been named as a defendant in 100 cases involving the sale of products that contain ephedra. In early 2003, we instructed all of our locations to stop selling products containing ephedra that were manufactured by GNC or one of our affiliates. Subsequently, we instructed all of our locations to stop selling any products containing ephedra by June 30, 2003. Sales of products containing ephedra amounted to approximately $35.2 million, or 3.3% of our retail sales, in 2003 and approximately $182.9 million, or 17.1% of our retail sales, in 2002. In addition, although we maintain quality controls and procedures with respect to products we manufacture, our products could contain contaminated substances. Many of the products we sell are produced by third-party manufacturers. As a distributor of products manufactured by third parties, we may also be liable for various products liability claims for products we do not manufacture even though we have no control over the manufacturing procedures used in connection with the production of these third-party products.
We maintain products liability insurance. However, such insurance may not continue to be available at a reasonable cost, or, if available, may not be adequate to cover liabilities. We generally seek to obtain contractual indemnification from parties that supply raw materials for our products or manufacture or market products we sell, and to be added as an additional insured under such parties' insurance policies. In connection with the Acquisition, we are also entitled to indemnification by Royal Numico, N.V. and Numico USA, Inc. for certain losses arising from all claims related to products containing ephedra or Kava Kava. Any such indemnification or insurance is limited by its terms and any such indemnification, as a practical matter, is limited to the creditworthiness of the indemnifying party and its insurer. If we do not have adequate insurance or contractual indemnification, product liabilities relating to our products could have a material adverse effect on our business, financial condition and results of operations. See "Business -- Legal Proceedings."
In addition, the Food and Drug Administration ("FDA") may take action with respect to any of our products that it deems fall within its jurisdiction. These actions could require us to change our product labeling or remove a particular product from the market. Any future recall or removal would result in additional costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. We cannot predict whether the FDA will take action with respect to any of our products and any such product recalls or removals could adversely affect our business, financial condition and results of operations.
COMPETITION -- WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.
The U.S. nutritional supplements retail industry is a large, highly fragmented and growing industry, with no single industry participant accounting for more than 10% of total industry retail sales. Participants include specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations and a variety of other smaller channels. In addition, the market is highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the market. In the United States, our VMHS products compete for sales with supermarkets, drugstores and mass merchants and with heavily advertised national brands manufactured by large pharmaceutical companies, as well as the Nature's Bounty(R) and Nature's Wealth brands, sold by Vitamin World(R). Our international competitors also include large international pharmacy chains, major international supermarket chains and other large U.S.-based companies with international operations. Our wholesale and manufacturing operations also compete with other wholesalers and manufacturers of third-party nutritional supplements.
Increased competition from companies that distribute through retail or
wholesale channels could have a material adverse effect on our financial
condition and results of operations. Such companies may have greater financial
and other resources available to them and possess manufacturing, distribution
and marketing capabilities greater than ours. Certain of our competitors may
have significantly greater financial, technical and marketing resources than we
do. In addition, our competitors may be more effective and efficient in
integrating new products. We may not be able to compete effectively and any of
the factors listed above may cause price reductions, reduced margins and losses
of our market share.
EFFECT OF UNFAVORABLE PUBLICITY -- UNFAVORABLE PUBLICITY OR CONSUMER PERCEPTION OF OUR PRODUCTS AND ANY SIMILAR PRODUCTS DISTRIBUTED BY OTHER COMPANIES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
We are highly dependent upon consumer perception regarding the safety and quality of our products, as well as similar products distributed by other companies. Consumer perception of products can be significantly influenced by scientific research or findings, national media attention and other publicity about product use. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less favorable or that questions such earlier research or publicity could have a material adverse effect on our ability to generate revenues. Adverse publicity in the form of published scientific research or otherwise, whether or not accurate, that associates consumption of our products or any other similar products with illness or other adverse effects, that questions the benefits of our or similar products or that claims that any such products are ineffective could have a material adverse effect on our financial condition and results of operations. Adverse publicity could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products appropriately.
GOVERNMENT REGULATION -- COMPLIANCE WITH GOVERNMENTAL REGULATIONS MAY IMPOSE ADDITIONAL COSTS.
The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products may be subject to regulation by one or more federal agencies, including the FDA, the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission, the United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which our products are sold. The FDA may attempt to regulate any of our products that it deems fall within its jurisdiction. The FDA may not accept the evidence of safety for any new ingredients that we may want to market, may determine that a particular product or product ingredient presents an unacceptable health risk, may determine that a particular statement of nutritional support that we want to use is an unacceptable drug claim or an unauthorized version of a "health claim," or the FDA or the FTC may determine that particular claims are not adequately supported by available scientific evidence. See "Business -- Government Regulation -- Product Regulation." Such a determination might prevent us from marketing particular products or using certain statements of nutritional support on our products. One of the key areas of our development focus is the specialty supplements category, which includes products that are directed at particular nutritional concerns. The FDA may not agree with our statements of nutritional support as to a particular specialty supplement or permit us to promote our specialty supplements directed at particular nutritional concerns. In addition, we may be unable to disseminate third-party literature in connection with our products if the third-party literature fails to satisfy certain requirements. Although the regulation of dietary supplements is in some respects less restrictive than the regulation of drugs, dietary supplements may not continue to be subject to less restrictive regulation. Further, if more stringent statutes are enacted for dietary supplements, or if more stringent regulations are promulgated, we may not be able to comply with such statutes or regulations without incurring substantial expense, or at all.
In addition, we expect that the FDA soon will adopt the proposed rules on good manufacturing practice in manufacturing, packaging, or holding dietary ingredients and dietary supplements, which may apply to the products we manufacture. These regulations would require dietary supplements to be prepared, packaged and held in compliance with certain rules, and may require quality control provisions similar to those in the good manufacturing practice regulations for drugs. If the FDA adopts the good manufacturing practice regulations, we may not be able to comply with the new rules without incurring additional expenses.
The FTC exercises jurisdiction over the advertising of dietary supplements. In the past, the FTC has instituted numerous enforcement actions against dietary supplement companies, including us, for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. These enforcement actions have often resulted in consent decrees and the payment of civil penalties by the companies involved. We are currently subject to three consent decrees that limit our ability to make certain claims with respect to our products and required us to pay civil penalties. See "Business -- Government Regulation -- Product Regulation." Our policy is to use advertising that complies with the consent decrees and applicable regulations. Nevertheless, inadvertent failures to comply with the consent
decrees and applicable regulations may occur from time to time. Violations of these orders could result in substantial monetary penalties, which could have a material adverse effect on our financial condition or results of operations.
We are also subject to regulation under various state, local, and international laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of our products that are deemed "dietary supplements" or "over-the-counter drugs." Government regulations in foreign countries may prevent or delay the introduction, or require the reformulation, of certain of our products.
In addition, from time to time in the future, Congress, the FDA, the FTC or other federal, state, local or foreign legislative and regulatory authorities may impose additional laws or regulations that apply to us, repeal laws or regulations that we consider favorable to us or impose more stringent interpretations of current laws or regulations. We are not able to predict the nature of such future laws, regulations, repeals or interpretations or to predict the effect additional governmental regulation, when and if it occurs, would have on our business in the future. Such developments could, however, require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, or other new requirements. Any such developments could have a material adverse effect on our business, financial condition and results of operations.
DEMAND FOR NEW PRODUCTS -- OUR FAILURE TO KEEP PACE WITH THE DEMANDS OF OUR CUSTOMERS FOR NEW PRODUCTS AND SERVICES COULD SIGNIFICANTLY HARM OUR BUSINESS.
The nutritional supplement industry we serve is characterized by rapid and frequent changes in demand for products and new product introductions. Some of our competitors may invest more heavily in research and/or product development than we do. The success of our new product offerings depends upon a number of factors, including our ability to:
- accurately anticipate customer needs;
- innovate and develop new products;
- successfully commercialize new products in a timely manner;
- price our products competitively and manufacture and deliver our products in sufficient volumes and on time; and
- differentiate our product offerings from those of our competitors.
If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could become obsolete, in which case our customer relationships, revenues, and operating results would suffer.
LIMITED HUMAN EXPERIENCE -- SOME OF OUR PRODUCTS CONTAIN INNOVATIVE INGREDIENTS FOR WHICH THERE IS LITTLE LONG-TERM EXPERIENCE WITH HUMAN CONSUMPTION.
Some of our products contain innovative ingredients which do not have long histories of human consumption. There may be little long-term experience with human consumption of certain of these innovative product ingredients. Our products may not have the effects intended. Previously unknown adverse reactions resulting from the long-term human consumption of these ingredients could occur. Any negative effect alleged to result from use of one of our products could result in decreased sales and product liability claims, any of which could have a material adverse effect on our business, financial condition and results of operations.
INSURANCE -- WE SELF-INSURE FOR A SIGNIFICANT PORTION OF OUR CLAIMS EXPOSURE, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Our future insurance and claims expense could materially adversely affect our results of operations. We face an inherent risk of exposure to product liability claims in the event that, among other things, the use of our products results in injury. We carry product liability insurance coverage that involves self-insured retentions with primary and excess liability coverage above the retention amount. We also self insure certain property and casualty risks due to the frequency and severity of a loss, the cost of insurance, the availability of the insurance in the market, and the overall risk analysis. Because of our self-insured retention amounts, we have significant exposure to fluctuations in the number and severity of claims. If there is an increase in the frequency and severity of claims, or if we are required to accrue or pay additional amounts because the claims prove to be more severe than originally assessed, our profitability would be adversely affected.
We maintain insurance with licensed insurance carriers above the amounts for which we self-insure. Since September 2001, insurance carriers have been raising premiums for many businesses, including nutritional supplement retailers. Prior to the Acquisition, we received insurance coverage for many of our insurance policies from Numico USA, Inc. As a result of the consummation of the Acquisition, we were required to obtain our own insurance policies including policies for general products liability. While our deductibles for products liability were historically $50,000, our deductibles/retentions have increased to $1 million per claim. As a result, our insurance and claims expense could increase in the future. Alternatively, we could raise our deductible/retention, which would increase our already significant exposure to expense from claims. If these expenses increase, our financial condition and results of operations could be materially adversely affected.
If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts. Any such claim could materially and adversely affect our financial condition and results of operations.
DEPENDENCE ON PROFITABLE FRANCHISE OPERATIONS -- A SUBSTANTIAL AMOUNT OF OUR REVENUES ARE GENERATED FROM OUR FRANCHISEES AND OUR REVENUES COULD DECREASE SIGNIFICANTLY IF OUR FRANCHISEES DO NOT CONDUCT THEIR OPERATIONS PROFITABLY OR WE FAIL TO ATTRACT NEW FRANCHISEES.
As of December 31, 2003, approximately 35% of our retail locations were operated by franchisees. Our revenues from franchised stores depend on the franchisees' ability to operate their stores profitably and adhere to our franchise standards. The closing of unprofitable stores or the failure of franchisees to comply with our policies could adversely affect our reputation and could reduce the amount of our franchise revenues. This could have a material adverse effect on our financial condition and results of operations.
If we are unable to attract new franchisees or to convince existing franchisees to open additional stores, any growth in royalties from franchised stores will depend solely upon increases in revenues at existing franchised stores, which could be minimal. In addition, our ability to open additional franchised locations is limited by the territorial restrictions in our existing franchise agreements as well as our ability to identify additional markets in the United States and Canada that are not currently saturated with the products we offer. If we are unable to open additional franchised locations, we will have to sustain additional growth internally by attracting new and repeat customers to our existing locations. If we are unable to do so, our revenues may decline significantly and have a material adverse effect on our business, financial condition and results of operations.
FRANCHISE REGULATION -- WE ARE SUBJECT TO FRANCHISE REGULATION.
We are subject to federal and state laws regulating the offer and sale of
franchises. These laws impose registration and extensive disclosure requirements
on the offer and sale of franchises. These laws frequently apply substantive
standards to the relationship between franchisor and franchisee and limit the
ability of a franchisor to terminate or refuse to renew a franchise. State
franchise laws may delay or prevent us from terminating a franchise or
withholding consent to renew or transfer a franchise. We may, therefore, be
required to retain an underperforming franchise and may be unable to replace the
franchisee, which could
have an adverse effect on franchise revenues. In addition, the nature and effect of any future legislation or regulation on our franchise operations cannot be predicted.
INTERNATIONAL RISKS -- ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
As of December 31, 2003, 6.2% of our revenues was derived from our international operations. Our international operations are subject to a number of risks inherent to operating in foreign countries. These risks include, among others:
- political and economic instability of foreign markets;
- foreign governments' restrictive trade policies;
- inconsistent product regulation or sudden policy changes by foreign agencies or governments;
- the imposition of, or increase in, duties, taxes, government royalties or non-tariff trade barriers;
- difficulty in collecting international accounts receivable and potentially longer payment cycles;
- increased costs in maintaining international franchise and marketing efforts;
- exchange controls;
- problems entering international markets with different cultural bases and consumer preferences; and
- fluctuations in foreign currency exchange rates.
All of these risks are beyond our control. We cannot predict the nature and the likelihood of any such events. However, if such an event should occur, it could have a material adverse effect on our business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL -- THE SUCCESS OF OUR BUSINESS DEPENDS ON THE SERVICES OF OUR KEY PERSONNEL.
We depend on the continued services of our key executive officers. The loss of any of these officers or other management personnel could result in inefficiencies in our operations, lost business opportunities or the loss of one or more customers.
RELIANCE ON SUPPLIERS -- WE RELY ON CERTAIN SUPPLIERS FOR RAW MATERIALS AND OTHER PRODUCTS AND ARE VULNERABLE TO FLUCTUATIONS IN THE AVAILABILITY AND PRICE OF SUCH RAW MATERIALS AND PRODUCTS.
We purchase certain raw materials and third-party products from third-party suppliers and vendors. Our suppliers and vendors may not provide the raw materials or third-party products needed by us in the quantities requested, in a timely manner, or at a price we are willing to pay. In the event any of our third-party suppliers or vendors were to become unable or unwilling to continue to provide the important raw materials and third-party products in the required volumes and quality levels or in a timely manner, we would be required to identify and obtain acceptable replacement supply sources. We may not be able to obtain alternative suppliers and vendors on a timely basis, or at all, which could result in lost sales because of our inability to manufacture products containing such raw materials or deliver products we sell from certain suppliers. If such an event should occur, it could have a material adverse effect on our business, financial condition and results of operations. In addition, we expect that the FDA may soon adopt the good manufacturing practice regulations. Our suppliers and vendors may be subject to, and may not be able to comply with, these regulations. Even if they are able to comply with these regulations, their compliance may increase the cost of certain raw materials and third-party products.
CLOSELY HELD COMPANY -- WE ARE CONTROLLED BY OUR EQUITY SPONSOR, AN AFFILIATE OF APOLLO MANAGEMENT, L.P., AND CERTAIN OF OUR DIRECTORS AND MEMBERS OF OUR MANAGEMENT, WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS.
Our equity sponsor, an affiliate of Apollo Management, L.P., and certain of our directors and members of our management beneficially own all of the outstanding common equity on a fully diluted basis of our parent, General Nutrition Centers Holding Company, and as a result, are in a position to control all matters affecting us. The interests of our equity sponsor, its respective affiliates and certain of our directors and members of our management could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might conflict with your interests as a noteholder. Equity holders may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments even though such transactions might involve risks to you as a noteholder.
RELIANCE ON MANUFACTURING OPERATIONS -- WE RELY ON OUR MANUFACTURING OPERATIONS TO PRODUCE THE PRODUCTS WE SELL, AND WE COULD BE ADVERSELY AFFECTED BY DISRUPTIONS IN OUR MANUFACTURING SYSTEM.
During the year ended December 31, 2003, our manufacturing operations produced approximately 32% of the products we sold. Other than powders and liquids, nearly all of our proprietary products are produced in our manufacturing facilities. Any significant disruption in those operations for any reason, such as power interruptions, fires, hurricanes, war or other force majeure, could adversely affect our sales and customer relationships and therefore adversely affect our business.
INTELLECTUAL PROPERTY -- IF WE FAIL TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS MAY PRODUCE AND MARKET PRODUCTS SIMILAR TO OURS. IN ADDITION, WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY LITIGATION AND INFRINGEMENT CLAIMS BY THIRD PARTIES.
Our ability to compete effectively is dependent upon the proprietary nature of the trademarks, designs, processes, technologies and materials owned by, used by or licensed to us. Although we attempt to protect such trademarks and other proprietary properties, both in the United States and in foreign countries through a combination of trademark, patent and trade secret laws and non-disclosure agreements, these may be insufficient. In addition, because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our products may not receive the same degree of protection in foreign countries as they would in the United States. Although we have trademarks and patents issued or licensed to us for our products, we may not always be able to successfully protect or enforce our trademarks and patents against competitors, or against challenges by others. For example, a third party is currently challenging our right to register in the United States certain marks that incorporate our GNC Live Well trademark. Also, some of our products are covered by patents to which we have a non-exclusive license from Royal Numico, N.V. These patents have also been licensed to two of our competitors. We cannot guarantee that these competitors will not introduce competitive products.
In addition, we may be subject to intellectual property litigation and
infringement claims, which could cause us to incur significant expenses or
prevent us from selling our products. A successful claim of trademark, patent or
other intellectual property infringement against us could adversely affect our
growth and profitability, in some cases materially. Others may claim that our
proprietary or licensed products are infringing their intellectual property
rights, and our products may infringe those intellectual property rights. From
time to time, we receive notices from third parties of potential infringement
and receive claims of potential infringement. We may be unaware of intellectual
property rights of others that may cover some of our technology or products. If
someone claims that our technology or products infringe their intellectual
property rights, any resulting litigation could be costly and time consuming and
would divert the attention of management and key personnel from other business
issues. The complexity of the technology involved and the uncertainty of
intellectual property litigation increase these risks. Claims of intellectual
property infringement also may require us to enter into costly royalty or
license agreements. However, we may be unable to obtain royalty or license
agreements on terms acceptable to us or at all. We also may be subject to
significant damages or injunctions preventing us from manufacturing, selling or
using some aspect of our
products in the event of a successful claim of patent or other intellectual property infringement. Any of these adverse consequences could have a material adverse effect on our business and profitability.
RISKS RELATED TO THE ACQUISITION
ACQUISITION RISKS -- WE MAY INCUR ADDITIONAL EXPENSES AS A STAND-ALONE ENTITY AS A RESULT OF THE ACQUISITION AND DID NOT SEEK CERTAIN CONSENTS THAT WERE REQUIRED TO BE GIVEN IN CONNECTION WITH THE ACQUISITION.
We now operate as a stand-alone entity. We had not previously operated as a stand alone entity since our acquisition by Numico in 1999. As a result, we may incur additional expenses. If we are not able to transition into a stand-alone entity successfully or if we significantly underestimate these expenses, our business may be adversely affected.
In connection with the Acquisition, many of the consents that were required to be obtained and notices that were required to be given under the terms of our commercial and other contracts were not sought, obtained or given. Our failure to obtain such consents or give such notices could have a material adverse effect on our financial condition and results of operations.
POTENTIAL GOODWILL WRITEDOWN -- IF WE WERE REQUIRED TO WRITE DOWN ALL OR PART OF OUR GOODWILL, OUR NET INCOME AND NET WORTH COULD BE MATERIALLY ADVERSELY AFFECTED.
As a result of the Acquisition, we have $83.1 million of goodwill recorded on our consolidated balance sheet as of December 31, 2003. Under accounting principles generally accepted in the United States of America, we are not permitted to amortize goodwill. Instead, we are required to periodically determine if our goodwill has become impaired, in which case we would write down the impaired portion of our goodwill. If we are required to write down all or part of our goodwill, our consolidated income and stockholders' equity could be materially adversely affected.
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. Any old notes that are properly tendered and exchanged pursuant to the exchange offer will be retired and cancelled.
RATIO OF EARNINGS TO FIXED CHARGES
We have calculated the ratio of earnings to fixed charges by dividing earnings by fixed charges. For the purpose of computing the ratio of earnings to fixed charges, "earnings" is defined as (loss) income before income taxes and fixed charges. "Fixed charges" consist of interest cost whether expensed or capitalized, amortization of debt expense and the portion of rental expense (approximately one-third) that we believe to be representative of the interest factor in those rentals.
PERIOD FROM 27 DAYS
YEAR ENDED DECEMBER 31, JANUARY 1, 2003 ENDED
------------------------------------------------------------------------ TO DECEMBER 4, DECEMBER 31,
1999 2000 2001 2002 2003 2003
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
--(1) --(1) --(1) --(1) --(1) 1.11
|
(1) Earnings were insufficient to cover fixed charges by $12.8 million in the period ended August 7, 1999, $20.8 million in the period ended December 31, 1999, and by $175.4 million, $70.0 million, $70.2 million and $759.4 million for the years ended December 31, 2000, 2001, 2002 and the period ended December 4, 2003, respectively.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2003. The table below should be read in conjunction with "Unaudited Pro Forma Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Senior Credit Facility" and our consolidated financial statements and related notes included elsewhere in this prospectus.
AS OF
DECEMBER 31,
2003
(IN MILLIONS) ------------
Debt:
Revolving credit facility(1)................................ $ 0.0
Term loan facility.......................................... 285.0
Assumed mortgage debt(2).................................... 14.2
------
Total senior debt(3)..................................... 299.2
Senior subordinated notes................................... 215.0
------
Total debt........................................... 514.2
Stockholders' equity:
Common stock, $0.01 par value, 1,000 shares authorized,
100 shares issued and outstanding...................... --
Paid-in-capital........................................... 277.5
Retained earnings......................................... 0.4
Accumulated other comprehensive income.................... 0.3
------
Total stockholders' equity........................... 278.2
------
Total capitalization............................ $792.4
======
|
(1) As of December 31, 2003, the total availability under our revolving credit facility was $74.0 million, after giving effect to $1.0 million of the revolving credit facility that was utilized to secure letters of credit.
(2) In connection with the Acquisition, we assumed a $14.2 million loan that is secured by a mortgage on our corporate headquarters.
(3) Excludes $5.4 million of letters of credit outstanding as of December 31, 2003 under existing facilities, of which $4.4 million is cash collateralized. $1.0 million of the revolving credit facility was utilized to secure $1.0 million of letters of credit. See note 9 to the consolidated financial statements included elsewhere in this prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the period from: (i) February 7, 1999 to August 7, 1999 and as of August 7, 1999, and (ii) August 8, 1999 to December 31, 1999 and as of December 31, 1999 is derived from our unaudited consolidated financial statements not included in this prospectus. The selected financial data for the period from February 7, 1999 to August 7, 1999 represents the period in 1999 prior to the purchase of General Nutrition Companies, Inc. by Royal Numico, N.V. The selected financial data for the period from August 8, 1999 to December 31, 1999 represents the period in 1999 that General Nutrition Companies, Inc. was owned by Royal Numico, N.V.
The selected consolidated financial data presented below as of and for the year ended December 31, 2000 is derived from our audited consolidated financial statements and accompanying notes not included in this prospectus. The selected consolidated financial data presented below as of and for the years ended December 31, 2001 and 2002 is derived from our audited consolidated financial statements and accompanying notes included elsewhere in this prospectus. The selected financial data as of and for the years ended December 31, 2000, 2001 and 2002 represents calendar years during which General Nutrition Companies, Inc. was owned by Royal Numico, N.V.
The selected consolidated financial data presented below for (i) the period from January 1, 2003 to December 4, 2003 and as of December 4, 2003, and (ii) the 27 days ended December 31, 2003 and as of December 31, 2003 is derived from our audited consolidated financial statements and accompanying notes that are included elsewhere in this prospectus. The selected financial data for the period from January 1, 2003 to December 4, 2003 represents the period in 2003 that General Nutrition Companies, Inc. was owned by Royal Numico, N.V. The selected financial data for the 27 days ended December 31, 2003 represents the period of operations in 2003 subsequent to the Acquisition.
You should read the following information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus.
PREDECESSOR SUCCESSOR
PERIOD ----------------------------------------------------------- ------------
FROM PERIOD FROM PERIOD FROM
FEBRUARY 7, AUGUST 8, JANUARY 1, 27 DAYS
1999 TO 1999 TO YEAR ENDED DECEMBER 31, 2003 TO ENDED
AUGUST 7, DECEMBER 31, ------------------------------ DECEMBER 4, DECEMBER 31,
1999 1999 2000 2001 2002 2003 2003
(DOLLARS IN MILLIONS) ----------- ------------ -------- -------- -------- ----------- ------------
STATEMENT OF INCOME DATA:
Revenue:
Retail......................... $ 513.1 $ 376.3 $1,075.7 $1,123.1 $1,068.6 $ 993.3 $ 66.2
Franchising.................... 134.0 98.4 273.4 273.1 256.1 241.3 14.2
Manufacturing/Wholesale (Third
Party)....................... 62.8 51.3 96.3 112.9 100.3 105.6 8.9
-------- -------- -------- -------- -------- --------- --------
Total revenues............... 709.9 526.0 1,445.4 1,509.1 1,425.0 1,340.2 89.3
Cost of sales, including costs of
warehousing, distribution and
occupancy...................... 525.5 361.8 953.2 1,013.4 969.9 934.9 63.6
-------- -------- -------- -------- -------- --------- --------
Gross profit................. 184.4 164.2 492.2 495.7 455.1 405.3 25.7
Compensation and related
benefits....................... 117.0 67.6 231.8 246.6 245.2 235.0 16.7
Advertising and promotion........ 31.6 21.9 47.2 41.9 52.0 38.4 0.5
Other selling, general and
administrative................. 23.8 40.7 146.1 140.7 86.0 70.9 5.1
Other expense (income)(1)........ -- -- 99.9 (3.4) (216.3) (10.1) --
Impairment of goodwill and
intangible assets(2)........... -- -- -- -- 222.0 709.4 --
-------- -------- -------- -------- -------- --------- --------
Operating income (loss)........ 12.0 34.0 (32.8) 69.9 66.2 (638.3) 3.4
Interest expense, net............ (24.8) (54.8) (142.6) (139.9) (136.4) (121.1) (2.8)
-------- -------- -------- -------- -------- --------- --------
(Loss) income before income
taxes.......................... (12.8) (20.8) (175.4) (70.0) (70.2) (759.4) 0.6
Income tax benefit (expense)..... 16.7 4.5 25.3 14.1 (1.0) 174.5 (0.2)
-------- -------- -------- -------- -------- --------- --------
Net income (loss) before
cumulative effect of accounting
change......................... 3.9 (16.3) (150.1) (55.9) (71.2) (584.9) 0.4
Loss from cumulative effect of
accounting change, net of
tax(3)......................... -- -- -- -- (889.6) -- --
-------- -------- -------- -------- -------- --------- --------
Net income (loss)(4)............. $ 3.9 $ (16.3) $ (150.1) $ (55.9) $ (960.8) $ (584.9) $ 0.4
======== ======== ======== ======== ======== ========= ========
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PREDECESSOR SUCCESSOR
PERIOD ----------------------------------------------------------- ------------
FROM PERIOD FROM PERIOD FROM
FEBRUARY 7, AUGUST 8, JANUARY 1, 27 DAYS
1999 TO 1999 TO YEAR ENDED DECEMBER 31, 2003 TO ENDED
AUGUST 7, DECEMBER 31, ------------------------------ DECEMBER 4, DECEMBER 31,
1999 1999 2000 2001 2002 2003 2003
(DOLLARS IN MILLIONS) ----------- ------------ -------- -------- -------- ----------- ------------
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 2.1 $ 20.3 $ 10.5 $ 16.3 $ 38.8 $ 9.4 $ 33.2
Working capital(5)............... 178.1 365.5 215.2 140.8 153.6 96.2 200.0
Total assets..................... 1,151.8 3,357.9 3,216.5 3,071.8 1,878.3 1,038.1 1,018.9
Total debt....................... 851.2 1,968.4 1,892.1 1,883.3 1,840.1 1,747.4 514.2
Stockholder's equity and
deficit........................ 112.9 667.1 523.1 469.0 (493.8) (1,077.1) 278.2
STATEMENT OF CASH FLOW DATA:
Net cash provided by operating
activities..................... 100.0 75.8 111.0 92.9 4.7
Net cash used in investing
activities..................... (42.0) (48.1) (44.5) (31.5) (740.0)
Net cash (used in) provided by
financing activities........... (66.9) (21.6) (44.3) (90.8) 759.2
OTHER DATA:
Number of stores (at end of
period):
Company-owned stores(6)........ 2,721 2,793 2,842 2,960 2,898 2,757 2,748
Franchised stores(6)........... 1,522 1,584 1,718 1,821 1,909 1,978 2,009
Licensed stores(6)............. 157 311 544 780 900 988 988
Domestic Company-owned "same
store" sales growth(7)....... (1.1)% 1.8% 6.5% 1.7% (6.6)% (0.4)% 9.2%
International Company-owned
"same store" sales
growth(8).................... 11.4%(8) 11.5%(8) 18.2% 24.7% 1.2% (0.4)% 8.8%
Domestic Franchised "same
store" sales growth(9)....... 4.3% 5.4% 3.9% 3.4% (3.2)% 0.2% 10.5%
EBITDA(10)....................... $ 52.1 $ 55.0 $ 91.8 $ 192.0 $ (765.4) $ (579.2) $ 5.7
Capital expenditures(11)......... $ 63.6 $ 38.4 $ 31.6 $ 29.2 $ 51.9 $ 31.0 $ 1.8
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(1) Other expense for 2000 represents an expense associated with the reduction of the market value of certain equity investments. Other income for 2001, 2002 and the period ending December 4, 2003 includes $3.6 million, $214.4 million, and $7.2 million respectively, received from legal settlement proceeds that we collected from a raw material pricing settlement.
(2) On January 1, 2002, we adopted SFAS No. 142, which requires that goodwill and other intangible assets with indefinite lives no longer be subject to amortization, but instead are to be tested at least annually for impairment. For the fiscal period ending December 31, 2002 and December 4, 2003, we recorded impairment charges of $222.0 million (pre-tax), and $709.4 million (pre-tax), respectively, for goodwill and other intangibles as a result of decreases in expectations regarding growth and profitability, and, in 2003, due to increased competition from the mass market, negative publicity by the media on certain supplements, and increasing pressure from the Federal Drug Administration on the industry as a whole each of which were identified in connection with a valuation related to the acquisition.
(3) Upon adoption of SFAS No. 142, we recorded a one-time, impairment charge of $889.6 million, net of taxes of $170.6 million to reduce the carrying amount of goodwill and other intangibles to their implied fair value.
(4) A table outlining the impact of the adoption of SFAS No. 142 on the reported net loss as a result of the non-amortization of goodwill beginning on January 1, 2002 is included in note 5 to the consolidated financial statements included elsewhere in this prospectus.
(5) Working capital represents current assets less current liabilities.
(6) The following table summarizes our stores for the periods indicated:
PREDECESSOR SUCCESSOR
------------------------------------------------------------------ -------------
PERIOD
FROM
FEBRUARY 7, PERIOD FROM PERIOD FROM
1999 TO AUGUST 8, TO JANUARY 1, TO 27 DAYS ENDED
AUGUST 7, DECEMBER 31, DECEMBER 4, DECEMBER 31,
1999 1999 2000 2001 2002 2003 2003
----------- ------------ ----- ----- ----- ------------- -------------
COMPANY-OWNED STORES
Beginning of period balance............. 2,608 2,721 2,793 2,842 2,960 2,898 2,757
Store openings.......................... 133 89 160 220 117 80 4
Store closings.......................... (20) (17) (111) (102) (179) (221) (13)
----- ----- ----- ----- ----- ----- -----
End of period balance................... 2,721 2,793 2,842 2,960 2,898 2,757 2,748
===== ===== ===== ===== ===== ===== =====
FRANCHISED STORES
Beginning of period balance............. 1,422 1,522 1,584 1,718 1,821 1,909 1,978
Store openings.......................... 145 93 257 291 182 186 33
Store closings.......................... (45) (31) (123) (188) (94) (117) (2)
----- ----- ----- ----- ----- ----- -----
End of period balance................... 1,522 1,584 1,718 1,821 1,909 1,978 2,009
===== ===== ===== ===== ===== ===== =====
LICENSED STORES
Beginning of period balance............. -- 157 311 544 780 900 988
Store openings.......................... 157 154 233 237 131 93 --
Store closings.......................... -- -- -- (1) (11) (5) --
----- ----- ----- ----- ----- ----- -----
End of period balance................... 157 311 544 780 900 988 988
===== ===== ===== ===== ===== ===== =====
|
(7) Company-owned "same store" sales growth is for our company-owned stores only. "Same store" sales are calculated on a calendar year basis. The calculation of "same store" sales growth excludes the net sales of a store for any period if the store was not open during the same period of the prior year. When a store's square footage has been changed as a result of expansion or relocation in the same mall, the store continues to be treated as a "same store." Company-owned "same store" sales were calculated on a 13 four-week period basis in 1999 and 2000 and on a calendar basis for 2001, 2002 and 2003.
(8) International company-owned "same store" sales were calculated on a 13 four-week period basis in 1999 based on sales generated in Canadian dollars.
(9) Domestic franchised "same store" sales growth is calculated to exclude the net sales of a store for any period if the store was not open during the same period of the prior year. When a store's square footage has been changed as a result of reconfiguration or relocation in the same mall, the store continues to be treated as a "same store." Domestic franchised "same store" sales growth is for our domestic franchised stores only. Domestic franchised "same store" sales were calculated on a 13 four-week period basis in 1999 and 2000 and on a calendar basis for 2001, 2002 and 2003.
(10) EBITDA as used herein represents net income (loss) before interest expense
(net), income tax (benefit) expense, depreciation and amortization. EBITDA
includes (a) non-cash goodwill and intangible impairment losses of $222.0
million (pre-tax) and $709.4 million (pre-tax) incurred in the year ended
December 31, 2002 and for the period January 1, 2003 to December 4, 2003,
respectively and (b) a loss from the cumulative effect of an accounting
change of $889.6 million, net of taxes of $170.6 million, for the year
ended December 31, 2002. We present EBITDA because we consider it a useful
analytical tool for measuring our ability to service our debt and generate
cash for other purposes. EBITDA is not a measurement of our financial
performance under GAAP and should not be considered as an alternative to
net income, operating income or any other performance measures derived in
accordance with GAAP or as an alternative to cash flow from operating
activities as a measure of our profitability or liquidity. We understand
that although EBITDA is frequently used by securities analysts, lenders and
others in their evaluation of companies, our calculation of EBITDA may not
be comparable to other similarly titled measures of other companies. In
addition, the calculation of
EBITDA as presented below is different than that used for purposes of the covenants under the indenture governing the notes. The following table reconciles EBITDA to net income (loss) as determined in accordance with GAAP for the periods indicated:
PRE-ACQUISITION PREDECESSOR SUCCESSOR
---------------- ------------------------------------------------------- -------------
PERIOD FROM
PERIOD FROM PERIOD FROM JANUARY 1,
FEBRUARY 7, 1999 AUGUST 8, TO YEAR ENDED DECEMBER 31, 2003 TO 27 DAYS ENDED
TO AUGUST 7, DECEMBER 31, -------------------------- DECEMBER 4, DECEMBER 31,
1999 1999 2000 2001 2002 2003 2003
(IN MILLIONS) ---------------- ------------ ------- ------ ------- ----------- -------------
Net (loss) income............... $ 3.9 $(16.3) $(150.1) $(55.9) $(960.8) $(584.9) $0.4
Interest expense, net......... 24.8 54.8 142.6 139.9 136.4 121.1 2.8
Income tax
(benefit)/expense........... (16.7) (4.5) (25.3) (14.1) 1.0 (174.5) 0.2
Depreciation and
amortization................ 40.1 21.0 124.6 122.1 58.0 59.1 2.3
------ ------ ------- ------ ------- ------- ----
EBITDA(a)....................... $ 52.1 $ 55.0 $ 91.8 $192.0 $(765.4) $(579.2) $5.7
====== ====== ======= ====== ======= ======= ====
|
(a) Included in EBITDA are: (1) non-cash goodwill and other intangible impairment losses of $222.0 million (pre-tax) and $709.4 million (pre-tax) incurred in the year ended December 31, 2002, and the period from January 1, 2003 to December 4, 2003, respectively, and (2) a loss from the cumulative effect of an accounting change of $889.6 million, net of tax, for the year ended December 31, 2002. The impairment charges were incurred upon the testing of goodwill and other intangibles, in accordance with SFAS No. 142. Impairment resulted from decreases in expectations regarding growth and profitability due to increased competition from the mass market, negative publicity by the media on certain supplements, and increasing pressure from the Federal Drug Administration on the industry as a whole.
(11) Capital expenditures for 2002 included approximately $13.9 million incurred in connection with our store reset and upgrade program and approximately $74.7 million of capital expenditures in 1999 to construct our manufacturing facility in Anderson, South Carolina.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
We derived the unaudited pro forma consolidated financial data set forth below by applying pro forma adjustments attributable to the Acquisition to our historical consolidated financial statements appearing elsewhere in this offering memorandum.
The unaudited pro forma consolidated statement of operations and comprehensive income for the year ended December 31, 2003 gives effect to the Acquisition as if it was consummated on January 1, 2003. The unaudited pro forma consolidated financial data does not purport to represent what our results of operations would have been if the Acquisition had occurred on or as of the dates indicated, nor is it indicative of results for any future periods. The unaudited pro forma consolidated financial data has been prepared giving effect to the Acquisition, which was accounted for as a purchase in accordance with SFAS No. 141, "Business Combinations."
The unaudited pro forma consolidated financial data is presented for informational purposes only and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements including the notes thereto.
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
COMBINED TWELVE PRO FORMA TWELVE
MONTHS ENDED PRO FORMA MONTHS ENDED
DECEMBER 31, ADJUSTMENTS DECEMBER 31,
2003 2003 2003
--------------- ----------- ----------------
Revenue................................................ $1,429,497 $1,429,497
Cost of sales, including costs of warehousing,
distribution and occupancy........................... 998,440 (430)(2) 998,010
---------- -------- ----------
Gross profit........................................... 431,057 (430) 431,487
Compensation and related benefits...................... 251,709 251,709
Advertising and promotion.............................. 38,927 38,927
Other selling, general and administrative.............. 76,036 (33,347)(3) 42,689
Other (income) expense................................. (10,063) (10,063)
Impairment of goodwill and intangible assets........... 709,367 709,367
---------- -------- ----------
Operating income (loss)................................ (634,919) 33,777 (601,142)
Interest expense, net.................................. (123,898) 91,959(4) (31,939)
(Loss) income before income taxes...................... (758,817) 125,736 (633,081)
Income tax benefit/(expense)........................... 174,250 45,894(5) 128,356
---------- -------- ----------
Net (loss) income...................................... $ (584,567) $ 79,842 $ (504,725)
========== ======== ==========
|
(1) The Combined twelve months ended December 31, 2003 amounts represent the periods ended December 4, 2003 and the 27 day period ended December 31, 2003. See the Results of Operations discussion paragraph in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in this document.
(2) Represents adjustment to eliminate inventory basis differences resulting from the fair valuation adjustments recorded at December 5, 2003.
(3) Represents the following adjustments to selling, general and administrative expenses:
TWELVE MONTHS
ENDED
DECEMBER 31, 2003
-----------------
Income/(expense)
Depreciation(a)........................................ $ 26,469
Amortization(a)........................................ 1,574
Management fees(b)..................................... (1,500)
Research and development(c)............................ 4,978
Transaction fees(d).................................... 2,229
Directors fees(e)...................................... (403)
--------
$ 33,347
========
|
(a) Represents adjustments to reflect differences in depreciation and amortization expense resulting from the fair valuation adjustments recorded at December 5, 2003.
TWELVE MONTHS
ENDED
DECEMBER 31, 2003
-----------------
Depreciation and amortization--historical basis......... $ 59,051
Depreciation and amortization--new basis................ (31,008)
--------
Pro forma depreciation and amortization................. $ 28,043
========
|
(b) Represents adjustments to reflect differences in management fees paid to Numico and what would have been paid to Apollo for the twelve months ended December 31, 2003.
TWELVE MONTHS
ENDED
DECEMBER 31, 2003
-----------------
Historical management fee............................... $ -0-
Apollo management fee................................... (1,500)
--------
Pro forma management fee................................ $ (1,500)
========
|
(c) Represents adjustments to eliminate expenses charged to us from Numico. We have not assumed these obligations subsequent to the Acquisition.
(d) Represents adjustments to eliminate fees and expenses directly related to the Acquisition.
(e) Represents adjustments to reflect differences in fees we have historically paid to our directors and what we would have paid to our directors for the twelve months ended December 31, 2003.
TWELVE MONTHS
ENDED
DECEMBER 31, 2003
-----------------
Historical director fees................................ $ 97
Apollo director fees.................................... 500
--------
Pro forma director fees................................. $ (403)
========
|
(4) Reflects adjustments to interest expense as a result of the financing arrangements to fund the Acquisition. A portion of the debt is based on a variable interest rate. A 1/8% change in interest rates would increase or decrease our annual interest cost by $350 thousand.
(5) Reflects pro forma tax effect of above adjustments at an estimated combined statutory rate of 36.5%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated financial statements and related notes included elsewhere in this prospectus. The discussion in this section contains forward-looking statements that involve risks and uncertainties. See "Risk Factors" included elsewhere in this prospectus for a discussion of important factors that could cause actual results to differ materially from those described or implied by the forward-looking statements contained herein.
The discussion includes the following sections:
- Overview -- a general description of our business.
- Purchase Accounting -- a discussion of the accounting for the Acquisition.
- Critical Accounting Policies -- a discussion of accounting policies that require critical judgments and estimates.
- Results of Operations -- a summary and analysis of our consolidated results of operations for the most recent three years presented in our financial statements.
- Liquidity and Capital Resources -- an analysis of cash flows, sources, and uses of cash.
- Contractual Cash Obligations -- a summary of our future minimum non-cancelable contractual obligations.
- Forward-Looking Information -- cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause our actual results to differ materially from our historical results or our current expectations or projections.
- Off Balance Sheet Arrangements -- a discussion of any material relationships that exist that are not included in our financial statements.
- Recently Issued Accounting Pronouncements -- a discussion of the effects that recent pronouncements have on our results of operations.
OVERVIEW
We are the largest global specialty retailer of nutritional supplements, which include sports nutrition products, diet products, VMHS (vitamins, minerals and herbal supplements) and specialty supplements. We derive our revenues principally from product sales through our company-owned stores, franchise activities and sales of products manufactured in our facilities to third parties. We sell products through a worldwide network of 5,745 locations operating under the GNC(R) brand name.
Revenues are derived from our three business segments, Retail, Franchise and Manufacturing/Wholesale, primarily as follows:
- Retail revenues are generated by sales to consumers at our company-owned stores.
- Franchise revenues are generated primarily from:
(1) product sales to our franchisees;
(2) royalties on franchise retail sales;
(3) franchise fees, which are charged for initial franchise awards, renewals and transfers of franchises; and
(4) sale of company-owned stores to franchisees.
- Manufacturing/Wholesale revenues are generated through sales of manufactured products to third parties, generally for third-party private label brands, and the sale of our proprietary and third-party products to Rite Aid and drugstore.com.
We calculate our "same store" sales growth to exclude the net sales of a store for any period if the store was not open during the same period of the prior year. When a store's square footage has been changed
as a result of reconfiguration or relocation in the same mall, the store continues to be treated as a "same store." Company-owned "same store" sales are calculated on a calendar year basis. Domestic franchised "same store" sales are calculated on a calendar basis for 2001, 2002 and 2003.
PURCHASE ACCOUNTING
The Acquisition was accounted for using the purchase method of accounting. As a result, the Acquisition affected our results of operations in certain significant respects. The aggregate acquisition consideration was allocated to the tangible and intangible assets acquired and liabilities assumed by us based upon their respective fair values as of the date of the Acquisition and resulted in a significant change in our annual depreciation and amortization expenses.
CRITICAL ACCOUNTING POLICIES
You should review the significant accounting policies described in the notes to our consolidated financial statements under the heading "Summary of Significant Accounting Policies" included elsewhere in this prospectus, in particular:
USE OF ESTIMATES. Certain amounts in our financial statements require management to use estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Our accounting policies are described in the notes to financial statements under the heading "Summary of Significant Accounting Policies" included elsewhere in this prospectus. Our critical accounting policies and estimates are described in this section. An accounting estimate is considered critical if:
- the estimate requires management to make assumptions about matters that were uncertain at the time the estimate was made;
- different estimates reasonably could have been used; or
- changes in the estimate that would have a material impact on our financial condition or our results of operations are likely to occur from period to period.
Management believes that the accounting estimates used are appropriate and the resulting balances are reasonable. However, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. See "Risk Factors" for a discussion of some of the risks that could affect us in the future.
REVENUE RECOGNITION. We operate primarily as a retailer, through company-owned and franchised stores, and to a lesser extent, as a wholesaler. We apply the provisions of Staff Accounting Bulletin No. 104, "Revenue Recognition." We recognize revenues in our Retail segment at the moment a sale to a customer is recorded. Gross revenues are reduced by customer returns. We recognize revenues on product sales to franchisees and other third parties when the risk of loss, title and insurable risks have transferred to the franchisee or third party. We recognize revenues from franchise fees at the time a franchised store opens or at the time of franchise renewal or transfer, as applicable. The majority of our retail revenues are received as cash or cash equivalents. The majority of our franchise revenues are billed to the franchisees with varying terms for payment. An allowance for receivables due from third parties is recorded, as necessary, based on facts and circumstances.
INVENTORIES. Where necessary, we provide estimated allowances to adjust the carrying value of our inventory to the lower of cost or net realizable value. These estimates require us to make approximations about the future demand for our products in order to categorize the status of such inventory items as slow moving, obsolete or in excess of need. These future estimates are subject to the ongoing accuracy of management's forecasts of market conditions, industry trends and competition. We are also subject to volatile changes in specific product demand as a result of unfavorable publicity, government regulation and rapid changes in demand for new and improved products or services.
ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS. We offer financing to qualified domestic franchisees with the initial purchase of a franchise location. The notes are demand notes, payable monthly over periods of five to seven years. We also generate a significant portion of our revenue from ongoing
product sales to franchisees and third-party customers. An allowance for doubtful accounts is established based on regular evaluations of our franchisees' and third-party customers' financial health, the current status of trade receivables and any historical write-off experience. We maintain both specific and general reserves for doubtful accounts. General reserves are based upon our historical bad debt experience, overall review of our aging of accounts receivable balances, general economic conditions of our industry or the geographical regions and regulatory environments of our third-party customers and franchisees.
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets, including fixed assets and intangible assets with finite useful lives, are evaluated periodically by us for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. If the sum of the undiscounted future cash flows is less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. These estimates of cash flow require significant management judgment and certain assumptions about future volume, revenue and expense growth rates, foreign exchange rates, devaluation and inflation. As such, this estimate may differ from actual cash flows.
SELF-INSURANCE. Prior to the Acquisition, General Nutrition Companies, Inc. was included as an insured under several of Numico's global insurance policies. Subsequent to the Acquisition, we procured insurance independently for such areas as general liability, product liability, directors and officers liability, property insurance, and ocean marine insurance. We are self-insured with respect to our medical benefits. As part of this coverage, we contract with national service providers to provide benefits to our employees for all medical, dental, vision and prescription drug services. We then reimburse these service providers as claims are processed from our employees. We maintain a specific stop loss provision of $200,000 per incident. Our liability for medical claims is included as a component of accrued payroll and related liabilities and was $3.0 million and $3.5 million as of December 31, 2003 and December 31, 2002, respectively. We are also self-insured for worker's compensation coverage in the State of New York with a stop loss of $250,000. Our liability for worker's compensation in New York was not significant as of December 31, 2003 and December 31, 2002. We are also self-insured for physical damage to our tractors, trailers and fleet vehicles for field personnel use. We also are self-insured for any physical damages that may occur at the corporate store locations. Our associated liability for this self-insurance was not significant as of December 31, 2003 and December 31, 2002.
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS. On an annual basis, we perform a valuation of the goodwill and indefinite lived intangible assets associated with our operating segments. To the extent that the fair value associated with the goodwill and indefinite-lived intangible assets is less than the recorded value, we write down the value of the asset. The valuation of the goodwill and indefinite-lived intangible assets is affected by, among other things, our business plan for the future, and estimated results of future operations. Changes in the business plan or operating results that are different than the estimates used to develop the valuation of the assets result in an impact on their valuation.
BASIS OF PRESENTATION. Our consolidated financial statements for the 27 days ended December 31, 2003 include the accounts of General Nutrition Centers, Inc. and its wholly owned subsidiaries. Included in this period are fair value adjustments to assets and liabilities, including inventory, goodwill, other intangible assets and property, plant and equipment. Also included is the corresponding effect these adjustments had to cost of sales, depreciation, and amortization expenses.
Our consolidated financial statements for the period ending December 4, 2003, and the periods ending December 31, 2002 and 2001 presented herein have been prepared on a carve-out basis and reflect our consolidated financial position, results of operations and cash flows in accordance with GAAP. In order to depict our financial position, results of operations and cash flows on a stand-alone basis, our financial statements reflect amounts that have been pushed down from Numico USA, Inc. (together with its parent company, Royal Numico N.V., "Numico"), our parent company prior to the sale of the company. As a result of recording these amounts, our consolidated financial statements for these periods may not be indicative of the results that would be presented if we had operated as an independent, stand-alone entity.
In the accompanying discussion of results of operations, the period ended December 4, 2003 and the 27 days ended December 31, 2003 have been combined for comparability to the year ending December 31, 2002.
The following is a discussion of our related party transactions with Numico and other affiliates during the periods presented:
We sell products to formerly affiliated companies, including Rexall Sundown, Inc., through our Manufacturing/Wholesale segment. Numico acquired Rexall in June 2000 and sold it July 2003. During this period, our sales to Rexall constituted sales to a related party and are included in revenue in our Manufacturing/Wholesale segment. We have continued to sell products to Rexall after the disposition pursuant to an agreement with them expiring in July 2005, subject to early termination provisions. The appropriate cost of sales related to affiliate sales is also included in our consolidated financial statements. Also included in the cost of sales is a significant portion of raw materials and packaging materials purchased from Rexall and Numico's subsidiary, Nutraco S.A.
We operate a fleet of distribution vehicles that deliver products to our company-owned and franchised stores and delivers products for certain other third party customers and vendors. The revenues associated with third party deliveries are recognized as a reduction of transportation costs in our consolidated financial statements. From 2002 through December 4, 2003, we had a management service agreement with Numico. This management agreement included charges for strategic planning, certain information technology expenses, product and material management, group business process, human resources, legal, tax, regulatory and management reporting. Upon the sale of the company to Apollo, this agreement was terminated.
Numico also allocated a portion of its research and development charges to us under a research activities agreement. These research and development activities included ongoing specific and medical research, support and advice on strategic research objectives, design and development of new products, organization and management of clinical trials, updates on the latest technological and scientific developments and updates on regulatory issues. Upon the Acquisition, this agreement was terminated.
Numico purchased certain global insurance policies covering several types of insurance, and allocated these charges to us. Upon the sale of the company to Apollo, we obtained stand-alone insurance policies with coverage appropriate for our business.
RESULTS OF OPERATIONS
The information presented below as of and for the 27 days ended December 31, 2003, the period ended December 4, 2003 and the years ended December 31, 2003, 2002 and 2001 was derived from our audited consolidated financial statements and accompanying notes. In the table below and in the accompanying discussion, the 27 days ended December 31, 2003 and the period ended December 4, 2003 have been combined for discussion purposes.
RESULTS OF OPERATIONS
PREDECESSOR SUCCESSOR
-------------------------------------------------------------------------
PERIOD FROM 27 DAYS
JAN 1, 2003 TO ENDED
(DOLLARS IN MILLIONS AND
YEAR ENDED DECEMBER 31,
------------------------------------ DEC 4, DEC 31,
PERCENTAGES EXPRESSED AS A PERCENTAGE OF 2001 2002 2003 2003
NET REVENUES) ---------------- ---------------- ---------------- -------------
Revenues:
Retail................. $1,123.1 74.4% $1,068.6 75.0% $ 993.3 74.1% $66.2 74.1%
Franchise.............. 273.1 18.1% 256.1 18.0% 241.3 18.0% 14.2 15.9%
Manufacturing/Wholesale (Third Party)... 112.9 7.5% 100.3 7.0% 105.6 7.9% 8.9 10.0%
-------- ----- -------- ----- -------- ----- ----- -----
Total net revenues..... 1,509.1 100.0% 1,425.0 100.0% 1,340.2 100.0% 89.3 100.0%
Operating expenses:
Cost of sales, including costs of
warehousing, distribution and
occupancy............ 1,013.4 67.2% 969.9 68.1% 934.9 69.8% 63.6 71.2%
Compensation and related benefits... 246.6 16.3% 245.2 17.2% 235.0 17.5% 16.7 18.7%
Advertising and promotion... 41.9 2.8% 52.0 3.6% 38.4 2.9% 0.5 0.6%
Other selling, general and
administrative expenses... 66.2 4.4% 75.9 5.3% 62.8 4.7% 4.8 5.4%
Amortization expense... 74.5 4.9% 10.1 0.7% 8.1 0.6% 0.3 0.3%
Other (income) expense... (3.4) (0.2)% (216.3) (15.2)% (10.1) (0.8)% 0.0 0.0%
Impairment of goodwill and intangible
assets............... -- 0.0% 222.0 15.6% 709.4 52.9% -- 0.0%
-------- ----- -------- ----- -------- ----- ----- -----
Total operating expenses... 1,439.2 95.4% 1,358.8 95.4% 1,978.5 147.6% 85.9 96.2%
Operating income (loss)
Retail............... 89.2 7.9% 86.8 8.1% 79.1 8.0% 6.6 10.0%
Franchise............ 46.3 17.0% 65.4 25.5% 63.7 26.4% 2.4 16.9%
Manufacturing/Wholesale... 29.9 26.5% 25.8 25.7% 24.3 23.0% 1.4 15.7%
-------- -------- -------- -----
Sub total segment operating
income........... 165.4 11.0% 178.0 12.5% 167.1 12.5% 10.4 11.6%
Unallocated corporate and other costs:
Warehousing & distribution costs... 40.9 40.3 40.7 3.4
Corporate overhead costs... 54.6 63.9 66.8 3.6
Other costs........ -- 7.6 697.9 --
-------- -------- -------- -----
Sub total unallocated corporate and
other costs...... 95.5 111.8 805.4 7.0
-------- -------- -------- -----
Total operating income (loss)... 69.9 4.6% 66.2 4.6% (638.3) (47.6)% 3.4 3.8%
Interest expense, net... (139.9) (136.4) (121.1) (2.8)
-------- -------- -------- -----
(Loss) income before income taxes... (70.0) (70.2) (759.4) 0.6
Income tax benefit (expense)... 14.1 (1.0) 174.5 (0.2)
-------- -------- -------- -----
Net (loss) income before cumulative
effect of accounting change... (55.9) (71.2) (584.9) 0.4
Loss from cumulative effect of
accounting change.... -- (889.6) -- --
-------- -------- -------- -----
Net (loss) income...... (55.9) (960.8) (584.9) 0.4
Other comprehensive income (loss)... 1.8 (1.9) 1.6 0.3
-------- -------- -------- -----
Comprehensive (loss) income... $ (54.1) $ (962.7) $ (583.3) $ 0.7
======== ======== ======== =====
COMBINED
(UNAUDITED)
----------------
YEAR ENDED
(DOLLARS IN MILLIONS AND
DEC 31,
PERCENTAGES EXPRESSED AS A PERCENTAGE OF 2003
NET REVENUES) ----------------
Revenues:
Retail................. $1,059.5 74.1%
Franchise.............. 255.5 17.9%
Manufacturing/Wholesale (Third Party)... 114.5 8.0%
-------- -----
Total net revenues..... 1,429.5 100.0%
Operating expenses:
Cost of sales, including costs of
warehousing, distribution and
occupancy............ 998.5 69.8%
Compensation and related benefits... 251.7 17.6%
Advertising and promotion... 38.9 2.7%
Other selling, general and
administrative expenses... 67.6 4.7%
Amortization expense... 8.4 0.6%
Other (income) expense... (10.1) (0.7)%
Impairment of goodwill and intangible
assets............... 709.4 49.6%
-------- -----
Total operating expenses... 2,064.4 144.4%
Operating income (loss)
Retail............... 85.7 8.1%
Franchise............ 66.1 25.9%
Manufacturing/Wholesale... 25.7 22.4%
--------
Sub total segment operating
income........... 177.5 12.4%
Unallocated corporate and other costs:
Warehousing & distribution costs... 44.1
Corporate overhead costs... 70.4
Other costs........ 697.9
--------
Sub total unallocated corporate and
other costs...... 812.4
--------
Total operating income (loss)... (634.9) (44.4)%
Interest expense, net... (123.9)
--------
(Loss) income before income taxes... (758.8)
Income tax benefit (expense)... 174.3
--------
Net (loss) income before cumulative
effect of accounting change... (584.5)
Loss from cumulative effect of
accounting change.... --
--------
Net (loss) income...... (584.5)
Other comprehensive income (loss)... 1.9
--------
Comprehensive (loss) income... $ (582.6)
========
|
As discussed in the segments footnote to the financial statements, we evaluate segment operating results based on several indicators. The primary key performance indicators are sales and operating income or loss for each segment. Sales and operating income or loss, as evaluated by management, exclude certain items that are managed at the consolidated level, such as distribution and transportation costs, corporate overhead, impairments, and other corporate costs. The following discussion compares the operating income or loss by segment, as well as those items excluded from the segment totals.
COMPARISON OF YEAR ENDED DECEMBER 31, 2003 AND 2002
Revenues
Consolidated. Our consolidated net revenues increased $4.5 million, or 0.3%, to $1,429.5 million during the twelve months ended December 31, 2003 compared to $1,425.0 million during the same period in 2002. This increase occurred in our Manufacturing/Wholesale segment and was offset with decreases in the Retail and Franchise segments.
Retail. Revenues in our Retail segment decreased $9.1 million, or 0.9%, to $1,059.5 million during the twelve months ended December 31, 2003 compared to $1,068.6 million during the same period in 2002. This decrease was primarily attributable to declines in 2003 sales of products containing ephedra, which we discontinued selling in June 2003, offset by sales of additional products in the diet category and the closing of 150 stores, net. For the twelve months ended December 31, 2003 and December 31, 2002, sales of ephedra products were $35.2 million and $182.9 million, respectively. We thoroughly reviewed our product pricing in the fourth quarter of 2002 and determined that our single unit pricing was not competitive with other market participants. A primary reason for higher single unit pricing was the creation of artificially high single unit prices to compensate for BOGO (Buy One Get One half price) pricing. At the beginning of December 2002, we repriced most of our proprietary products and eliminated BOGO pricing. The effect was to lower prices with the expectation that customers would buy single units due to the elimination of the incentive to buy two units. We expected that the decision to buy single units would lead to a shorter cycle time between customer visits and a corresponding increase in transaction counts. As a result of eliminating BOGO pricing in December, 2002, the average ticket price per transaction for company-owned stores decreased by 3.7% during the twelve months ended December 31, 2003 compared to the same period in 2002. Transaction counts, however, rose by 3.9% during this same period. Company-owned same store sales growth improved 0.1% during the twelve months ended December 31, 2003.
Franchise. Revenues in our Franchise segment decreased $0.6 million, or 0.2%, to $255.5 million during the twelve months ended in December 31, 2003 compared to $256.1 million during the same period in 2002. The decrease was caused by a reduction in product sales to our franchisees of approximately $7.2 million, offset by increases in revenues from sales of company-owned stores to franchisees of $4.8 million and increases in royalties and franchise fees of $1.9 million. A portion of the decrease in product sales was attributable to declines in sales to franchisees of products containing ephedra in 2003. Same store sales growth for our U.S. franchised stores improved to 0.8% for the twelve months ended December 31, 2003.
Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment increased $14.2 million, or 14.2%, to $114.5 million, during the twelve months ended December 31, 2003 compared to $100.3 million during the same period in 2002. This revenue increase was primarily due to the increased utilization of available manufacturing capacity for additional third-party customers.
Cost of Sales
Our consolidated cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased $28.6 million, or 2.9%, to $998.5 million during the twelve months ended December 31, 2003 compared to $969.9 million during the same period in 2002. Cost of sales, as a percentage of net revenues, was 69.8% during the twelve months ended December 31, 2003 compared to 68.1% during the same period of the prior year.
Consolidated product costs increased $21.4 million, or 3.0%, to $739.2 million during the twelve months ended December 31, 2003 compared to $717.8 million during the same period in 2002. The increased cost
was primarily due to our increasing sales of energy and meal replacement bars in the diet and sports nutrition products categories. These products carry lower margins than other products within these categories or within the VMHS category.
Consolidated warehousing and distribution costs increased $4.0 million, or 9.3%, to $46.9 million during the twelve months ended December 31, 2003 compared to $42.9 million during the same period in 2002. This increase was primarily due to an increase in the number of tractors, trailers and drivers required to provide trucking services to an affiliate, Rexall. Due to the sale of the Rexall business in July 2003 by Numico, the revenue from freight deliveries declined significantly. In September 2003, we began to reduce the fleet to match these freight requirements.
Consolidated occupancy costs increased $3.2 million, or 1.5%, to $212.4 million during the twelve months ended December 31, 2003 compared to $209.2 million during the same period in 2002. This increase was primarily due to increased depreciation of $3.5 million at our company-owned stores related to our store reset and upgrade program that was completed in the fourth quarter of 2002, and disposal costs of $2.9 million for company-owned stores that were closed during this same period. Additionally, common area maintenance charges related to the stores increased. These increases were offset by decreases in base and percentage rent charges and other occupancy related accounts.
Selling, General and Administrative Expenses
Our consolidated selling, general and administrative expenses, including compensation and related benefits, advertising and promotion expenses and other selling, general and administrative expenses, decreased $16.6 million, or 4.3%, to $366.6 million during the twelve months ended December 31, 2003 from $383.2 million during the same period in 2002. Selling, general and administrative expenses, as a percentage of net revenues, were 25.6% during the twelve months ended December 31, 2003, compared to 26.9% for the same period during 2002.
Consolidated compensation and related benefits increased $6.5 million, or 2.7%, to $251.7 million during the twelve months ended December 31, 2003 compared to $245.2 million during the same period in 2002. The increase was primarily due to increased health insurance and workers' compensation expense of $1.2 million, change in control and retention bonuses of $8.7 million, non-cash charges for stock compensation of $6.4 million, and increased incentives and commissions of $7.4 million. These increases were offset by a reduction in base wages, severance costs, and other wage related expense of $17.1 million.
Consolidated advertising and promotion expenses decreased $13.1 million, or 25.2%, to $38.9 million during the twelve months ended December 31, 2003 compared to $52.0 million during the same period in 2002. This decrease was primarily due to decreased direct marketing to our Gold Card members of $21.7 million for the twelve months ended December 31, 2003 compared to $26.9 million during the same period in 2002. The remaining reduction in advertising was due to the elimination of our NASCAR sponsorship and a significant reduction in media spending, as we did not repeat the advertising done in the third and fourth quarters of 2002, to announce a grand reopening of GNC after the store reset was completed.
Consolidated other selling, general and administrative expenses, including amortization expense, decreased $10.0 million, or 11.6%, to $76.0 million during the twelve months ended December 31, 2003 compared to $86.0 million during the same period in 2002. The decrease was primarily due to reductions in operational accounts, a decrease in bad debt expense of $4.3 million, a decrease in charges for insufficient funds checks presented at the stores of $0.9 million, a decrease in travel and entertainment expenses of $0.6 million, and a $2.5 million aggregate reduction in all other operating accounts. Additionally, there was a decrease in amortization expense of $1.7 million, for the twelve months ended December 31, 2003 compared with the same period in 2002.
Other (Income) Expense
Our consolidated other income decreased $206.2 million, or 95.3%, to $10.1 million during the twelve months ended December 31, 2003 compared to $216.3 million during the same period in 2002. This decrease was primarily due to a decrease in income from non-recurring legal settlement proceeds that we received related to raw material pricing litigation of $7.2 million during the twelve months ended December 31, 2003
compared to $214.4 million during the same period in 2002, currency translation adjustments expense of $2.9 million and income of $1.9 million during these same periods, respectively, and a recognized gain of $5.0 million on the sale of marketable securities in the twelve months ended December 31, 2002.
Impairment of Goodwill and Intangible Assets
In October 2003, Numico entered into an agreement to sell the company for a purchase price that indicated a potential impairment of our long-lived assets. Accordingly, management initiated an evaluation of the carrying value of goodwill and indefinite-lived intangible assets as of September 30, 2003. As a result of this evaluation, an impairment charge of $709.4 million (pre-tax) was recorded for goodwill and other indefinite-lived intangibles in accordance with SFAS No. 142.
Operating Income (Loss)
Consolidated. As a result of the foregoing, consolidated operating income decreased $701.1 million, generating a loss of $634.9 million during the twelve months ended December 31, 2003 compared with income of $66.2 million during the same period in 2002. For the 27 days ended December 31, 2003, we generated operating income of $3.4 million.
Retail. Operating Income decreased $1.1 million, or 1.3%, during the twelve months ended December 31, 2003 compared to the same period in 2002. Retail margins were down $15.2 million, primarily due to decreased sales of products containing ephedra, and sales mix changes. This decrease was offset with reduced spending in advertising of $12.8 million, reduced selling, general and administrative expenses of $7.1 million, and increased wages of $5.8 million.
Franchise. Operating income increased $0.7 million, or 1.1%, during the twelve months ended December 31, 2003 compared to the same period in 2002. Franchise margins decreased $4.3 million, or 5.0%, as we provided additional incentives to our franchisees to purchase products at discounted prices. This margin decrease was offset with a decrease in selling, general and administrative expenses of $4.7 million, primarily due to a decrease in bad debt expense related to the franchisee receivables and note portfolio.
Manufacturing/Wholesale. Operating Income decreased $0.1 million, or 0.4%, during the twelve months ended December 31, 2003 compared to the same period in 2002.
Warehousing & Distribution Costs. As reported in the cost of sales discussion, unallocated warehousing and distribution costs increased $3.8 million, to $44.1 million from $40.3 million for the twelve months ended December 31, 2003 compared to the same period in 2002.
Corporate Overhead. Operating Expense increased $6.5 million or 10.2% during the twelve months ended December 31, 2003 compared to the same period in 2002. The primary reason for this increase was an increase in change in control, retention, and incentive expense and health insurance costs in 2003.
Other. Other costs increased $690.3 million during the twelve months ended December 31, 2003, compared to the same period in 2002. Included in these costs were $709.4 million and $222.0 million impairment charges for 2003 and 2002, respectively, and $7.2 million and $214.4 million income in 2003 and 2002, respectively, for settlement income related to a raw material pricing settlement.
Interest Expense
Consolidated interest expense decreased $12.5 million, or 9.2%, to $123.9 million during the twelve months ended December 31, 2003 compared to $136.4 million during the same period in 2002. This decrease was primarily due to a reduced outstanding principal balance of $1,750.0 million at December 4, 2003 compared to $1,825.0 million in 2002, and a new debt structure after the Acquisition. The actual interest expense for the 27 days ended December 31, 2003 was $2.8 million. If the Numico debt remained in place for those 27 days, interest expense would have been $9.6 million higher for the 27 days ended December 31, 2003.
Income Tax Benefit (Expense)
We recognized a $174.3 million consolidated income tax benefit during the
twelve months ended December 31, 2003 and a $1.0 million income tax expense
during the twelve months ended December 31, 2002. The increased benefit
recognized was primarily due to the additional impairment of deductible
intangible assets recognized during the period. Additionally, differences
between the federal statutory tax rate
and our effective tax rate were primarily due to the impairment charge for non-deductible goodwill and a valuation allowance against interest expense.
Loss from Cumulative Effect of Accounting Change
We adopted SFAS No. 142 on January 1, 2002, which requires that goodwill and other intangible assets with indefinite lives no longer be subject to amortization, but instead are to be tested at least annually for impairment. Upon adoption of SFAS No. 142, we recorded a one-time, non-cash charge of $889.6 million, net of taxes of $170.6 million, to reduce the carrying amount of goodwill and other intangibles to their implied fair value. The impairment resulted from several factors, including the declining performance by us and the overall industry, increased competition, diminished contract manufacturing growth, and differences in the methods of determining impairments under SFAS No. 142 compared to the previously applicable accounting guidance.
Net (Loss) Income
As a result of the foregoing, consolidated net loss for the twelve months ended December 31, 2003 decreased $376.3 million to a net loss of $584.5 million compared to a net loss of $960.8 million for the twelve months ended December 31, 2002. For the 27 day period subsequent to the Acquisition which ended December 31, 2003, we generated net income of $0.4 million.
Other Comprehensive Income (Loss)
We recognized $1.9 million in other comprehensive income in the twelve months ended December 31, 2003 compared to a $1.9 million other comprehensive loss in the twelve months ended December 31, 2002. The entire $1.9 million of income during the twelve months ended December 31, 2003 is a result of foreign currency translation adjustments related to the investment in our Canadian subsidiary and receivables due from such subsidiary. During the twelve months ended December 31, 2002, unrealized loss in marketable equity securities of $3.3 million was recognized, net of tax benefit of $1.2 million, and an additional $0.2 million in currency exchange translation income.
COMPARISON OF YEARS ENDED DECEMBER 31, 2002 AND 2001
Revenues
Our net revenues decreased $84.1 million, or 5.6%, to $1,425.0 million during 2002 compared to $1,509.1 million during 2001. This decrease occurred in each of our three business segments and was primarily attributable to a decline in sales of products containing ephedra.
Retail. Revenues in our Retail segment decreased $54.5 million, or 4.9%, to $1,068.6 million during 2002 compared to $1,123.1 million during 2001. This decrease was primarily attributable to a decline in sales of products containing ephedra. Sales of ephedra products at company-owned stores during 2002 and 2001 were $182.9 million and $222.4 million, respectively. Company-owned same store sales growth decreased to (6.3)% in 2002 as a result of negative publicity related to ephedra in the second half of 2002 and decreased traffic in company-owned stores. The decrease in revenues was also attributable to the fact that we had 62 fewer company-owned stores at the end of 2002 compared to 2001.
Franchise. Revenues in our Franchise segment decreased $17.0 million, or 6.2%, to $256.1 million during 2002 compared to $273.1 million during the same period in 2001. The decrease was primarily related to a reduction in product sales to our franchisees of approximately $16.5 million. Part of the reason for this decrease was additional discounts of $4.7 million offered to the franchisees in 2002 to reflect the better pricing that we were able to obtain from our vendors, which in turn helps the franchisees maintain better product margins. Sales of ephedra products to the franchisees decreased $4.1 million, or 9.0%, to $42.8 million in 2002 compared to $46.9 million in 2001. The remainder of the decrease was primarily due to reduced levels of retail sales at the franchised stores. Same store sales growth for our U.S. franchised stores decreased to (3.2)% in 2002.
Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment decreased $12.6 million, or 11.2%, to $100.3 million, during 2002 compared to $112.9 million during 2001. The decrease was primarily the result of Numico's acquisition of Rexall, which led to a reduction of manufacturing orders by Rexall competitors. In addition, sales to Rite Aid decreased $6.4 million, or 17.5%, during 2002 compared to
2001. This decrease was attributable to our opening fewer Rite Aid store-within-a-store locations in 2002, which led to fewer orders to initially fill the store locations and fewer replenishment product orders as Rite Aid balanced their inventory levels. We opened 131 and 237 GNC store-within-a-store Rite Aid locations in 2002 and 2001, respectively.
Cost of Sales
Our cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, decreased $43.5 million, or 4.3%, to $969.9 million during 2002 compared to $1,013.4 million during 2001. Cost of sales, as a percent of net revenues, was 68.1% in 2002 compared to 67.2% in 2001.
Product costs decreased $48.3 million, or 6.3%, to $717.8 million during 2002 compared to $766.1 million during 2001. The decrease was primarily due to lower revenues.
Warehousing and distribution costs decreased $0.3 million, or 0.7%, to $42.9 million during 2002 compared to $43.2 million during 2001. This decrease was attributable to additional revenues generated from Rexall transportation contracts, which directly offsets transportation expenses. These expenses otherwise remained constant.
Occupancy costs increased $5.1 million, or 2.5%, to $209.2 million during 2002 compared to $204.1 million during 2001. This increase was primarily attributable to higher store maintenance costs, increased store lease expense due to renewals on existing stores, and increased common area maintenance costs. These increased costs were offset by a decrease in utilities and percentage rent, which is based upon retail store sales.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses, including compensation and related benefits, advertising and promotion expenses and other selling, general and administrative expenses, decreased $46.0 million, or 10.7%, to $383.2 million during 2002 compared to $429.2 million during 2001. Selling, general and administrative expenses, as a percentage of net revenues, were 26.9% during 2002 compared to 28.4% during 2001.
Compensation and related benefits decreased $1.4 million, or 0.6%, to $245.2 million during 2002 from $246.6 million during 2001. The decrease includes $16.7 million less in non-cash compensation expense in 2002 compared to 2001. This expense was related to the Numico management stock purchase plan. When excluded from compensation and benefits, these expenses actually increased $18.1 million, due primarily to a $13.2 million allocation charge from Numico for management services, increased severance costs of $3.6 million as a result of a workforce reduction in 2002 and a $3.3 million increase in healthcare costs. These increases were offset by reductions in bonus and incentive payments.
Advertising and promotion expenses increased $10.1 million, or 24.1%, to $52.0 million during 2002 compared to $41.9 million during 2001. The increase was primarily due to the elimination of our cooperative advertising program in 2001 that resulted in $8.6 million in refunds of unused advertising monies contributed by us.
Other selling, general and administrative expenses increased $9.7 million, or 14.7%, to $75.9 million during 2002 compared to $66.2 million during 2001. Bad debt expense accounted for an $8.0 million increase for 2002 compared to 2001.
Amortization expense decreased $64.4 million, or 86.4%, to $10.1 million during 2002 compared to $74.5 million during 2001. In connection with the adoption of SFAS No. 142 on January 1, 2002, we assigned an indefinite life to the Brand intangible asset and goodwill, which were both previously amortized over a 40 year period, resulting in a reduction in amortization expense related to such assignment of $31.7 million and $27.1 million, respectively. The remaining decreases in the amortization expense were attributable to our Gold Card intangible asset, which was fully amortized on a declining scale basis during 2002, and our third-party customer list intangible asset, which had a change in estimable life from seven years in 2001 to six years in 2002.
Other Income (Expense)
Other income increased $212.9 million to $216.3 million during 2002 compared to $3.4 million in 2001. This increase was primarily due to the additional receipt of $214.4 million in non-recurring legal settlement proceeds that we received related to price-fixing litigation, compared to $3.6 million in legal settlement proceeds that we received in 2001 and a gain of $5.0 million on the sale of marketable securities in 2002, offset by a currency translation adjustment in both years.
Impairment of Other Intangible Assets
In 2002, deterioration in market conditions and financial results caused a decrease in expectations regarding growth and profitability. Accordingly, management initiated an evaluation of the carrying value of its goodwill and indefinite-lived intangible assets as of December 31, 2002. As a result of this evaluation, an impairment charge of $222.0 million (pre-tax) was recorded for goodwill and other indefinite-lived intangible assets intangibles in accordance with SFAS No. 142.
Operating Income
Consolidated. As a result of the foregoing, consolidated operating income decreased $3.7 million to $66.2 million during 2002 compared to $69.9 million during 2001.
Retail. Operating Income decreased $2.4 million or 2.7% during the twelve months ended December 31, 2002 compared to the same period in 2001. The primary reason for the decrease was increased advertising costs due to additional advertising run in 2002 to promote the grand reopening after the store reset was completed.
Franchise. Operating Income increased $19.1 million or 41.3% during the twelve months ended December 31, 2002 compared to the same period in 2001. This increase was primarily due to higher amortization expense in 2001 related to intangible assets.
Manufacturing/Wholesale. Operating Income decreased $4.1 million, or 13.7%, during the twelve months ended December 31, 2002 compared to the same period in 2001. This was due to decreased third party revenue contracts in 2002, as we focused on supplying the retail and franchised stores, and affiliated parties, which were acquired by our parent, Numico.
Corporate Overhead. Expenses increased $9.3 million, or 17.0%, during the twelve months ended December 31, 2002 compared to the same period in 2001. This increase was primarily due to an internal charge for administrative expenses from our parent, Numico, and severance costs in 2002 due to a reduction in workforce at the corporate headquarters.
Other. Other costs increased $7.6 million during the twelve months ended December 31, 2002, compared to the same period in 2001. Included in these costs were $222.0 million impairment charges and $157.8 million income for settlement income related to a raw material pricing settlement.
Interest Expense
Interest expense decreased $3.5 million, or 2.5%, to $136.4 million during 2002 compared to $139.9 million during 2001. This decrease was primarily due to a lower principal balance outstanding as of the end of 2002 under a loan agreement entered into by Numico at the time it acquired us. This debt has been allocated to us for accounting purposes and was eliminated upon consummation of the Acquisition.
Income Tax Benefit (Expense)
We recognized $1.0 million of income tax expense during 2002 and a $14.1 million income tax benefit during 2001. The additional expense recognized was primarily related to additional income from the price-fixing litigation recognized during 2002, and a valuation allowance recognized against interest expense in 2001. Additionally, differences between the federal statutory rate and our effective tax rate were primarily due to the amortization of non-deductible goodwill in both years and a valuation allowance against interest expense in 2001.
Loss from Cumulative Effect of Accounting Change
We adopted SFAS No. 142 on January 1, 2002, which requires that goodwill and other intangible assets with indefinite lives no longer be subject to amortization, but instead are to be tested at least annually for impairment. Upon adoption of SFAS No. 142, we recorded a one-time, non-cash charge of $889.6 million, net of taxes of $170.6 million, to reduce the carrying amount of goodwill and other intangibles to their implied fair value. The impairment resulted from several factors including our declining performance, and overall industry declines, increased competition, and diminished contract manufacturing growth.
Net Income (Loss)
As a result of the foregoing, net income (loss) increased $904.9 million to $(960.8) million during 2002 compared to $(55.9) during 2001. When the charge for the cumulative effect of accounting change of $889.6 million is excluded from 2002, the net loss increased $15.3 million.
Other Comprehensive (Loss) Income
We recognized a $2.1 million unrealized depreciation in a marketable equity security during 2002, offset by an unrealized foreign currency gain of $0.3 million, compared to a $2.1 million unrealized appreciation in a marketable equity security during 2001, offset by an unrealized foreign currency exchange loss of $0.4 million.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2003, we had $33.2 million in cash and cash equivalents and $200.0 million in working capital compared with $38.8 million in cash and cash equivalents and $153.6 million in working capital at December 31, 2002. The $46.4 million increase in working capital was primarily driven by reductions in current maturities related to our debt as a result of the Acquisition, offset by a reduction in the settlement receivable of $134.8 million which was collected in January 2003.
Historically, we have funded our operations through internally generated cash. Cash provided by operating activities was $97.6 million, $111.0 million and $75.8 million during the twelve months ended December 31, 2003, 2002, and 2001, respectively. The primary reason for the change in each year was changes in working capital accounts. Receivables decreased in 2003 due to the receipt of $134.8 million in January 2003 from legal settlement proceeds relating to raw material pricing litigation, offset by an increase in receivables of $12.7 million due to the recording of a purchase price adjustment due from Numico related to the Acquisition, and a decrease in receivables of $70.6 million related to the settlement at December 4, 2003 of a receivable due from Numico. Receivables increased $132.6 million in 2002 primarily due to the recording of a raw material pricing settlement receivable of $134.8 million. Accounts payable increased in 2002 due to the recording of various amounts due to our parent, Numico, and an affiliated purchasing subsidiary, Nutraco. We expect to fund our operations through internally generated cash and, if necessary, from borrowings under our $75.0 million revolving credit facility. We expect our primary uses of cash in the near future will be debt service requirements, capital expenditures and working capital requirements. We anticipate that cash generated from operations, together with amounts available under our revolving credit facility, will be sufficient to meet our future operating expenses, capital expenditures and debt service obligations as they become due. However, our ability to make scheduled payments of principal on, to pay interest on, or to refinance our indebtedness and to satisfy our other debt obligations will depend on our future operating performance which will be affected by general economic, financial and other factors beyond our control.
We used cash from investing activities of approximately $771.5 million, $44.5 million, and $48.1 million for the twelve months ended December 31, 2003, 2002, and 2001, respectively. We used $738.1 million to acquire General Nutrition Companies, Inc. from Numico in 2003. This $738.1 million was reduced by approximately $12.7 million for a purchase price adjustment received in April 2004, and increased by $7.8 million for other acquisition costs, for a net purchase price of $733.2 million. Excluding the $738.1 million cash used to acquire the company in 2003, the primary use of cash in each year was for improvements to the retail stores, and on-going maintenance and improvements at our manufacturing facility. The decrease in cash used for investing activities in the twelve months ended December 31, 2003 compared to the same period in
2002 was the result of a decrease of $19.1 million in capital expenditures in 2003 and the receipt of $7.4 million in proceeds from the sale of marketable securities in 2002. The decrease in cash used for investing activities when comparing 2002 to 2001 was due to a decrease in franchised store purchases in 2002 compared with 2001, offset by higher capital expenditures. In 2001, we had an active franchise store buyback program in place, and repurchased or acquired 125 stores, compared with 59 in 2002. The increase in capital expenditures in 2002 was due primarily to a $13.9 million store reset and upgrade program, which was completed in the third quarter, and $4.3 million for a soft gel reconfiguration project at our manufacturing facility. Additionally, we used $2.0 million cash to purchase and install a warehouse management software system, and $1.8 million cash to purchase a customer relationship software system. Capital expenditures were $32.8 million, $51.9 million, and $29.2 million during the twelve months ended December 31, 2003, 2002, and 2001, respectively. We expect our store-related maintenance capital expenditures to be approximately $18.3 million during 2004. Total capital expenditures are expected to be $33.0 million in 2004.
In the 27 days ended December 31, 2003, the primary source of cash was from borrowings under our senior credit facility of $285.0 million, proceeds from the issuance by our parent, General Nutrition Centers Holding Company, of shares of its common stock and preferred stock for $277.5 million, and proceeds from the issuance of the old notes of $215.0 million. We generated cash from financing activities of approximately $668.4 million for the twelve months ended December 31, 2003, and used cash in financing activities of approximately $44.3 million and $21.6 million for the twelve months ended December 31, 2002 and 2001, respectively.
In connection with the Acquisition, we entered into a senior credit facility, consisting of a $285.0 million term loan facility and a $75.0 million revolving credit facility. We borrowed the full amount under the term loan facility in connection with the closing of the Acquisition. Borrowings under the senior credit facility bear interest at a rate per annum of equal to (1) the higher of (x) the prime rate and (y) the federal funds effective rate, plus 0.5% per annum, or (2) the Eurodollar rate, plus in each case, an applicable margin, and, in the case of revolving loans, such rates per annum may be decreased if our leverage ratio is decreased. In addition, we are required to pay an unused commitment fee equal to 0.5% per year. The term loan facility matures on December 5, 2009 and the revolving credit facility matures on December 5, 2008. The senior credit facility contains customary covenants, including certain financial maintenance tests. The revolving credit facility allows for $15.0 million to be used as collateral for outstanding letters of credit, of which $1.0 million was used at December 31, 2003. At December 31, 2003, $74.0 million of this facility was available, after giving effect to the use of $1.0 million of the revolving credit facility to secure letters of credit. This facility contains normal and customary covenants including financial tests (including maximum total leverage, minimum fixed charge coverage ratio and maximum capital expenditures) and places certain other limitations on us concerning our ability to incur additional debt, guarantee other obligations, grant liens on assets, make investments, acquisitions or mergers, dispose of assets, make optional payments or modifications of other debt instruments, and pay dividends or other payments on capital stock. See note 9 of the consolidated financial statements included elsewhere in this prospectus.
On December 5, 2003, we issued $215.0 million aggregate principal amount of old notes in connection with the Acquisition. The notes mature in 2010 and bear interest at the rate of 8 1/2 per annum. In addition, GNC Investors, LLC, an affiliate of Apollo Management L.P. made an equity contribution of $277.5 million in exchange for 28,743,333 shares of common stock and 100,000 shares of Series A preferred stock of our parent company, General Nutrition Centers Holding Company. The proceeds of the equity contribution were contributed to us to fund a portion of the acquisition price. In addition, our parent sold shares of common stock for $200,000 to one of our new outside directors shortly after consummation of the Acquisition and recently sold shares of its common stock for approximately $1.7 million to certain members of our management, the proceeds of all of such sales were contributed to us by our parent company.
The primary use of cash in the period ended December 4, 2003 was principal payments on debt related to our parent, Nutricia's loan, of which we were a guarantor. The primary use of cash in the twelve months ended December 31, 2002, and 2001 was for payments on debt to related parties. The increase in cash used in financing activities in 2002 is due to additional repayments on short-term debt due to related parties in 2002. The decrease in cash used in financing activities in 2001 was the result of our borrowing $62.3 million from related parties.
CAPITAL EXPENDITURES
Capital expenditures were $32.8 million, $51.9 million and $29.2 million in 2003, 2002, and 2001, respectively. The primary use of cash in each year was for improvements to the retail stores, and on-going maintenance and improvements of our manufacturing facility. During 2002, we completed a $23.5 million store reset and upgrade program, $6.1 million of which was funded by our franchisees. Of the $17.4 million paid by us, $13.9 million was capitalized and $3.5 million was expensed. We expect our store-related maintenance capital expenditures to be approximately $15 million during 2004.
CONTRACTUAL OBLIGATIONS
The following table summarizes our future minimum non-cancelable contractual obligations at December 31, 2003.
2009 AND
TOTAL 2004 2005 2006 2007 2008 BEYOND
------ ------ ----- ----- ----- ----- --------
CONTRACTUAL OBLIGATIONS (IN MILLIONS)
Long-term debt obligations........ $514.2 $ 3.8 $ 3.9 $ 4.0 $ 4.1 $ 4.1 $494.3
Operating lease obligations....... 373.0 99.2 80.3 63.5 48.0 33.1 48.9
Purchase obligations(1)........... 33.3 24.9 4.2 4.2 -- -- --
------ ------ ----- ----- ----- ----- ------
$920.5 $127.9 $88.4 $71.7 $52.1 $37.2 $543.2
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(1) Consists of $20.7 million in inventory purchase commitments and $12.6 million in advertising commitments.
FORWARD-LOOKING INFORMATION
In 2003 we identified, as part of an evaluation of individual stores, 117 underperforming stores with store specific expenses exceeding gross profit to be closed in the near future. The store rationalization plan excluded what we would consider to be normalized store closings that occur on an ongoing basis. Some of these 117 stores became cash flow positive by the end of 2003 or were not eligible for early lease terminations, and are no longer considered for closure. The remaining 104 stores on this closure list generated approximately $4.0 million of store specific expenses exceeding gross profit in 2003. The estimated termination cost for these store closures is $7.6 million and has been recorded in accrued liabilities on the December 31, 2003 balance sheet. As of March 31, 2004, we have closed 68 of these underperforming stores. Also, as of March 31, 2004, we have entered into early termination agreements with respect to 17 leases and we are in the process of negotiating early termination agreements for the remaining stores. We cannot assure you that these negotiations will result in early termination or that these 19 stores will be closed prior to their lease expiration date.
We have identified and recorded valuation allowances that related to tax assets that were associated with the interest expense on the related party push down debt. This interest expense was only deductible in future years upon generation of sufficient taxable income. At December 31, 2002, we did not believe that the company would generate sufficient taxable income to utilize these deferred tax assets. Subsequent to the Acquisition, these assets were adjusted to reflect the new basis of accounting for both book and tax assets. At December 31, 2003, we believe that, based on available information, it is more likely than not that future taxable income will be sufficient to utilize the net deferred tax assets that we have recorded.
OFF BALANCE SHEET ARRANGEMENTS
As of December 31, 2003, 2002 and 2001, we had no relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off balance sheet arrangements, or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
We have a balance of unused advertising barter credits on account with a third party advertising agency. These available credits are not recognized as assets in the accompanying financial statements because their fair value cannot be reasonably estimated. The credits can be used to offset the cost of cable advertising. As
of December 31, 2003, and December 31, 2002 the available credit balance was $16.6 and $18.8 million, respectively. However, no value was attributed to these credits at December 5, 2003.
EFFECTS OF INFLATION
Inflation generally affects us by increasing costs of raw materials, labor and equipment. We do not believe that inflation had any material effect on our results of operations, and we do not expect that it will have any material effect on our results of operations in the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in the results of our operations and cash flows. In the ordinary course of business, we are primarily exposed to foreign currency and interest rate risks. We do not use derivative financial instruments in connection with these market risks.
FOREIGN EXCHANGE RATE MARKET RISK. We are subject to the risk of foreign currency exchange rate changes in the conversion from local currencies to the U.S. dollar of the reported financial position and operating results of our non-U.S. based subsidiaries. We are also subject to foreign currency exchange rate changes for purchases and services that are denominated in currencies other than the U.S. dollar. The primary currencies to which we are exposed to fluctuations is the Canadian Dollar and the Euro. The fair value of our net foreign investments and our foreign denominated payables would not be materially affected by a 10% adverse change in foreign currency exchange rates for the periods presented.
INTEREST RATE MARKET RISK. A portion of our debt is subject to changing interest rates. Although changes in interest rates do not impact our results of operations, the changes could affect the fair value of our debt and related interest payments. As of December 31, 2003, we had fixed rate debt of $229.2 million and variable rate debt of $285.0 million. Fluctuations in market rates have not had a significant impact on our results of operations in recent years because, in general, our contracts with vendors limit our exposure to increases in product prices. We are not exposed to price risks except with respect to product purchases. We do not enter into futures or swap contracts at this time. Based on our variable rate debt balance as of December 31, 2003, a 1% change in interest rates would increase or decrease our annual interest cost by $2.9 million.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB revised SFAS No. 132. The revised standards relate to additional disclosures about pension plans and other postretirement benefit plans. GNCI had previously adopted the disclosure requirements of SFAS No. 132. The adoption of this revised standard did not have a material impact on GNCI's consolidated financial position or results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It is effective for reporting years beginning after June 15, 2002. The adoption of this standard did not have a material impact on its consolidated financial position or results of operations. As the operation of our manufacturing facility and distribution centers constitutes a material portion of our business, other obligations may arise in the future. Since these operations have indeterminate lives, an asset retirement obligation cannot be reasonably estimated. Therefore, any additional liabilities associated with potential obligations cannot be estimated and thus, have not been accrued for in the accompanying financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This statement applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. It is effective for transactions
after December 31, 2002. The adoption of this standard did not have a material impact on our consolidated financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This interpretation clarifies existing guidance relating to a guarantor's accounting for and disclosure of, the issuance of certain types of guarantees. FIN No. 45 requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee. FIN No. 45 is effective on a prospective basis for guarantees issued or modified after December 31, 2002, except for the disclosure provisions which were adopted by us for the year ended December 31, 2002. The adoption of the remaining provisions of FIN No. 45 did not have a material impact on our consolidated financial position or results of operations.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities -- an interpretation of ARB No. 51". This interpretation addresses the consolidation of variable interest entities ("VIEs") and its intent is to achieve greater consistency and comparability of reporting between business enterprises. It defines the characteristics of a business enterprise that qualifies as a primary beneficiary of a variable interest entity. In December 2003, the FASB issued a modification to FIN 46, titled FIN 46R. FIN 46R delayed the effective date for certain entities and also provided technical clarifications related to Implementation Issues. In summary, a primary beneficiary is a business enterprise that is subject to the majority of the risk of loss from the VIE, entitled to receive a majority of the VIE's residual returns, or both. The implementation of FIN No. 46 has been deferred for non-public entities. For non-public entities, such as us, FIN No. 46 requires immediate application to all VIEs created after December 31, 2003. For all other VIEs, we are required to adopt FIN No. 46 by no later than the beginning of the first period beginning after December 15, 2004. FIN No. 46 also requires certain disclosures in financial statements regardless of the date on which the VIE was created if it is reasonably possible that the business enterprise will be required to disclose the activity of the VIE once the interpretation becomes effective. We have evaluated the effect of FIN No. 46 for potential VIEs. As a result, we believe that the adoption of FIN No. 46 will not be material to our financial statements.
In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies the accounting for and reporting of derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. SFAS No. 149 is effective for contracts entered into after June 30, 2003. As of December 4, 2003, we have not identified any financial instruments that fall within the scope of SFAS No. 149, thus the adoption of SFAS No. 149 did not have a material impact on the accompanying consolidated financial statements or results of operations.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." This statement clarifies and defines how certain financial instruments that have both the characteristics of liabilities and equity be accounted for. Many of these instruments that were previously classified as equity will now be recorded as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and must be adopted for financial statements issued after June 15, 2003. As of December 31, 2003, we have not identified any financial instruments that fall within the scope of SFAS No. 150, thus the adoption of SFAS No. 150 does not have a material impact on the accompanying consolidated financial statements or results of operations.
In December 2003, the Securities and Exchange Commission issued SAB No. 104 "Revenue Recognition". This SAB revises or rescinds certain portions of interpretative guidance included in Topic 13 of the codification of staff accounting bulletins. These changes make SAB 104 guidance consistent with current accounting regulations promulgated under U.S. generally accepted accounting principles. As stated in the Revenue Recognition accounting policy, we have adopted SAB No. 104 for all periods presented herein. The adoption of SAB No. 104 did not have a material impact on the accompanying consolidated financial statements or results of operations.
BUSINESS
GENERAL NUTRITION CENTERS, INC.
We are the largest global specialty retailer of nutritional supplements, which include sports nutrition products, diet products, vitamins, minerals and herbal supplements (VMHS) and specialty supplements. We derive our revenues principally from product sales through our company-owned stores, franchise activities and sales of products manufactured in our facilities to third parties. We were formed as a Delaware corporation on October 16, 2003. On December 5, 2003, we acquired from Numico USA, Inc., 100% of the outstanding equity interests of General Nutrition Companies, Inc., a company that opened its first health food store in 1935 and today sells products through a worldwide network of 5,745 locations operating under the GNC(R) brand name. The GNC brand name is one of the most widely recognized brands in the nutritional supplements industry. An estimated 84% of the U.S. population recognizes GNC as a source of health and wellness products. Our product mix, which is focused on high-margin, value-added nutritional products, is sold under our GNC proprietary brands, including Pro Performance(R), Total Lean(TM) and Preventive Nutrition(R), and under nationally recognized third-party brands, including Atkins(R), Muscletech(R) and EAS(R).
The following charts illustrate, for the year ended December 31, 2003, the percentage of our net revenues generated by our three business segments and the percentage of our net U.S. retail supplement revenues generated by our four product categories:
NET REVENUES BY SEGMENT NET U.S. RETAIL SUPPLEMENT REVENUES
BY PRODUCT CATEGORY
(PIE CHART) (PIE CHART)
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BUSINESS OVERVIEW
Retail Locations
Our retail network represents the largest specialty retail store network in the nutritional supplements industry. As of December 31, 2003, there were 5,098 GNC locations in the United States and Canada and 647 franchised stores operating in other international locations under the GNC name. Of our U.S. and Canadian locations, 2,748 were company-owned stores, 1,362 were franchised stores and 988 were GNC "store-within-a-store" locations under our strategic alliance with Rite Aid(R). Our retail network in the United States was over nine times larger than that of our nearest specialty retail competitor as of December 31, 2003. Most of our U.S. stores are between 1,000 and 2,000 square feet and are located in shopping malls and strip shopping centers. In the fourth quarter of 2002 we completed a $23.5 million store reset and upgrade program, $6.1 million of which was funded by our franchisees. As a result, most of our stores have a modern and customer-friendly layout and promote our GNC Live Well theme.
Franchise Activities
As of December 31, 2003, we had 1,362 franchised stores in the United States and Canada and 647 other international franchised stores. We generate income from franchise activities primarily through product sales to franchisees, royalties on franchise retail sales and franchise fees. To assist our franchisees in the successful operation of their stores and to protect our brand image, we offer a number of services to franchisees including training, site selection, construction assistance and accounting services. We believe that
our franchise program enhances our brand awareness and market presence and will enable us to expand our store base internationally with limited capital expenditures by us. We enjoy strong relationships with our franchisees, as evidenced by our franchisee renewal rate of over 98% between 2000 and 2003. Our franchise program has been recognized numerous times by several publications as one of the top franchise programs in the country.
"Store-Within-a-Store" Locations
To increase brand awareness and promote access to customers who may not frequent specialty nutrition stores, we entered into a strategic alliance with Rite Aid to open our GNC "store-within-a-store" locations. As of December 31, 2003, we had 988 stores-within-a-store locations. Through this strategic alliance, we generate revenues from sales to Rite Aid of our products at wholesale prices, the manufacture of Rite Aid private label products and retail sales of consignment inventory. We are Rite Aid's sole supplier for the PharmAssure(R) vitamin brand and a number of Rite Aid private label supplements.
Products
We offer a wide range of high-quality nutritional supplements sold under our GNC proprietary brand names, including Pro Performance, Total Lean and Preventive Nutrition, and under nationally recognized third-party brand names, including Atkins, Muscletech and EAS. Sales of our proprietary brands at our company-owned stores represented approximately 42% of our net retail product revenues for the year ended December 31, 2003. We develop our proprietary products independently at our own facilities and through collaborative efforts with our suppliers. We believe that new products are a key driver of customer traffic and purchases, and we are committed to developing new and innovative products for the nutritional supplements industry. During the year ended December 31, 2003, we launched 37 new proprietary products, and we currently have over 50 new products under development for launch during 2004.
Marketing
We market our proprietary brands of nutritional products through an integrated marketing program that includes television, print and radio media, storefront graphics, direct mailings to members of our Gold Card program and point of purchase materials. Our Gold Card program is a key component of our marketing strategy and entitles members to discount offers and other benefits. With 4.8 million Gold Card members as of December 31, 2003, we believe that our Gold Card program builds customer loyalty and serves to make us a destination retailer. We also benefit from product advertising paid for entirely by third-party vendors that promotes their products and identifies our stores as a place to purchase their products.
Manufacturing and Distribution
With our state-of-the-art manufacturing and distribution facilities supporting our retail stores, we are a low-cost, vertically integrated producer and supplier of high-quality nutritional supplements. We operate two manufacturing facilities in South Carolina and three distribution centers located in Pennsylvania, South Carolina and Arizona. Although we utilize our facilities primarily for the production of our proprietary products that are sold at GNC locations, we have available capacity to produce products for sale to third-party customers. By controlling the production and distribution of our proprietary products, we can protect product quality, monitor delivery times and maintain appropriate inventory levels.
Industry Overview
The U.S. nutritional supplements retail industry is large and highly
fragmented, with no single industry participant accounting for more than 10% of
total industry retail sales in 2002. Participants include specialty retailers,
supermarkets, drugstores, mass merchants, multi-level marketing organizations,
mail order and a variety of other smaller channels. The nutritional supplements
sold through these channels are divided into four major product categories:
sports nutrition products, diet products, VMHS and specialty supplements. Most
supermarkets, drugstores and mass merchants have narrow product offerings
limited primarily to simple
vitamins and herbs, and their share of the nutritional supplements market over the last five years has remained relatively constant.
During the 1990s, our industry underwent a period of rapid expansion. From 1990 to 2002, industry retail sales grew at a compound annual growth rate of 10.0%, with the most rapid growth in the early 1990s. Total retail sales in the industry reached approximately $18.8 billion in 2002 and are estimated to grow at a compound annual growth rate of 3.7% between 2002 and 2008. During this same period, the diet products and specialty supplements categories are estimated to grow at compound annual growth rates of 8.8% and 5.9%, respectively, driving overall industry growth. Additionally, several demographic, healthcare and lifestyle trends are expected to drive the continued growth of the nutritional supplements industry. These trends include:
- Increasing Focus on Fitness: The number of Americans belonging to health clubs has grown 23% from 29.5 million in 1998 to 36.3 million in 2002, according to a 2002 trend report published by the International Health, Racquet & Sportsclub Association. We believe that fitness-oriented consumers are interested in taking sports nutrition products to increase energy, endurance and strength during exercise.
- Increasing Incidence of Obesity: Diet products are growing in popularity. According to a 2002 study by the National Heart, Lung and Blood Institute, 61% of adults ages 20-74 are either overweight or obese. An estimated 46% of adults in the United States are currently dieting, according to a 2003 Gallup Study of Dieting and the Market for Diet Products and Services.
- Aging Population: The average age of the U.S. population is increasing. U.S. Census Bureau data indicates that the number of Americans age 55 or older is expected to increase by 19% from 2003 to 2010. According to a 2001 Simmon Market Research Bureau data report, consumers over the age of 55 are significantly more likely to use VMHS products than younger persons.
- Rising Healthcare Costs and Use of Preventive Measures: Healthcare related costs have increased substantially in the United States. According to a leading healthcare provider, private health insurance premiums increased an average of 13.9% from 2002 to 2003, with an average premium for family coverage of $9,068 in 2003. To reduce medical costs and avoid the complexities of dealing with the healthcare system, many consumers take preventive measures, including alternative medicines and nutritional supplements.
COMPETITIVE STRENGTHS
Our strengths include:
UNMATCHED SPECIALTY RETAIL FOOTPRINT. Our retail network in the United States was over nine times larger than that of our nearest specialty retail competitor at December 31, 2003. The size of our retail network provides us with advantages within the fragmented nutritional supplements industry. For instance, our scale helps us to attract industry-leading vendors to sell their products in our locations, often on a preferred basis. Our extensive retail footprint in established territories also provides us with broad distribution capabilities that are difficult to replicate. Through our multiple store formats located across the United States, large franchise operations and extensive international store base, we are not dependent on any single format or geographic location.
STRONG BRAND RECOGNITION. We have strong brand recognition within the nutritional supplements industry. According to a September 2003 Parker Awareness Tracking Study Report, an estimated 84% of the U.S. population recognized the GNC brand name as a source of health and wellness products. We utilize extensive marketing and advertising campaigns through television, print and radio media, storefront graphics, Gold Card membership communications and point of purchase materials to strengthen our established brand name and reinforce our broad consumer recognition.
EXTENSIVE PRODUCT SELECTION. We offer an extensive mix of brands and products, including approximately 2,100 SKUs across multiple categories. This variety provides our customers with a vast
selection of products to fit their specific needs and provides us with an advantage over drugstores, supermarkets and mass merchants who offer a more limited product selection. Our products include powders, bars, tablets, meal replacements, shakes and teas. With a broad range of products, our success does not depend on any one specific product or vendor. During the year ended December 31, 2003, no single product accounted for more than 4.7% of our company-owned store sales.
WELL POSITIONED IN HIGH-GROWTH CATEGORIES. We believe that we are well positioned in the diet products and specialty supplements categories, the two fastest growing categories within the nutritional supplements industry. Although the diet products and specialty supplements categories represent only 26% of the nutritional supplements industry's 2002 retail sales, our sales of products within these categories represented 42% of our net U.S. retail product revenues in 2002. Industry sales of these categories are expected to grow at compound annual growth rates of 8.8% and 5.9%, respectively from 2002 to 2008, exceeding the overall industry's estimated compound annual growth rate of 3.7% for the same period.
INNOVATIVE NEW PRODUCT DEVELOPMENT. We believe that new products are a key driver of customer traffic and purchases. Interactions with our customers and raw materials vendors help us identify changes in consumer trends that, in turn, influence our development, manufacturing and marketing of new products. Our dedicated development teams conduct extensive market research and formulate new products utilizing scientific methods and third-party product testing. The key areas of our development focus are the diet products category and the specialty supplements category, which includes products that are geared to specific nutritional concerns. During the year ended December 31, 2003, we launched 37 new proprietary products, which generated $38.0 million of our net revenues during this period. We currently have over 50 new products under development for launch during 2004, of which 27 are expected to be diet products or specialty supplements.
GOLD CARD PROGRAM CUSTOMER BASE. Our Gold Card program, with 4.8 million members as of December 31, 2003, has been a core promotional program for over ten years and continues to be a key driver of customer sales. During the year ended December 31, 2003, 56% of U.S. company-owned store sales were generated from purchases by our customers using Gold Cards. The Gold Card program also gives us access to a large database of nutritional supplement consumers and allows us to match and analyze consumers' product buying patterns. We cultivate customer loyalty through a combination of discount offers and targeted marketing efforts aimed toward our Gold Card members. We believe that our Gold Card program serves to make us a destination retailer.
VALUE-ADDED CUSTOMER SERVICE. Our sales associates are trained to provide guidance to customers with respect to the broad selection of products sold in GNC stores. We believe this level of customer service provides us with an advantage over supermarkets, drugstores and mass merchants. Our sales associates are prepared to educate customers about product features and direct them to products that will address their specific requests. In 2002, we instituted the 'GNC University,' an online training program for our sales associates at our company-owned stores and for sales associates at participating franchised locations. We provide additional education and training materials through a monthly newsletter detailing new products and through interactive training modules. We also provide a wide range of nutritional information in numerous forms, including signage, brochures, and touch screen computers enabling customers to make informed purchases.
VERTICALLY INTEGRATED OPERATIONAL CAPABILITIES. Our vertically integrated manufacturing, distribution and retail capabilities differentiate us from many of our competitors. Our state-of-the-art manufacturing facilities and distribution centers, combined with our retail footprint, enable us to better control costs and protect product quality. We are also able to monitor delivery times and to maintain appropriate inventory levels for our proprietary products by controlling production scheduling and distribution.
EXPERIENCED MANAGEMENT TEAM AND EQUITY SPONSOR. Our senior management team is composed of experienced retail executives who have, on average, been employed with us for over 15 years. Our equity sponsor is an affiliate of Apollo Management, L.P., which is among the most active private investment firms in the United States and has considerable experience investing in retail companies. In addition, our board of directors is comprised of executives with significant experience in the retail industry. As of February 10,
2004, our senior management and our directors owned approximately 2.3%, in the aggregate, and have options to purchase an additional 5.6%, in the aggregate of the fully diluted common equity of our parent company.
BUSINESS STRATEGY
We have implemented a series of initiatives geared toward improving our operating and financial performance. As part of these initiatives, we have:
- revised pricing through the elimination of BOGO (Buy One Get One half price) and created an every day competitively priced structure to drive customer traffic;
- re-established an independent research and development effort to improve our proprietary product offerings;
- reset and upgraded our stores, creating a more modern and customer-friendly layout;
- improved efficiencies through fixed operating cost reductions and rationalization of our store base; and
- launched ephedra-free products such as Total Lean to capitalize on opportunities in the rapidly growing diet products category.
We believe these initiatives have helped to improve our recent business performance. Our company-owned same store sales increased by 0.1% for the year ended December 31, 2003 and by 11.0% for the three months ended December 31, 2003. Similarly, U.S. franchised same store sales increased 0.8% for the year ended December 31, 2003 and by 10.0% for the three months ended December 31, 2003. We cannot assure you that we will continue to achieve same store sales growth at the levels experienced in the fourth quarter of 2003.
To increase our future revenues and to drive profitability and cash flow generation, we intend to continue to:
- focus on higher-growth categories, such as diet products and specialty supplements;
- forge direct relationships with raw material suppliers and third-party product vendors in order to position ourselves to be first-to-market with new and innovative proprietary and third-party products;
- utilize our extensive customer database to improve customer loyalty, facilitate direct marketing and increase cross-sell and up-sell opportunities;
- shift our product mix to emphasize higher-margin proprietary products, particularly diet products and specialty supplements;
- close approximately 104 underperforming stores (68 of which have been closed as of March 31, 2004) and aggressively promote nearby stores to maximize revenues transfer;
- increase third-party manufacturing to improve capacity utilization;
- improve inventory management to reduce levels of discontinued inventory and increase inventory turns at both the store and distribution center levels; and
- leverage our strong franchise operations by expanding internationally, which will require limited capital expenditures by us.
BUSINESS SEGMENTS
We generate revenues primarily from our three business segments, Retail, Franchise and Manufacturing/ Wholesale. The following chart outlines our business segments and the historical contribution to our consolidated revenues by those segments, after intercompany eliminations. For a description of operating income (loss) by business segment, our total assets by business segment, total revenues by geographic area,
and total assets by geographic area, see Note 23, Segments to our consolidated financial statements included elsewhere in this prospectus.
PREDECESSOR SUCCESSOR
-------------------------------------------------------- -------------
YEAR ENDED DECEMBER 31, PERIOD FROM 27 DAYS ENDED
----------------------------------- JANUARY 1, 2003 TO DECEMBER 31,
2001 2002 DECEMBER 4, 2003 2003
(DOLLARS IN MILLIONS) ---------------- ---------------- ------------------ -------------
Retail.................. $1,123.1 74.4% $1,068.6 75.0% $ 993.3 74.1% $66.2 74.1%
Franchise............... 273.1 18.1 256.1 18.0 241.3 18.0% 14.2 15.9
Manufacturing/Wholesale
(Third Party)......... 112.9 7.5 100.3 7.0 105.6 7.9 8.9 10.0
-------- ----- -------- ----- -------- ----- ----- -----
Total................. $1,509.1 100.0% $1,425.0 100.0% $1,340.2 100.0% $89.3 100.0%
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RETAIL
Our Retail segment generates revenues from sales of products to customers at our company-owned stores in the United States and Canada.
LOCATIONS
As of December 31, 2003, we operated 2,748 company-owned stores across 50 states and in Canada, Puerto Rico and Washington DC. Most of our U.S. company-owned stores are between 1,000 and 2,000 square feet and are located primarily in shopping malls and strip shopping centers. Traditional mall and strip center locations typically generate a large percentage of our total retail sales. All of our company-owned stores follow one of two consistent formats, one for mall locations and one for strip shopping center locations. Our store graphics are periodically redesigned to better identify with our GNC customers and provide product information to allow the consumer to make educated decisions regarding product purchases and usage. Our product labeling is consistent within our product lines and the stores are designed to present a unified approach to packaging with emphasis on added information for the consumer. In addition, in the fourth quarter of 2002 we completed a store reset and upgrade program for all of our company-owned stores to create a more modern and customer-friendly layout, while promoting our GNC Live Well theme. As part of the store reset and upgrade program, we redesigned our floor layouts to create one-stop stations where our customers can locate a variety of products to address their specific needs.
PRODUCTS
We offer a wide range of high-quality nutritional supplements sold under our GNC proprietary brand names, including, Pro Performance(R), Total Lean(TM) and Preventive Nutrition(R), and under nationally recognized third-party brand names, including Atkins(R), Muscletech(R) and EAS(R). We operate in four major nutritional supplement categories: sports nutrition products, diet products, VMHS (vitamins, minerals and herbal supplements) and specialty supplements. We offer an extensive mix of brands and products, including approximately 2,100 SKUs across multiple categories. This variety is designed to provide our customers with a vast selection of products to fit their specific needs. Sales of our proprietary brands at our company-owned stores represented approximately 42% of our net retail product revenues for 2003. Products are delivered to our retail stores through our distribution operations located in Leetsdale, Pennsylvania; Anderson, South Carolina; and Phoenix, Arizona. Our distribution centers support our company-owned stores as well as franchised stores and Rite Aid locations. Our distribution fleet delivers raw materials and components to our manufacturing facilities and delivers our finished goods and third-party products through our distribution centers to our company-owned and domestic franchised stores on a weekly and biweekly basis, depending on sales volume of the store. Each of our distribution centers has a quality control department that monitors products received from our vendors to determine if they meet our requirements.
Based on data collected from our point of sale systems (POS), below is a comparison of our domestic retail product sales by major product category and the respective percentage of our retail supplement sales for our last three years:
YEAR ENDED DECEMBER 31,(1)
--------------------------------------------------
2001 2002 2003
(DOLLARS IN MILLIONS) -------------- ---------------- --------------
Sports Nutrition Products.......... $287.5 28.8% $ 288.7 30.4% $300.9 32.3%
Diet Products...................... 289.2 29.0 267.1 28.2 265.5 28.5
VMHS............................... 273.1 27.3 252.8 26.7 238.4 25.6
Specialty Supplements.............. 148.9 14.9 139.8 14.7 126.6 13.6
------ ----- -------- ----- ------ -----
TOTAL.............................. $998.7 100.0% $1,026.0 100.0% $931.4 100.0%
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(1) 2003 data calculated on a combined basis, by adding data for the period from January 1, 2003 through December 4, 2003 to data for the 27 days ended December 31, 2003.
Sports Nutrition Products
Sports nutrition products are designed to be taken in conjunction with an exercise and fitness regimen. Our target consumer for sports nutrition products is the 18-49 year old male. We typically offer a broad selection of sports nutrition products, such as protein and weight gain powders, sports drinks, sports bars, and high potency vitamin formulations, including GNC brands such as Pro Performance and popular third-party products such as NO2(R).
Diet Products
Diet products consist of various formulas designed to supplement the diet and exercise plans of weight conscious consumers. Our target consumer for diet products is the 18-49 year old female. We typically offer a variety of diet products, including pills, meal replacements, shakes, diet bars and teas. Our retail stores offer our proprietary and third-party products suitable for different diet and weight management approaches, including low-carbohydrate products such as the nationally-recognized Atkins(R) product line and products designed to increase thermogenesis and metabolism. We also offer several ephedra-free diet products, including our Total Lean(TM) and our Body Answers(TM) product lines.
VMHS (Vitamin, Minerals and Herbal Supplements)
We sell vitamins and minerals in single vitamin and multi-vitamin form and in different potency levels. Our vitamin and mineral products are available in tablets, soft gelatin and hard-shell capsules and powder forms. Many of our special vitamin and mineral formulations, such as Mega Men(R) and Ultra Mega(R), are only available at GNC locations. In addition to our selection of VMHS products with unique formulations, we also offer the full range of standard "alphabet" vitamins. We sell herbal supplements in various solid dosage and soft gelatin capsules, tea and liquid forms. We have consolidated our traditional herbal offerings under a single umbrella brand, Herbal Plus(R). In addition to the Herbal Plus line, we offer a full line of whole food-based supplements and top selling herb and natural remedy products. Our target consumers for VMHS are women over the age of 35.
Specialty Supplements
Specialty supplements is a catch-all category for nutritional supplements that do not fit within the bounds of the other nutritional supplement categories. Specialty supplements include glucosamine and melatonin products, as well as products that are designed to provide nutritional support to specific areas of the body. Our target consumers for specialty supplements are women over the age of 35. Many of our specialty supplements have ingredients unique to our formulations that are not available at other outlets. Our specialty supplements particularly emphasize recent third party research and available literature regarding the positive benefits from certain ingredients. Our comprehensive Preventive Nutrition product line includes Heart Advance(TM), a product designed to support healthy heart and blood vessel function, Triple Cleanse(TM), a
product designed to support healthy digestive function, and Fast Flex, a product designed to provide comprehensive joint support. Our specialty supplements are located in designated wall areas that include information and other products that offer a comprehensive solution to meet a customer's particular nutritional concerns.
Product Development
We believe a key driver of customer traffic and purchases is the introduction of new products. According to the 2003 Parker Awareness Tracking Study, 49% of consumers surveyed rated the availability of "new, innovative products" as extremely or very important when making purchase decisions and rated this as one of our competitive strengths. We identify changing customer trends through interactions with our customers and leading industry vendors to assist in the development, manufacturing and marketing of our new products. We develop proprietary products independently and through the collaborative effort of our dedicated development team. During 2003, we targeted our product development efforts on sports nutrition products, diverse diet products and specialty supplements, including ephedra-free and low-carbohydrate weight management products and new sports formulas and delivery systems. During 2003, we launched 37 new proprietary products, and we currently have over 50 new products under development for launch during 2004.
FRANCHISE
Our Franchise segment is comprised of our domestic and international franchise operations. Our Franchise segment generates revenues from franchise activities primarily through product sales to franchisees, royalties on franchise retail sales and franchise fees.
As a means of enhancing our operating performance and building our store base, we began opening franchised locations in 1988. As of December 31, 2003, there were 2,009 franchised stores operating, including 1,362 stores in the United States and Canada and 647 stores operating in other international locations. Approximately 87% of our franchises in the United States are in strip shopping centers and are typically between 1,200 and 1,800 square feet. The international franchised stores are smaller, typically an average of 750 square feet and, depending upon the country and cultural preferences, are located in mall, strip shopping center, street or store-within-a-store locations. All of our franchised stores in the United States were recently reset in the same manner as our company-owned stores. Typically, our international stores have a store format and signage similar to our U.S. franchised stores. To assist our franchisees in the successful operation of their stores and to protect our brand image, we offer site selection, construction assistance, accounting services and a three-part training program, which consists of classroom instruction, training in a company-owned location and actual on-site training after the franchised store opens. We enjoy strong relationships with our franchisees, as evidenced by our franchisee renewal rate of over 98% between 2000 and 2003. In addition, we do not have heavy reliance on any single franchise operator in the United States, as the largest franchisee owns and/or operates 11 store locations.
All of our franchised stores in the United States offer both our proprietary products and third-party products, with a product selection similar to that of our company-owned stores. Our international franchised stores offer a more limited product selection than our franchised stores in the United States. Products are distributed to our franchised stores in the United States through our distribution centers and transportation fleet in the same manner as our company-owned stores.
FRANCHISES IN THE UNITED STATES
Franchise revenues from our franchisees in the United States accounted for approximately 87% of our franchise revenues for the year ended December 31, 2003. In 2004, new franchisees in the United States are required to pay an initial fee of $40,000 for a franchise license. Existing GNC franchise operators may purchase an additional franchise license at the rate of $30,000. We typically offer limited financing to qualified franchisees in the United States for terms up to five years. Once a store is established, franchisees are required to pay us a continuing royalty of 6% of sales and contribute 3% of sales to a national advertising fund. Our standard franchise agreements for the United States are effective for a ten-year period with two
five-year renewal options. At the end of the initial term, the franchisee has the option to renew the agreement at 33% of the franchisee fee that is then in effect. Our franchisees in the United States receive limited geographical exclusivity and are required to follow the GNC store format.
Franchisees must meet certain minimum standards and duties prescribed by our franchise operations manual and we conduct periodic field visit reports to ensure our minimum standards are maintained. Generally, we enter into a five-year lease with two five-year renewal options with landlords for our franchised locations in the United States. This allows us to secure space at cost-effective rates, which we sublease to our franchisees at cost. By subleasing to our franchisees, we have greater control over the location and have greater bargaining power for lease negotiations than an individual franchisee typically would have, and we can elect not to renew subleases for underperforming locations. If a franchisee does not meet specified performance and appearance criteria, the franchise agreement specifies the procedures under which we are permitted to terminate the franchise agreement. In these situations, we may take possession of the location, inventory, and equipment, and operate the store as a company-owned store or re-franchise the location. Our U.S. franchise agreements and operations in the United States are regulated by the FTC. See "-- Government Regulation -- Franchise Regulation."
INTERNATIONAL FRANCHISES
Franchise revenues from our international franchises accounted for approximately 13% of our franchise revenues for the year ended December 31, 2003. In 2004, new international franchisees were required to pay an initial fee of $20,000 for a franchise license for each store and continuing royalty fees of 5% of sales. Our franchise program has enabled us to expand into international markets with limited capital expenditures. We expanded our international presence from 457 international franchised locations at the end of 2001 to 647 international locations as of December 31, 2003, without incurring any capital expenditures related to such expansion. Our international franchised stores generate sales per square foot of store space comparable to domestic store locations. However, we typically generate less revenues from franchises outside the United States due to lower international royalty rates and a smaller percentage of products that are purchased by the franchisees from us.
Franchisees in international locations enter into development agreements with us for either full size stores or a store-within-a-store at a host location. The development agreement grants the franchisee the right to develop a specific number of stores in a territory, often the entire country. The international franchisee then enters into a franchise agreement for each location. The full-size store franchise agreement has an initial ten-year term with two five-year renewal options. At the end of the initial term, the international franchisee has the option to renew the agreement at 33% of the franchise fee that is then in effect. Franchise agreements for international store-within-a-store locations have an initial term of five years, with two five-year renewal options. At the end of the initial term, the international franchisee of a store-within-a-store location has the option to renew the agreement for 50% of the franchise fee that is then in effect. Our international franchisees often receive exclusive franchising rights to the entire country franchised, excluding military bases. Our international franchisee must meet minimum standards and duties similar to our U.S. franchisees and our international franchise agreements and international operations may be regulated by various state, local and international laws. See "-- Government Regulation -- Franchise Regulation."
MANUFACTURING/WHOLESALE
Our Manufacturing/Wholesale segment is comprised of our manufacturing operations in South Carolina and our wholesale sales business. This segment supplies our Retail and Franchise segments as well as various third parties with finished products. Our Manufacturing/Wholesale segment generates revenues through sales of manufactured products to third parties, generally for third-party private label brands, and the sale of our proprietary and third-party brand products to Rite Aid and drugstore.com.
MANUFACTURING
Our state-of-the-art manufacturing and distribution facilities support our Retail and Franchise segments and enable us to control the production and distribution of our proprietary products, protect product quality, monitor delivery times and maintain appropriate inventory levels. We operate two main manufacturing facilities, one in Greenville, South Carolina and one in Anderson, South Carolina. We utilize our plants primarily for the production of proprietary products. Our manufacturing operations are designed to allow low- cost production of a variety of products of different quantities, sizes and packaging configurations while maintaining strict levels of quality control. Our manufacturing procedures are designed to promote consistency and quality in our finished goods. We conduct sample testing on raw materials and finished products, including weight, purity and micro-bacterial testing. Our manufacturing facilities also service our wholesale operations, including the manufacture and supply of Rite Aid private label products for distribution to Rite Aid locations. We also use our available capacity at these facilities to produce products for sale to third-party customers. Our distribution fleet delivers raw materials and components to our manufacturing facilities and delivers our finished goods and third-party products to our distribution centers.
WHOLESALE
"Store-Within-a-Store" Locations
To increase brand awareness and promote access to customers who may not frequent specialty nutrition stores, we entered into a strategic alliance with Rite Aid to open GNC "store-within-a-store" locations. We are Rite Aid's sole supplier for the PharmAssure(R) vitamin brand and a number of Rite Aid private label supplements. The initial term of our agreement with Rite Aid expires in March 2009, subject to early termination provisions. A calculation of the average net sales of products sold in each "store-within-a-store" open for at least one year will be made prior to April 30, 2004. If the resulting per store average is less than $80,000 per store, Rite Aid will have the option to terminate the agreement. In addition, if the resulting per store average is less than $100,000 per store, GNC will have the option to terminate the agreement. The initial term may be extended for five additional five-year terms at Rite Aid's option. The parties are currently involved in negotiations relating to the modification or termination of the agreement. We cannot assure you that the agreement will be modified or that the agreement will not be terminated. As of December 31, 2003, we had 988 GNC stores-within-a-store. Through this strategic alliance, we generate revenues from sales to Rite Aid of our products at wholesale prices, the manufacture of Rite Aid private label products and retail sales of consignment inventory.
Distribution Agreement with drugstore.com
We have an Internet distribution agreement with drugstore.com, inc. Through this strategic alliance, drugstore.com became the exclusive Internet retailer of our proprietary products, the PharmAssure vitamin brand and certain other nutritional supplements. The initial term of the agreement expires in July 2009, subject to early termination provisions, and the exclusivity period expires in June 2005. This alliance allows us to access a larger customer base, who may not otherwise live close to, or have the time to visit, a GNC store. We generate revenues from the distribution agreement with drugstore.com through sales of our proprietary and third-party products on a wholesale basis and through retail sales of certain other products on a consignment basis.
Our wholesale operations, including our Rite Aid and drugstore.com wholesale operations, are supported by our Anderson distribution center. Products are delivered to our store-within-a-store locations in a manner similar to our company-owned stores.
COMPETITION
The U.S. nutritional supplements retail industry is a large, highly fragmented and growing industry, with no single industry participant accounting for more than 10% of total industry retail sales. Competition is based primarily on price, quality and assortment of products, customer service, marketing support and
availability of new products. In addition, the market is highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the market.
We compete with publicly owned and privately owned companies, which are highly fragmented in terms of geographical market coverage and product categories. We compete with other specialty retailers, including Vitamin World(R) and Vitamin Shoppe(R), supermarkets, drugstores, mass merchants, multi-level marketing organizations and a variety of other smaller channels. In the United States, our VMHS products compete with heavily advertised national brands manufactured by large pharmaceutical companies sold at supermarkets and drugstores, as well as with the Nature's Bounty(R) and Nature's Wealth(R) brands, sold by Vitamin World. Most supermarkets, drugstores and mass merchants have narrow product offerings limited primarily to simple vitamins and herbs. Our international competitors also include large international pharmacy chains and major international supermarket chains as well as other large U.S.-based companies with international operations. Our wholesale and manufacturing operations also compete with other wholesalers and manufacturers of third-party nutritional supplements.
TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
We believe trademark protection is particularly important to the maintenance of the recognized brand names under which we market our products. We own or have rights to material trademarks or trade names that we use in conjunction with the sale of our products, including the GNC brand name. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We protect our intellectual property rights through a variety of methods, including trademark, patent and trade secret laws, as well as confidentiality agreements and proprietary information agreements with vendors, employees, consultants and others who have access to our proprietary information. Protection of our intellectual property often affords us the opportunity to enhance our position in the marketplace by precluding our competitors from using or otherwise exploiting our technology and brands. We are also a party to several intellectual property license agreements relating to certain of our products. For example, several of our products are covered by patents which we license from Royal Numico, N.V. The scope and duration of our intellectual property protection varies throughout the world by jurisdiction and by individual product.
INSURANCE AND RISK MANAGEMENT
We purchase insurance to cover standard risks in the nutritional supplements industry, including policies to cover general products liability, workers compensation, auto liability and other casualty and property risks. Our insurance rates are based on our safety record as well as trends in the insurance industry. We also maintain workers compensation insurance and auto insurance policies that are retrospective in that the cost per year will vary depending on the frequency and severity of claims in the policy year. Prior to the Acquisition, we were covered by certain of Numico USA, Inc.'s insurance policies. Following the consummation of the Acquisition, we obtained our own insurance policies to replace those policies that were covered by Numico USA, Inc.'s policies, including policies for general products liability. We currently maintain products liability insurance with a deductible/retention of $1 million per claim with an aggregate cap on retained losses of $10.0 million.
We face an inherent risk of exposure to product liability claims in the event that, among other things, the use of our products results in injury. With respect to product liability coverage, we expect to carry insurance coverage typical of our industry and product lines. Our coverage involves self-insured retentions with primary and excess liability coverage above the retention amount. We have the ability to refer claims to our vendors and their insurers to pay the costs associated with any claims arising from such vendors' products. Our insurance covers such claims that are not adequately covered by a vendor's insurance and provides for excess secondary coverage above the limits provided by our product vendors.
We self-insure certain property and casualty risks due to our analysis of the risk, the frequency and severity of a loss, and the cost of insurance for the risk. We believe that the amount of self-insurance is not significant and will not have an adverse impact on our performance.
EMPLOYEES
As of December 31, 2003, we had a total of 5,267 full-time and 8,923 part-time employees, of whom approximately 12,348 were employed in our Retail segment; 38 were employed in our Franchise segment; 1,282 were employed in our Manufacturing/Wholesale segment; 522 were employed in corporate support functions. None of our employees belongs to a union or is a party to any collective bargaining or similar agreement. We consider our relationships with our employees to be good.
PROPERTIES
In our Retail segment, there were 2,748 company-owned stores operating in the United States and Canada as of December 31, 2003. All but one of our stores are located on leased premises that typically range in size from 1,000 to 2,000 square feet. In our Franchise segment, substantially all of our 1,362 franchised stores in the United States and Canada are located on premises we lease, and then sublease to our respective franchisees. All of our 647 franchised stores in other international locations are owned or leased directly by our franchisees. No single store is material to our operations.
As of December 31, 2003, our company-owned and franchised stores in the United States and Canada (excluding store-within-a-store locations) and our other international franchised stores consisted of:
COMPANY-
OWNED
UNITED STATES AND CANADA RETAIL FRANCHISE INTERNATIONAL FRANCHISE
------------------------ -------- --------- ------------- ---------
Alabama........................... 34 14 Aruba............................. 2
Alaska............................ 6 5 Australia......................... 35
Arizona........................... 45 15 Bahamas........................... 3
Arkansas.......................... 19 6 Brazil............................ 11
California........................ 211 181 Brune............................. 1
Colorado.......................... 50 29 Cayman Islands.................... 1
Connecticut....................... 40 9 Chile............................. 45
Delaware.......................... 9 10 Costa Rica........................ 5
District of Columbia.............. 7 3 Dominican Republic................ 12
Florida........................... 231 128 Ecuador........................... 12
Georgia........................... 87 65 El Salvador....................... 8
Hawaii............................ 20 2 Guam.............................. 5
Idaho............................. 9 5 Guatemala......................... 12
Illinois.......................... 93 76 Honduras.......................... 1
Indiana........................... 49 35 Hong Kong......................... 2
Iowa.............................. 27 8 Indonesia......................... 22
Kansas............................ 19 14 Israel............................ 15
Kentucky.......................... 39 11 Japan............................. 8
Louisiana......................... 37 8 Korea............................. 9
Maine............................. 9 0 Kuwait............................ 4
Maryland.......................... 59 30 Lebanon........................... 5
Massachusetts..................... 55 12 Malaysia.......................... 16
Michigan.......................... 85 49 Mexico............................ 161
Minnesota......................... 61 17 Panama............................ 5
Mississippi....................... 20 9 Peru.............................. 12
Missouri.......................... 47 23 Philippines....................... 42
Montana........................... 6 3 Saudi Arabia...................... 32
Nebraska.......................... 5 20 Singapore......................... 60
Nevada............................ 12 10 South Africa...................... 8
New Hampshire..................... 17 5 Taiwan............................ 14
New Jersey........................ 76 60 Thailand.......................... 29
New Mexico........................ 22 2 Turkey............................ 17
New York.......................... 158 63 U.S. Virgin Islands............... 2
North Carolina.................... 86 48 Venezuela......................... 31
North Dakota...................... 6 0
Ohio.............................. 105 66
Oklahoma.......................... 31 7
Oregon............................ 24 11
Pennsylvania...................... 136 55
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COMPANY-
OWNED
UNITED STATES AND CANADA RETAIL FRANCHISE INTERNATIONAL FRANCHISE
------------------------ -------- --------- ------------- ---------
Puerto Rico....................... 26 0
Rhode Island...................... 12 1
South Carolina.................... 31 27
South Dakota...................... 5 0
Tennessee......................... 43 38
Texas............................. 199 98
Utah.............................. 22 8
Vermont........................... 5 0
Virginia.......................... 91 31
Washington........................ 51 23
West Virginia..................... 25 3
Wisconsin......................... 47 11
Wyoming........................... 4 1
Canada............................ 135 7
----- ----- ---
TOTAL........................... 2,748 1,362 TOTAL 647
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In our Manufacturing/Wholesale segment, we lease facilities for manufacturing, packaging, warehousing, and distribution operations. The majority of our manufacturing of GNC proprietary products occurs at a 230,000 square foot facility in Greenville, South Carolina. We also lease a 630,000 square foot complex located in Anderson, South Carolina, for packaging, materials receipt, lab testing, warehousing, and distribution. Both the Greenville and Anderson facilities are leased on a long-term basis pursuant to "fee-in-lieu-of-taxes" arrangements with the counties in which the facilities are located, but we retain the right to purchase each of the facilities at any time during the lease for $1.00, subject to a loss of tax benefits. We also lease a 210,000 square foot distribution center in Leetsdale, Pennsylvania and a 112,000 square foot distribution center in Phoenix, Arizona. We conduct additional manufacturing that we perform for wholesalers or retailers of third-party products, as well as certain additional warehousing at a leased facility located in New South Wales, Australia.
We also lease four small regional sales offices in Clearwater, Florida; Fort Lauderdale, Florida; Laguna Hills, California; and Mississauga, Ontario. None of the regional sales offices is larger than 5,000 square feet. Our 253,000 square foot corporate headquarters in Pittsburgh, Pennsylvania is owned by Gustine Sixth Avenue Associates, Ltd., a Pennsylvania limited partnership, of which General Nutrition, Incorporated, one of our subsidiaries, is a 50% limited partner. The partnership's ownership of the land and buildings, and the partnership's interest in the ground lease to General Nutrition, Incorporated, are all encumbered by a mortgage in the original principal amount of $17.9 million, with an outstanding balance of $14.2 million as of December 31, 2003.
ENVIRONMENTAL
We are subject to numerous federal, state, local and foreign environmental laws and regulations governing our operations, including the handling, transportation and disposal of our products, and our non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water and groundwater. Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. Changes in laws or the interpretation thereof or the development of new facts could also cause us to incur additional capital and operation expenditures to maintain compliance with environmental laws and regulations. We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or properties to which substances or wastes were sent by current or former operations at our facilities. The presence of contamination from such substances or wastes could also adversely affect our ability to sell or lease our properties, or to use them as collateral for financing. From time to time, we have incurred and are incurring costs and obligations for correcting environmental noncompliance matters and
for remediation at or relating to certain of our properties. We believe we have complied with, or are currently complying with, our environmental obligations to date and that such liabilities will not have a material adverse effect on our business or financial performance. However, we cannot assure you that future liabilities and obligations will not have a material adverse effect on our business operations or financial condition.
LEGAL PROCEEDINGS
We are from time to time engaged in litigation. We regularly review all pending litigation matters in which we are involved and establish reserves deemed appropriate by management for these litigation matters. However, some of these matters are material and an adverse outcome in these matters could have a material impact on our financial condition and operating results.
As a manufacturer and retailer of nutritional supplements that are ingested by consumers or applied to their bodies, we have been and are currently subjected to various product liability claims. Although the effects of these claims to date have not been material to us, it is possible that current and future product liability claims could have a material adverse impact on our financial condition and operating results. We currently maintain product liability insurance with a deductible/retention of $1.0 million per claim with an aggregate cap on retained loss of $10 million per claim. We generally seek to obtain contractual indemnification from parties that supply raw materials for our products or that manufacture or market products we sell, and to be added as additional insured under these parties' insurance policies. We are also entitled to indemnification by Royal Numico, N.V. and Numico USA, Inc. for certain losses arising from claims related to products containing ephedra or Kava Kava sold prior to December 5, 2003. Any such indemnification or insurance is limited by its terms and any such indemnification, as a practical matter, is limited to the creditworthiness of the indemnifying party and its insurer. See "Risk Factor -- Risks Relating to Our Business and Operations -- Products Liability -- We may incur material products liability and products recall costs."
EPHEDRA. As of March 15, 2004, we have been named as a defendant in 100 cases involving the sale of third-party products that contain ephedra. Ephedra products have been the subject of adverse publicity and regulatory scrutiny in the United States and other countries relating to alleged harmful effects, including the deaths of several individuals. In early 2003, we instructed all of our locations to stop selling products containing ephedra that were manufactured by GNC or one of our affiliates. Subsequently, we instructed all of our locations to stop selling any products containing ephedra by June 30, 2003. All claims to date have been tendered to the third-party manufacturer or to our insurer and we have incurred no expense to date with respect to litigation involving ephedra products. Furthermore, we are entitled to indemnification by Royal Numico N.V. and Numico USA, Inc. for certain losses arising from claims related to products containing ephedra sold prior to December 5, 2003.
PRO-HORMONE/ANDROSTENDIONE. On July 29, 2001, substantially identical class action lawsuits were filed in the state courts of the States of Florida, New York, New Jersey, Pennsylvania and Illinois against us and various manufacturers of products containing pro-hormones, including androstendione. Plaintiffs allege that we have distributed or published periodicals that contain advertisements claiming that the various pro-hormone products promote muscle growth. The complaint alleges that we knew the advertisements and label claims promoting muscle growth were false, but nonetheless continued to sell the products to consumers. We have tendered these cases to the various manufacturers for defense and indemnification. Based upon the information available to us at the present time, we believe that these matters will not have a material adverse effect upon our liquidity, financial condition or results of operations.
"BEST BY" LITIGATION. In November 2001, substantially identical class action lawsuits were filed in the state courts of the States of Florida, Connecticut and Pennsylvania alleging that we have engaged in a continuous practice of including false and misleading "best by" dates on our product labels and/or selling products after the expiration of the purported "best by" dates. By agreement of the parties, the Connecticut and Pennsylvania actions have been stayed pending the outcome of the Florida case. The Florida case was submitted to mediation but no resolution was obtained. The plaintiffs have not taken any subsequent action to move the case forward. Furthermore, we are entitled to indemnification by Royal Numico N.V. and Numico USA, Inc. for certain losses arising from all claims related to this litigation. Based upon the information
available to us at the present time, we believe that these matters will not have a material adverse effect upon our liquidity, financial condition or results of operations.
CALIFORNIA WAGE CLAIMS. On November 2, 2001, Matthew Capelouto, a former store manager in California, filed a lawsuit in the Superior Court of California, Orange County, initially claiming that we misclassified store managers at our company-owned stores as exempt from overtime requirements and failed to pay them overtime, in violation of California's wage and hour laws. The plaintiff is seeking to certify the case as a class action lawsuit. We intend to vigorously oppose class certification. On October 23, 2003, an amended complaint was filed, adding another named plaintiff, as well as claims for failure to provide required meal periods and rest periods for GNC managers at our company-owned stores. Based upon the information available to us at the present time, we believe that these matters will not have a material adverse effect upon our liquidity, financial condition or results of operations.
GOVERNMENT REGULATION
PRODUCT REGULATION
Domestic
The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products are subject to regulation by one or more federal agencies, including the Food and Drug Administration ("FDA"), the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission, the United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which our products are sold. Pursuant to the Federal Food, Drug, and Cosmetic Act ("FDCA"), the FDA regulates the formulation, safety, manufacture, packaging, labeling and distribution of dietary supplements, (including vitamins, minerals, herbs) and over-the-counter drugs. The FTC has jurisdiction to regulate the advertising of these products.
The FDCA has been amended several times with respect to dietary supplements, in particular by the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). DSHEA established a new framework governing the composition, safety, labeling and marketing of dietary supplements. "Dietary supplements" are defined as vitamins, minerals, herbs, other botanicals, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, constituents, extracts or combinations of such dietary ingredients. Generally, under DSHEA, dietary ingredients that were on the market prior to October 15, 1994 may be used in dietary supplements without notifying the FDA. "New" dietary ingredients (i.e., dietary ingredients that were "not marketed in the United States before October 15, 1994") must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been "present in the food supply as an article used for food" without being "chemically altered." A new dietary ingredient notification must provide the FDA evidence of a "history of use or other evidence of safety" establishing that use of the dietary ingredient "will reasonably be expected to be safe." A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. There is no certainty that the FDA will accept any particular evidence of safety for any new dietary ingredient. The FDA's refusal to accept such evidence could prevent the marketing of such dietary ingredients.
The FDA issued a consumer warning in 1996, followed by proposed regulations
in 1997, covering dietary supplements that contain ephedra or its active
substance, ephedrine. In February 2003, the Department of Health and Human
Services, announced a series of actions that the Department of Health and Human
Services and the FDA plan to execute with respect to products containing ephedra
or ephedrine, including the solicitation of evidence regarding the significant
or unreasonable risk of illness or injury from dietary supplements containing
ephedra and the immediate execution of a series of actions against ephedra or
ephedrine products making unsubstantiated claims about sports performance
enhancement. In addition, many states proposed regulations and three states
enacted laws restricting the promotion and distribution of ephedra-containing
dietary supplements. The botanical ingredient ephedra was formerly used in
several third party and private label dietary supplement products. In January
2003, we began focusing our diet category on products that would replace ephedra
products. In early 2003, we instructed all of our locations to stop selling
products
containing ephedra that were manufactured by GNC(R) or one of our affiliates. Subsequently, we instructed all of our locations to stop selling any products containing ephedra by June 30, 2003. Sales of products containing ephedra amounted to approximately $35.2 million, or 3.3% of our retail sales, in 2003 and approximately $182.9 million, or 17.1% of our retail sales, in 2002. In February 2004, the FDA issued a final regulation declaring dietary supplements containing ephedrine alkaloids illegal under the FDCA because they present an unreasonable risk of illness or injury under the conditions of use recommended or suggested in labeling, or if no conditions of use are suggested or recommended in labeling, under ordinary conditions of use. The rule took effect on April 12, 2004 and bans the sale of dietary supplement products containing ephedra or ephedrine. Similarly, the FDA issued a consumer advisory in 2002 with respect to dietary supplements that contain the ingredient Kava, and the FDA is currently investigating adverse effects associated with ingestion of this ingredient. One of our subsidiaries, Nutra Manufacturing, Inc. (f/k/a Nutricia Manufacturing USA, Inc.), manufactured products containing Kava Kava from December 1995 until August 2002. All stores were instructed to stop selling products containing Kava Kava in December 2002. The FDA could take similar actions against other products or product ingredients which it determines present an unreasonable health risk to consumers.
DSHEA permits "statements of nutritional support" to be included in labeling for dietary supplements without FDA premarket approval. Such statements must be submitted to FDA within thirty days of marketing and must bear a label disclosure that "This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease." Such statements may describe how a particular dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being, but may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease. A company that uses a statement of nutritional support in labeling must possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA determines that a particular statement of nutritional support is an unacceptable drug claim or an unauthorized version of a disease claim for a food product, or, if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false or misleading, we would be prevented from using the claim.
In addition, DSHEA provides that so-called "third-party literature," e.g., a reprint of a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used "in connection with the sale of a dietary supplement to consumers" without the literature being subject to regulation as labeling. Such literature must not be false or misleading; the literature may not "promote" a particular manufacturer or brand of dietary supplement; and a balanced view of the available scientific information on the subject matter must be presented. If the literature fails to satisfy each of these requirements, we may be prevented from disseminating such literature with our products, and any dissemination could subject our product to regulatory action as an illegal drug.
We expect that the FDA will adopt in the near future the final regulations, proposed on March 13, 2003, regarding good manufacturing practice in manufacturing, packing, or holding dietary ingredients and dietary supplements, authorized by DSHEA. Good manufacturing practice regulations would require dietary supplements to be prepared, packaged and held in compliance with strict rules, and might require quality control provisions similar to those in the good manufacturing practice regulations for drugs. There can be no assurance that, if the FDA adopts good manufacturing practice regulations for dietary supplements, we or our third-party supplier or vendors will be able to comply with the new rules without incurring substantial additional expenses.
The FDA has broad authority to enforce the provisions of the FDCA applicable to dietary supplements, including powers to issue a public warning letter to a company, to publicize information about illegal products, to request a recall of illegal products from the market, and to request the Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the United States courts. The regulation of dietary supplements may increase or become more restrictive in the future.
Legislation has been introduced in Congress to impose substantial new regulatory requirements for dietary supplements, e.g., S.722, S.1538, S.1780, H.R. 3377 and H.R. 3866, S.722 would impose adverse
event reporting, postmarket surveillance requirements, FDA reviews of dietary supplement ingredients, and other requirements. H.R. 3377 would impose similar requirements as well as safety testing and records inspection. S.1538 would increase FDA appropriations to allow full implementation and enforcement of DSHEA. S.1780 and H.R. 3866 would subject specified anabolic steroid substances currently used in some dietary supplements, such as "andro," to the requirements of the Controlled Substances Act. The dietary supplement industry supports S.1538, S.1780, and H.R. 3866. If enacted, S.722 and H.R. 3377 could raise our costs and hinder our business.
The FTC exercises jurisdiction over the advertising of dietary supplements. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. We continue to be subject to three consent orders issued by the FTC. In 1984, the FTC instituted an investigation of General Nutrition, Incorporated, one of our subsidiaries, alleging deceptive acts and practices in connection with the advertising and marketing of certain of its products. General Nutrition, Incorporated accepted a proposed consent order which was finalized in 1989, under which it agreed to refrain from, among other things, making certain claims with respect to certain of its products unless the claims are based on and substantiated by reliable and competent scientific evidence. We also entered into a consent order in 1970 with the FTC, which generally addressed "iron deficiency anemia" type products. As a result of routine monitoring by the FTC, disputes arose concerning its compliance with these orders, and with regard to advertising for certain hair care products. While General Nutrition, Incorporated believes that, at all times, it operated in material compliance with the orders, it entered into a settlement in 1994 with the FTC to avoid protracted litigation. As a part of this settlement, General Nutrition, Incorporated entered into a consent decree and paid, without admitting liability, a civil penalty in the amount of $2.4 million and agreed to adhere to the terms of the 1970 and 1989 consent orders and to abide by the provisions of the settlement document concerning hair care products. We do not believe that future compliance with the outstanding consent decrees will materially affect our business operations. In 2000, the FTC amended the 1970 order to clarify language in the 1970 order that was believed to be ambiguous and outmoded.
The FTC continues to monitor our advertising and, from time to time, requests substantiation with respect to such advertising to assess compliance with the various outstanding consent decrees and with the Federal Trade Commission Act. Our policy is to use advertising that complies with the consent decrees and applicable regulations. We review all products brought into our distribution centers to assure that such products and their labels comply with the consent decrees. We also review the use of third-party point of purchase materials such as store signs and promotional brochures. Nevertheless, there can be no assurance that inadvertent failures to comply with the consent decrees and applicable regulations will not occur. Approximately 20% of the products sold by franchised stores are purchased by franchisees directly from other vendors and these products do not flow through our distribution centers. Although franchise contracts contain strict requirements for store operations, including compliance with federal, state, and local laws and regulations, we cannot exercise the same degree of control over franchisees as we do over our company-owned stores. As a result of our efforts to comply with applicable statutes and regulations, we have from time to time reformulated, eliminated or relabeled certain of our products and revised certain provisions of our sales and marketing program. We believe we are in material compliance with the various consent decrees and with applicable federal, state and local rules and regulations concerning our products and marketing program. Compliance with the provisions of national, state and local environmental laws and regulations has not had a material effect upon our capital expenditures, earnings, financial position, liquidity or competitive position.
Foreign
Our products sold in foreign countries are also subject to regulation under various national, local, and international laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of dietary supplements and over-the-counter drugs. Government regulations in foreign countries may prevent or delay the introduction, or require the reformulation, of certain of our products.
We cannot determine what effect additional domestic or international governmental legislation, regulations or administrative orders, when and if promulgated, would have on our business in the future. New legislation or regulations may require the reformulation of certain products to meet new standards, require the recall or discontinuance of certain products not capable of reformulation, impose additional record keeping or require expanded documentation of the properties of certain products, expanded or different labeling, or scientific substantiation.
FRANCHISE REGULATION
We must comply with regulations adopted by the FTC and with several state laws that regulate the offer and sale of franchises. The FTC's Trade Regulation Rule on Franchising and certain state laws require that we furnish prospective franchisees with a franchise offering circular containing information prescribed by the Trade Regulation Rule on Franchising and applicable state laws and regulations.
We also must comply with a number of state laws that regulate some substantive aspects of the franchisor-franchisee relationship. These laws may limit a franchisor's business practices in a number of ways, including limiting the ability to:
- terminate or not renew a franchise without good cause;
- interfere with the right of free association among franchisees;
- disapprove the transfer of a franchise;
- discriminate among franchisees with regard to charges, royalties and other fees; and
- place new stores near existing franchises.
To date, these laws have not precluded us from seeking franchisees in any given area and have not had a material adverse effect on our operations. Bills intended to regulate certain aspects of franchise relationships have been introduced into Congress on several occasions during the last decade, but none have been enacted.
Our international franchise agreements and franchise operations are regulated by various foreign laws, rules and regulations. To date, these laws have not precluded us from seeking franchisees in any given area and have not had a material adverse effect on our operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding directors and executive officers of GNC and the other registrants of March 30, 2004.
NAME AGE POSITION
---- --- --------
Louis Mancini............... 58 Chief Executive Officer and Director -- General Nutrition
Centers, Inc.(1)
David Heilman............... 51 Executive Vice President and Chief Financial
Officer -- General Nutrition Centers, Inc.(2)
Joseph Fortunato............ 51 Executive Vice President and Chief Operating
Officer -- General Nutrition Centers, Inc.
James M. Sander............. 47 Senior Vice President, Chief Legal Officer and
Secretary -- General Nutrition Centers, Inc.(3)
Curt Larrimer............... 48 Senior Vice President of Finance and Corporate
Controller -- General Nutrition Centers, Inc.
Michael Locke............... 58 Senior Vice President of Manufacturing -- General Nutrition
Centers, Inc.
J.J. Sorrenti............... 38 Senior Vice President and General Manager of
Franchising -- General Nutrition Centers, Inc.
Reginald Steele............. 58 Senior Vice President of International
Franchising -- General Nutrition Centers, Inc.
Susan Trimbo................ 48 Senior Vice President of Scientific Affairs -- General
Nutrition Centers, Inc.
Margaret Peet............... 41 Senior Vice President and National Sales Director
Tom Dowd.................... 40 Senior Vice President of Stores
Lee Karayusuf............... 54 Senior Vice President of Distribution and Transportation
Eileen Scott................ 50 Senior Vice President, Human Resources & Customer Service
Peter P. Copses............. 44 Chairman of the Board of Directors -- General Nutrition
Centers, Inc.(4)
Andrew S. Jhawar............ 32 Director -- General Nutrition Centers, Inc.(5)
George G. Golleher.......... 54 Director -- General Nutrition Centers, Inc.(4)
Mary Elizabeth Burton....... 51 Director -- General Nutrition Centers, Inc.
Robert J. DiNicola.......... 56 Director -- General Nutrition Centers, Inc.(4)
Edgardo A. Mercadante....... 48 Director -- General Nutrition Centers, Inc.(5)
Joshua J. Harris............ 38 Director -- General Nutrition Centers, Inc.
Joseph W. Harch............. 50 Director -- General Nutrition Centers, Inc.(5)
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(1) Holds same position(s) with General Nutrition Companies, Inc., General Nutrition Corporation, General Nutrition Distribution Company, General Nutrition Distribution, L.P., General Nutrition Government Services, Inc., General Nutrition, Incorporated, General Nutrition Investment Company, General Nutrition International, Inc., General Nutrition Sales Corporation, General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC Franchising, LLC, GNC, Limited, GNC US Delaware, Inc., GN Investment, Inc., Informed Nutrition, Inc. and Nutra Manufacturing, Inc.
(2) Also Executive Vice President, Chief Financial Officer and Director of General Nutrition Companies, Inc., General Nutrition Corporation, General Nutrition Distribution Company, General Nutrition Distribution, L.P., General Nutrition Government Services, Inc., General Nutrition, Incorporated, General Nutrition Investment Company, General Nutrition International, Inc., General Nutrition Sales Corporation, General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC Franchising, LLC, GNC, Limited, GNC US Delaware, Inc., GN Investment, Inc., Informed Nutrition, Inc. and Nutra Manufacturing, Inc.
(3) See footnote 1.
(4) Member of Compensation Committee of General Nutrition Centers, Inc.
(5) Member of Audit Committee of General Nutrition Centers, Inc.
LOUIS MANCINI became GNC's Chief Executive Officer in November 2003 and is one of GNC's directors. Mr. Mancini also serves as Chief Executive Officer and as a director for each of our subsidiaries. In
January 2003, Mr. Mancini returned to General Nutrition Companies, Inc. as Executive Vice President and Chief Marketing Officer. Prior to 2003, Mr. Mancini was President and Chief Executive Officer of Nutraceuticals Enterprises, LLC from March 2000 to January 2003. He was Chief Executive Officer of Omni Nutraceuticals from April 1999 to March 2000 and was its President and Chief Operating Officer from October 1998 to April 1999. Mr. Mancini was with us from February 1977 until October 1998 and served in various positions during that time, including President from December 1995 until October 1998, Senior Vice President and General Manager from September 1988 until December 1995, Division Manager from June 1985 to October 1986 and Regional Sales Manager from July 1984 to June 1985.
DAVID HEILMAN became GNC's Executive Vice President and Chief Financial Officer in November 2000. Mr. Heilman also serves as Executive Vice President and Chief Financial Officer and as a director for each of our subsidiaries. Mr. Heilman joined General Nutrition Companies, Inc. in December 1994 and served as our Vice President of Strategic Planning and Corporate Development from February 1995 until November 2000. During 1994, Mr. Heilman was a consultant with Meridian Group, a private investment banking concern, and from January 1990 to December 1993, Mr. Heilman served as the President of First Westinghouse Capital Corporation, a subsidiary of Westinghouse Financial Services. Mr. Heilman serves on the board of directors of the National Nutritional Foods Association.
JOSEPH FORTUNATO became GNC's Executive Vice President and Chief Operating Officer in November 2001. From October 2000 until November 2001, Mr. Fortunato served as our Executive Vice President of Retail Operations and Store Development. Mr. Fortunato began his employment with General Nutrition Companies, Inc. in October 1990 and has held various positions, including Senior Vice President of Store Development and Operations from 1998 until 2000, Vice President of Financial Operations from 1997 until 1998 and Director of Financial Operations from 1990 until 1997.
JAMES M. SANDER became GNC's Senior Vice President in November 2001. Mr. Sander has been GNC's Vice President, Chief Legal Officer and Secretary of General Nutrition Companies, Inc. and each of our subsidiaries and as a director of each of our subsidiaries since February 1993. From February 1989 until February 1993, Mr. Sander served as our Assistant General Counsel and Assistant Secretary. Prior to working at General Nutrition Companies, Inc., Mr. Sander was the Assistant Vice President and Corporate and Securities Counsel for Equimark Corporation from 1985 until 1988.
CURT LARRIMER became GNC's Senior Vice President of Finance and Corporate Controller in August 2001. From January 1995 until August 2001, Mr. Larrimer served as GNC's Vice President and Controller since January 1995. He began his employment with General Nutrition, Incorporated in the Budgets and Taxes department in 1980 and has held various positions, including Controller of the Retail and Manufacturing/ Wholesale divisions and Assistant Corporate Controller, Vice President and Controller.
MICHAEL LOCKE became GNC's Senior Vice President of Manufacturing in June 2003. Prior to that he was GNC's Senior Vice President of Operations. He served as GNC's Director of Distribution from 1986 until 1991. From 1991 until 1993, he served as GNC's Vice President of Distribution. Mr. Locke had served as GNC's Senior Vice President of Manufacturing from 1994 until 1999. From 1999 until 2003, Mr. Locke served as the head of North American manufacturing operations for GNC's former parent company, Numico.
J.J. SORRENTI became GNC's Senior Vice President and General Manager of Franchising in April 2003. From December 2000 until April 2003, Mr. Sorrenti served as GNC's Senior Vice President of Retail Stores. In October 2000, Mr. Sorrenti returned to GNC Franchising, Inc. (n/k/a GNC Franchising, LLC), and served as GNC's Vice President for Franchise Operations until December 2000. From October 1999 through October 2000, Mr. Sorrenti was the Chief Operating Officer of the franchise division of Nevada Bob's Golf in Dallas, Texas. From January 1994 through October 1999, Mr. Sorrenti was Director of Operations of GNC Franchising, Inc.
REGINALD STEELE became GNC's Senior Vice President of International Franchising in April 2001. Mr. Steele started as a Vice President of General Nutrition International Inc. in March 1994. From 1992 through March 1994, Mr. Steele was Executive Vice President and Chief Operating Officer of the Coffee Beanery, Ltd., a 300-unit gourmet coffee store retailer. From 1989 to 1992, Mr. Steele was employed as
Senior Vice President of Franchising for Shoney's Restaurants Inc., a casual dining restaurant company. From 1985 to 1989 Mr. Steele was the Vice President and Executive Vice President of Franchise Operations for Arby's, Inc., a 2,600-unit fast food chain.
SUSAN TRIMBO, PH.D. became GNC's Senior Vice President of Scientific Affairs in August 2001. Dr. Trimbo joined GNC in 1999 as Vice President of Scientific Affairs and, between 2000 and 2003, she also provided oversight for all of our former parent company, Numico USA, Inc.'s North American nutritional supplement businesses. Prior to joining GNC, Dr. Trimbo worked for Wyeth Consumer Healthcare on its Centrum vitamin business from 1997 until 1999 and for Clintec, a Nestle S.A./Baxter Healthcare Medical Nutrition venture, from 1986 until 1997.
MARGARET PEET became GNC's Senior Vice President and National Sales Director in January 2004. Margaret was formerly founder and Managing Director of Health and Diet Centre Limited, a UK-based nutritional supplements chain, which was acquired by GNC in 1995. Ms. Peet remained Managing Director under GNC's ownership until March 2003 when Diet Centre Limited was sold. At that time Ms. Peet founded Healthy Inspirations Limited, a consulting firm that worked with retailers and manufacturers to formulate initiatives designed to increase market share; until she rejoined GNC in January 2004.
TOM DOWD became GNC's Senior Vice President of Stores in March 2003. From March 2001 until March 2003 Mr. Dowd was President of Contract Supplement Manufacturing Company, a product consulting company. From 1997 until 1999, Mr. Dowd was one of GNC's Divisional Vice Presidents. From 1994 until 1997 Mr. Dowd held Divisional Sales Director position in Division Two, and from 1989 until 1994 Mr. Dowd was a Regional Sales Director.
LEE KARAYUSUF became GNC's Senior Vice President of Distribution and Transportation in December 2000 with additional responsibility for GNC's then affiliates, Rexall Sundown and Unicity. Mr. Karayusuf started as our Director of Transportation from December 1991 until March 1994 and Vice President of Transportation and Distribution from 1994 until December 2000. Prior to working at GNC in 1991, Mr. Karayusuf was responsible for transportation operations for Daily Juice Company until he began his career with GNC.
EILEEN D. SCOTT became Senior Vice President in January 2001; has been our Vice President of Human Resources since May 1996 and Director of Human Resources since October 1989. Ms. Scott joined GNC in August 1988 as Assistant Director, Human Resources. Prior to working at GNC, Ms. Scott was the Director of Compensation and Benefits at the Joseph Horne Company, a department store chain, and had held a variety of finance and human resources positions there from 1978 to 1988.
PETER P. COPSES has been the Chairman of the Board of Directors of GNC since October 2003. Mr. Copses is a founding Senior Partner at Apollo, a private securities investment fund, and has served as an officer of certain affiliates of Apollo since 1990. Prior to that time, from 1986 to 1990, Mr. Copses was initially an investment banker at Drexel Burnham Lambert Incorporated, and subsequently at Donaldson, Lufkin & Jenrette Securities Corporation, an investment bank. Mr. Copses is also a Director of Rent-A-Center, Inc., Zale Corporation, Compass Minerals International, Inc. and Resolution Performance Products Inc.
ANDREW S. JHAWAR has been a member of GNC's Board of Directors since October 2003. Mr. Jhawar is a Partner at Apollo, where he has been employed since February 2000. Prior to joining Apollo, Mr. Jhawar was an investment banker at Donaldson, Lufkin & Jenrette Securities Corporation from July 1999 until January 2000 and at Jefferies & Company, Inc. from August 1993 until December 1997. Mr. Jhawar is also a Director of Rent-A-Center, Inc.
GEORGE G. GOLLEHER has been a member of GNC's Board of Directors since December 2003. Mr. Golleher is a business consultant and private equity investor. From March 1998 to May 1999, Mr. Golleher served as President, Chief Operating Officer and director of Fred Meyer, Inc. a food and drug retailer. In May 1999, Fred Meyer, Inc. merged with Kroger Company. Prior to joining Fred Meyer, Inc., Mr. Golleher served for 15 years with Ralphs Grocery Company until March 1998, ultimately as the Chief Executive Officer and Vice Chairman of the Board. Mr. Golleher is currently also Chairman of the Board of
American Restaurant Group, Inc., and is a director of Rite Aid Corporation and director and Chief Executive Officer of Simon Worldwide, Inc.
MARY ELIZABETH BURTON has been a member of GNC's Board of Directors since December 2003. Since July 1992, Ms. Burton has also served as the Chairman and Chief Executive Officer of BB Capital, Inc., a management services and advisory company, which she owns. From June 1998 until April 1999, Ms. Burton served as the Chief Executive Officer of The Cosmetic Center, Inc., a specialty retailer of cosmetics and fragrances. From July 1991 to June 1992, Ms. Burton also served as the Chief Executive Officer of PIP Printing, Inc., a leading business printing franchise chain. In addition, Ms. Burton was the Chief Executive Officer of Supercuts, Inc. from September 1987 until May 1991, as well as having served in various other senior executive level capacities in the retailing industry. Ms. Burton currently also serves on the Board of Directors of Staples, Inc., The Sports Authority, Inc., Rent-A-Center, Inc., Zale Corporation and Aeropostale, Inc.
ROBERT J. DINICOLA has been a member of GNC's Board of Directors since December 2003. Mr. DiNicola is a 32-year veteran of the retail industry. He currently serves as the Chairman of the Board of Zale Corporation since December 2003. Mr. DiNicola was previously the Chairman and Chief Executive Officer of Zale Corporation from February 2001 through July 2002 and from April 1994 through July 1999. From 1991 to 1994, prior to joining Zale Corporation, Mr. DiNicola served as the Chairman and Chief Executive Officer of the Bon Marche, a division of Federated Department Stores. From 1989 to 1991, Mr. DiNicola was a general merchandising manager of Rich's, a division of Federated Department Stores.
EDGARDO A. MERCADANTE has been a member of GNC's Board of Directors since December 2003. Mr. Mercadante is currently Chairman and Chief Executive Officer of Familymeds Group, Inc., a company that operates specialty clinic-based pharmacies and vitamin centers. Prior to joining Familymeds, Mr. Mercadante was President and Chief Executive Officer of APP, Inc., a pharmacy benefit management company, which he co-founded in 1991. Additionally from 1987 to 1996, Mr. Mercadante was President of Arrow Corp., a franchise pharmacy retailer. Prior to joining Arrow, Mr. Mercadante was Chief Operating Officer of Appell Management Corp., a company that established licensed pharmacy outlets in supermarkets. From 1980 to 1986, Mr. Mercadante was a Division Manager at Rite Aid Corporation.
JOSHUA J. HARRIS has been a member of GNC's Board of Directors since December 2003. Mr. Harris is a founding Senior Partner at Apollo and has served as an officer of certain affiliates of Apollo since 1990. Prior to that time, Mr. Harris was a member of the Mergers and Acquisitions Department of Drexel Burnham Lambert Incorporated, an investment bank. Mr. Harris is also a Director of Breuners Home Furnishings Corporation, Compass Minerals International, Inc., Pacer International, Inc., Quality Distribution Inc., Resolution Performance Products Inc. and Nalco Company.
JOSEPH W. HARCH has been a member of GNC's Board of Directors since February 2004. Mr. Harch is a Certified Public Accountant and has been in the securities business since 1979. Mr. Harch founded Harch Capital Management, Inc. (HCM) in 1991. At HCM, Mr. Harch has worked as a research analyst, investment strategist and portfolio manager for HCM's high yield fixed income and equity accounts. Between 1979 and 1991, Mr. Harch was a senior investment banker with the firms of Bateman Eichler, Hill Richards, Prudential Bache Securities, Drexel Burnham Lambert, Inc. ("Drexel Burnham") and Donaldson, Lufkin & Jenrette, Inc. From October 1988 through February 1990, Mr. Harch was the National High Yield Sales Manager at Drexel Burnham, where he managed its high yield sales force and syndicate and was responsible for new account development and origination.
BOARD COMPOSITION
As of February 5, 2004, GNC's Board of Directors was composed of nine directors and the Board of Directors of each of General Nutrition Companies, Inc., General Nutrition Corporation, General Nutrition Distribution Company, General Nutrition Government Services, Inc., General Nutrition, Incorporated, General Nutrition Investment Company, General Nutrition International, Inc., General Nutrition Sales Corporation, General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC, Limited, GNC US Delaware, Inc.,
GN Investment, Inc., Informed Nutrition, Inc. and Nutra Manufacturing, Inc. was composed of three directors and in the case of GNC Franchising, LLC, the Management Committee was comprised of three managers.
Each director of each of the registrants serves for annual terms and until his or her successor is elected and qualified and in the case of GNC Franchising, LLC, each manager serves until removal or resignation. The annual stockholders meeting for General Nutrition Centers, Inc. is held at such date and at such time as designated by the Board of Directors from time to time, at which the directors are elected. The annual stockholders meetings for General Nutrition Corporation, General Nutrition, Incorporated, General Nutrition Companies, Inc., GNC US Delaware, Inc., GN Investment, Inc., General Nutrition Investment Company, General Nutrition Sales Corporation and Nutra Manufacturing, Inc. (f/k/a Nutricia Manufacturing USA, Inc.) are scheduled to be held on the first Monday in July. The annual stockholders meetings for General Nutrition Distribution Company, General Nutrition Government Services, Inc., General Nutrition International, Inc., General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC, Limited and Informed Nutrition, Inc. are scheduled to be held on the second Thursday in June. Apollo indirectly controls a majority of the common stock of General Nutrition Centers Holding Company, our parent company. Our parent company, as our sole stockholder, has the power to name and replace all of our directors.
COMPENSATION OF DIRECTORS
The non-employee individual members of GNC's Board of Directors receive a one-time grant of 25,000 fully vested options to purchase shares of common stock of our parent company for their service on GNC and its parent company's Boards of Directors. Each non-employee member of the Board of Directors receives a stipend of $2,000 for each board meeting attended. Additionally, each member of our Audit Committee and Compensation Committee receives a stipend of $1,000 for each meeting attended in person or $500 for each meeting attended telephonically.
AUDIT COMMITTEE
The responsibilities of the Board of Directors of GNC, Inc. include oversight of the systems of internal control, preparation and presentation of financial reports and compliance with applicable laws, regulations and company policies. The Board of Directors of GNC delegates certain responsibilities to the Audit Committee to assist the Board of Directors in the fulfillment of its duties to GNC and its stockholders. The Audit Committee currently consists of Messrs. Jhawar, Mercadante and Harch. The Audit Committee assists the Board of Directors in its oversight of:
- the integrity of the financial statements;
- compliance with legal and regulatory requirements;
- the qualification and independence of independent auditors; and
- the performance of the independent auditors and of GNC's internal audit function.
COMPENSATION COMMITTEE
The board of directors of GNC and our parent company have formed Compensation Committees which have identical membership and are each currently comprised of Messrs. Copses, DiNicola and Golleher. Our Compensation Committee reviews and makes recommendations to our board of directors regarding senior officers' salaries and bonuses and to our parent company regarding grants of stock options and other forms of equity compensation. The Compensation Committee of our parent company assists its board of directors in the administration of the parent company's stock option and other equity incentive plans.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Mr. Copses, the Chairman of the Compensation Committee of GNC, was an executive officer of GNC from its inception in October 2003 and of its parent company, General Nutrition Centers Holding Company,
from its inception in November 2003, in each case until his resignation as an executive officer in February 2004 following consummation of the Acquisition. Mr. Copses is also a founding Senior Partner at Apollo Management, L.P., an affiliate of our equity sponsor. He serves as Chairman of the Board of Directors and the Compensation Committee for GNC and its parent company, General Nutrition Centers Holding Company. Except as described above, no member of the Compensation Committee has ever been an executive officer of GNC or its subsidiaries or been an affiliate of GNC or one of its affiliates. In the year ended December 31, 2003, no other executive officer of GNC served on the Board of Directors or Compensation Committee of another entity.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation paid by GNC to its chief executive officer and its four most highly compensated executive officers (collectively, the "named executive officers") for services rendered in all capacities to GNC during the year ended December 31, 2003:
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ------------------------------------------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS(1) COMPENSATION(2) (#)(3) COMPENSATION(4)
--------------------------- ---- ---------- -------- --------------- ------------ ---------------
Louis Mancini............ 2003 $285,577 $201,308 $99,009 458,000 $ 450,000
President and Chief
Executive Officer and
Director
David Heilman............ 2003 $284,231 $179,396 $44,380 310,333 $1,048,777
Executive Vice President
and Chief Financial
Officer
Joseph Fortunato......... 2003 $308,846 $195,705 $52,853 310,333 $ 899,999
Executive Vice President
and Chief Operating
Officer
Susan Trimbo............. 2003 $208,494 $ 99,022 $36,994 54,300 $ 528,476
Senior Vice President of
Scientific Affairs
Reginald Steele.......... 2003 $199,504 $ 95,328 $38,297 54,300 $ 601,504
Senior Vice President of
International Franchising
Michael Meyers........... 2003 $525,000 $933,175 $54,118 35,000 $4,149,973
Former President and Former
Chief Executive
Officer(5)
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(1) Incentive compensation is based on performance in the year shown but determined and paid the following year. For Mr. Mancini and Mr. Meyers, respectively, the amounts also include incentives of $30,000 and $516,615, determined and paid in year 2003.
(2) Includes cash amounts received by the persons listed in this table for (a) supplemental retirement purposes in the following amounts:Mr. Mancini $21,125; Mr. Heilman $14,138; Mr. Fortunato $14,138; Ms. Trimbo $13,596; Mr. Steele $13,596; and Mr. Meyers $14,138; (b) professional assistance and personal life and disability insurance in the following amounts. Mr. Mancini $15,503; Mr. Heilman $14,845; Mr. Fortunato $14,845; Ms. Trimbo $4,759; Mr. Steele $4,759; and Mr. Meyers $14,845; and (c) relocation expenses in the following amount for Lou Mancini $38,399.
(3) Includes stock appreciation rights ("SAR's") granted by the former owner, Royal Numico, NV in the following amounts: Mr. Mancini 15,000; Mr. Heilman 15,000; Mr. Fortunato 15,000; Ms. Trimbo 10,000; Mr. Steele 10,000 and Mr. Meyers 35,000. The SAR's have an exercise price of E 10.71 and are based upon the market price of Royal Numico N.V. common stock.
(4) Includes payments received by the individuals listed in this table in connection with the sale of the company in 2003 for (a) retention bonuses in the following amounts: Mr. Mancini $150,000; Mr. Heilman $151,250; Mr. Fortunato $165,000; and Mr. Meyers $2,100,000; (b) change in control bonuses in the following amounts: Mr. Mancini $300,000; Mr. Heilman $302,500; Mr. Fortunato $330,000; Ms. Trimbo $208,494; Mr. Steele $201,536 and Mr. Meyers $1,050,000; (c) Numico stock purchase plan loan forgiveness under the Numico 1999 Management Stock Purchase Plan in the following amounts: Mr. Heilman -- $595,027; Mr. Fortunato -- $404,999; Ms. Trimbo -- $319,982; Mr. Steele -- $399,968; and Mr. Meyers -- $899,973; and (d) a success bonus of $100,000 for Mr. Meyers.
(5) Mr. Meyers served as President and Chief Executive Officer and Director of General Nutrition Companies, Inc., the predecessor company to GNC, prior to the consummation of the Acquisition. Concurrently with the consummation of the Acquisition, Mr. Meyers resigned as Chief Executive Officer and Director of General Nutrition Companies, Inc. and its affiliates.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
------------------------------------------------------------------------------ ---------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE OF
SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
---- ---------- -------------- ----------- ---------- ------------ ------------
Louis Mancini......... 443,000 17 $6.00/share 12/5/2010 $1,082,073 $2,521,690
David Heilman......... 295,333 11.3 $6.00/share 12/5/2010 $ 721,381 $1,681,125
Joseph Fortunato...... 295,333 11.3 $6.00/share 12/5/2010 $ 721,381 $1,681,125
Susan Trimbo.......... 53,160 1.7 $6.00/share 12/5/2010 $ 108,207 $ 252,169
Reginald Steele....... 44,300 1.7 $6.00/share 12/5/2010 $ 108,207 $ 252,169
Michael Meyers........ 0 0 N/A N/A -- --
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(1) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by the rules of the SEC. Our actual stock price appreciation over the 7 year option term will likely differ from these assumed rates.
In addition, we may from time to time give our executive officers additional benefits, none of which we believe to be material.
EMPLOYMENT AGREEMENTS
We entered into employment agreements with Messrs, Mancini, Heilman, Fortunato and Steele and Ms. Trimbo in connection with the Acquisition. The agreements provide for an employment term up to December 31, 2005, subject to automatic annual one-year renewals commencing on October 31, 2004 and each October 31st thereafter, unless GNC or the executive provides 30 days' advance notice of termination. The agreements also provide for an annual base salary of $525,000 for Mr. Mancini, $350,000 for each of Messrs. Heilman and Fortunato, $201,536 for Mr. Steele and $208,000 for Ms. Trimbo. Such salary is subject to annual review by the Board of Directors or Compensation Committee.
The executives are entitled to certain annual performance bonus payments pursuant to the terms of their employment agreements. The bonus payments for Messrs. Mancini, Heilman and Fortunato are based upon a range of annual target levels of EBITDA and cash flow generation goals set by the Board of Directors or Compensation Committee. Such bonus is payable in an amount within a range of 50% to 120% of Mr. Mancini's annual base salary and 40% to 100% of Mr. Heilman's and Mr. Fortunato's annual base salaries, all of which are dependent upon meeting or exceeding EBITDA and cash flow generation goals for the applicable year. Such bonus is payable only if the executive is employed by GNC on the last day of the bonus period. The bonus payments for Mr. Steele and Ms. Trimbo are in an amount to be determined by the Compensation Committee in its discretion.
Pursuant to the terms of the employment agreements and the General Nutrition Centers Holding Company 2003 Omnibus Stock Option Plan, Messrs. Heilman and Fortunato were each granted an option to purchase 295,333 shares of Common Stock, Mr. Mancini was granted on option to purchase 443,000 shares, Ms. Trimbo was granted an option to purchase 53,160 shares and Mr. Steele was granted an option to purchase 44,300 shares, all at an exercise price of $6 per share. The options vest in equal parts, annually, over a four year period on each anniversary of the effective date of the Acquisition. In the event of a change of control of GNC, all options granted to Messrs. Mancini, Heilman, Fortunato and Steele and Ms. Trimbo shall accelerate and become fully vested and exercisable. Change of control is defined under the employment agreements to mean (i) the occurrence of an event including a merger or consolidation of GNC, if following
the transaction, any person or group becomes the beneficial owner (directly or indirectly) of more than 50% of the voting power of the equity interests of GNC or any successor company provided that Apollo and certain related parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors and further provided that the transfer of 100% of the voting stock of GNC to an entity that has an ownership structure identical to GNC prior to such transfer, such that GNC becomes a wholly owned subsidiary of such entity, shall not be treated as a change of control, (ii) the sale, lease, transfer, conveyance or other disposition of substantially all of the assets of GNC and its subsidiaries taken as a whole, (iii) after an initial public offering of capital stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office; or (iv) GNC dissolves or adopts a plan of complete liquidation.
The employment agreements also provide for certain benefits upon
termination of the executive's employment. Upon death or disability, the
executive (or his or her estate) shall be entitled to the executive's current
base salary (less any payments made under Company-sponsored disability benefit
plans) for the remainder of his or her employment period, plus a pro rata share
of his or her annual bonus based on actual employment. With respect to Messrs.
Mancini, Heilman and Fortuanto the bonus payment will be made provided that
bonus targets are met for the year of such termination. With respect to Mr.
Steel and Ms. Trimbo, such bonus payments are subject to the discretion of the
Compensation Committee. Upon termination of employment by GNC without cause or
voluntarily by the executive for good reason, the executive is entitled to
salary continuation for the remainder of his employment period, a pro rata share
of bonus based on actual employment (provided that bonus targets are met for the
year of such termination or subject to the discretion of the Compensation
Committee, as the case may be) and continuation of certain welfare benefits and
perquisites through the remainder of the employment term or during the
continuation of base salary for the 2-year period following a change of control
(further described as follows). If such termination occurs upon or within 6
months following a change of control, we will continue to pay the executive's
base salary for a 2 year period following such date of termination. The
executive may, in such circumstances, elect a lump sum payment based upon a
present value discount rate equal to 6% per year. Payment of benefits following
termination by the Company without cause or voluntarily by the executive for
good reason will be contingent upon execution of a written release by the
executive. "Good Reason" is defined in the employment agreements to mean (i) the
failure of the Company to comply with a material obligation imposed by the
employment agreement, (ii) assignment of duties or responsibilities to the
executive which are materially inconsistent with his positions, duties,
responsibilities, titles or offices in effect on the date of the Acquisition,
(iii) reduction in base salary, or (iv) requiring the executive to be based at
any office or location more than 75 miles from the principal office of the
Company. "Cause" is defined in the employment agreements to mean (i) a material
failure by the executive to comply with any material obligation under the
employment agreement (ii) conviction of, or pleading guilty or nolo contendere
to, or being indicted for any felony (iii) theft, embezzlement, or fraud, (iv)
engaging in an activity that gives rise to a material conflict of interest that
is not cured within 10 days of written notice and a demand to cure, or (v) the
misappropriation of any material business interest.
The employment agreements provide that, upon termination for cause or voluntary resignation by the executive, the executive shall be entitled to all unpaid salary and benefits accrued to the date of such termination. Such termination is subject to 30 days' advance notice to the other party and, in the case of termination for cause, provides the executive with an opportunity to cure within a 30-day period following receipt of such notice.
The employment agreements and stock option agreements provide that stock options which are not exercisable as of the date of termination of employment shall expire and options which are exercisable as of such date will remain exercisable for a 90-day period (180 days in the event of the executive's death). Stock of GNC held by the executive is subject to a call right by GNC for a period of 180 days (270 days in the
case of death) from the date of termination. Such call right is for an amount equal to the product of (x) all shares held by such executive and (y) the fair market value of the stock, as determined by our Board of Directors. Messrs. Mancini, Heilman and Fortunato have the right under their employment agreements to request that the Board of Directors obtain a fairness opinion from a nationally recognized accounting firm or investment bank chosen by the Company, to review the Board's fair market value determination of the Common Stock. If such fairness opinion validates the fair market determination of the Board, the gross purchase price paid to the executive for such shares shall be reduced by 10% (excluding such other tax or withholding as may be required by applicable law).
The employment agreements further provide that if any payment to the executive would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, then the amount of such payments shall be reduced to the highest amount that may be paid by the Company without subjecting such payment to the excise tax. The executive shall have the right to designate those payments or benefits that shall be reduced or eliminated. Notwithstanding the foregoing, in the employment agreements for Messrs. Mancini, Heilman and Fortunato, the reduction shall not apply if the executive would, on a net after-tax basis, receive less compensation than if the payment were not so reduced. All determinations with regard to such excise tax and any reduction in connection with payments to the executive shall be made by any nationally recognized accounting firm that acts as the Company's outside auditors at the time of such determination.
The employment agreements set forth certain terms of confidentiality concerning trade secrets and confidential or proprietary information which may not be disclosed by the executive except as required by court order or applicable law. The agreements further provide certain non-competition and non-solicitation provisions which restrict the executive and certain relatives from engaging in activities which compete against the interests of GNC during the term of his employment and for the longer of the first anniversary of the date of termination of employment or the period during which the executive receives termination payments.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our parent company, General Nutrition Centers Holding Company, owns all of our issued and outstanding capital stock. GNC directly or indirectly owns all of the outstanding capital stock of each of the other registrants.
The table below sets forth the security ownership of the directors and officers of GNC and certain individuals and entities that beneficially own more than 5% of the outstanding common stock of our parent company, General Nutrition Centers Holding Company at February 10, 2004:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
----------------------------
NAME OF OFFICER OR DIRECTOR NUMBER PERCENTAGE
--------------------------- ---------- ----------
GNC Investors, LLC(1)....................................... 28,743,333(3)(4) 95.24%
Mary Elizabeth Burton(1).................................... 158,333(4)(5) *
Peter P. Copses(1).......................................... 28,768,333(3)(4)(6) 95.32%
Robert J. DiNicola(1)....................................... 91,667(4)(7) *
Joseph Fortunato(2)......................................... 62,500(4) *
George G. Golleher(1)....................................... 105,000(4)(8) *
Joshua J. Harris(1)......................................... 28,768,333(3)(4)(9) 95.32%
David Heilman(2)............................................ 62,500(4) *
Andrew S. Jhawar(1)......................................... 28,813,333(3)(4)(10) 95.47%
Louis Mancini(2)............................................ 100,000(4) *
Edgardo A. Mercadante(2).................................... 78,333(4)(11) *
Joseph W. Harch(2).......................................... 25,000(12) *
Reginald Steele(2).......................................... 18,750(4) *
Susan Trimbo(2)............................................. 11,250(4) *
ALL OFFICERS AND DIRECTORS AS A GROUP(3)(13)................ 29,574,166 97.99%
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* Less than 1% of the outstanding shares.
(1) c/o Apollo Management, L.P., Two Manhattanville Road, Purchase, New York 10577.
(2) c/o General Nutrition Centers, Inc., 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222.
(3) GNC Investors, LLC is the equity sponsor of General Nutrition Centers Holding Company. GNC Investors, LLC is controlled by its manager, Apollo Management V, L.P. Peter P. Copses, Joshua J. Harris and Andrew S. Jhawar, three of our directors, are partners of Apollo Management V, L.P. Mr. Copses, Mr. Harris and Mr. Jhawar disclaim beneficial ownership of the shares held by GNC Investors, LLC.
(4) On December 5, 2003, in connection with the Acquisition, General Nutrition Centers Holding Company entered into a stockholders' agreement with each of its stockholders. Pursuant to the stockholders' agreement, each stockholder agreed to give Apollo Investment Fund V, L.P. a voting proxy to vote with respect to certain matters as set forth in the stockholders' agreement. As a result, Apollo Investment Fund V, L.P. may be deemed to be the beneficial owner of the shares of common stock held by the parties to the stockholders' agreement. Apollo Investment Fund V, L.P. expressly disclaims beneficial ownership of such shares of common stock held by each of the parties to the stockholders' agreement, except to the extent of its pecuniary interest in GNC Investors, LLC.
(5) Ms. Burton was granted 75,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of her amended and restated stock option agreement, all 75,000 of these options vested on February 5, 2004.
(6) Mr. Copses was granted 25,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 25,000 of these options vested on February 5, 2004.
(7) Mr. DiNicola was granted 50,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 50,000 of these options vested on February 5, 2004.
(8) Mr. Golleher was granted 55,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 55,000 of these options vested on February 5, 2004.
(9) Mr. Harris was granted 25,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 25,000 of these options vested on February 5, 2004.
(10) Mr. Jhawar was granted 25,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 25,000 of these options vested on February 5, 2004.
(11) Mr. Mercadante was granted 45,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his amended and restated stock option agreement, all 45,000 of these options vested on February 5, 2004.
(12) Mr. Harch was granted 25,000 options to purchase common stock on December 5, 2003. Pursuant to the terms of his stock option agreement, all 25,000 of these options vested on February 5, 2004.
(13) Includes 28,743,333 shares held by GNC Investors, LLC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Management and Advisory Services
Immediately prior to the consummation of the Acquisition, we entered into a management agreement with Apollo Management V, L.P., which controls GNC Investors, LLC, our equity sponsor. Three of our directors, Peter P. Copses, Joshua J. Harris and Andrew S. Jhawar, are partners of Apollo Management V, L.P. Under this management agreement, Apollo Management agreed to provide certain management services to us in exchange for a fee of $1.5 million per year, plus reimbursement of expenses. Apollo Management may provide additional services to us from time to time pursuant to the management agreement, including financial advisory and investment banking services in connection with certain transactions for which we will pay customary fees and expenses. Under the management agreement, we agreed to provide customary indemnification. In addition, on December 5, 2003, we incurred a transaction fee of $7.5 million (plus reimbursement of expenses) to Apollo Management for financial advisory services rendered in connection with the Acquisition, which was paid in January 2004.
Stockholders' Agreement
Upon consummation of the Acquisition, our parent company, General Nutrition Centers Holding Company, entered into a stockholders' agreement with each of its stockholders, which includes certain of our directors and members of our management and our equity sponsor. The stockholders' agreement gives Apollo Investment V, L.P., an affiliate of Apollo Management, the right to appoint all of the members of our board of directors and, until the occurrence of certain events, the right to vote all shares of our parent's common stock and preferred stock subject to the stockholders' agreement on all matters. In addition, the stockholders' agreement contains customary drag rights, tag along rights and rights of first refusal with respect to transfers of our parent's common stock.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Subject to terms and conditions detailed in this prospectus, we will accept for exchange old notes that are properly tendered on or prior to the expiration date and not withdrawn as permitted below. When we refer to the term expiration date, we mean 5:00 p.m., New York City time, , 2004, the 21st business day following the date of this prospectus. We may, however, in our sole discretion, extend the period of time that the exchange offer is open. In such event, the term expiration date means the latest time and date to which the exchange offer is extended.
As of the date of this prospectus, $215,000,000 principal amount of old notes are outstanding. We are sending this prospectus, together with the letter of transmittal, to all holders of old notes that we are aware of on the date of this prospectus.
We expressly reserve the right, at any time, to extend the period of time that the exchange offer is open, and delay acceptance for exchange of any old notes, by giving oral or written notice of an extension to the holders of the old notes as described below. During any extension, all old notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder as promptly as practicable after the expiration or termination of the exchange offer.
Old notes tendered in the exchange offer must be in denominations of principal amount of $1,000 and any integral multiple thereof.
We expressly reserve the right to amend or terminate the exchange offer, and not to exchange any old notes, upon the occurrence of any of the conditions of the exchange offer specified under "-- Conditions to the Exchange Offer." We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable. In the case of any extension, we will issue a notice by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.
PROCEDURES FOR TENDERING OLD NOTES
Your tender to us of old notes as set forth below and our acceptance of old notes will constitute a binding agreement between us and you upon the terms and subject to the conditions detailed in this prospectus and in the accompanying letter of transmittal. Except as set forth below, to tender old notes for exchange in the exchange offer, you must transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal or, in the case of a book-entry transfer, an agent's message in place of the letter of transmittal, to U.S. Bank National Association, as exchange agent, at the address set forth below under "-- Exchange Agent" on or prior to the expiration date. In addition, either:
- certificates for old notes must be received by the exchange agent along with the letter of transmittal, or
- a timely confirmation of a book-entry transfer, which we refer to in this prospectus as a book-entry confirmation, of old notes, if this procedure is available, into the exchange agent's account at DTC pursuant to the procedure for book-entry transfer described beginning on page 84 must be received by the exchange agent prior to the expiration date, with the letter of transmittal or an agent's message in place of the letter of transmittal, or the holder must comply with the guaranteed delivery procedures described below.
The term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant stating that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce such letter of transmittal against such participant.
The method of delivery of old notes, letters of transmittal and all other required documents is at your election and risk. If such delivery is by mail, it is recommended that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. No letter of transmittal or old notes should be sent to us.
Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the old notes surrendered for exchange are tendered:
- by a holder of the old notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal, or
- for the account of an Eligible Institution (as defined below).
In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, such guarantees must be by a firm which is a member of the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Program (we refer to each such entity as an Eligible Institution in this prospectus). If old notes are registered in the name of a person other than the signer of the letter of transmittal, the old notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as we or the exchange agent determine in our sole discretion, duly executed by the registered holders with the signature thereon guaranteed by an Eligible Institution.
We or the exchange agent in our sole discretion will make a final and binding determination on all questions as to the validity, form, eligibility, including time of receipt, and acceptance of old notes tendered for exchange. We reserve the absolute right to reject any and all tenders of any particular old note not properly tendered or to not accept any particular old note which acceptance might, in our judgment or our counsel's, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular old note either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer. Our or the exchange agent's interpretation of the terms and conditions of the exchange offer as to any particular old note either before or after the expiration date, including the letter of transmittal and the instructions thereto, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within a reasonable period of time, as we determine. We are not, nor is the exchange agent or any other person, under any duty to notify you of any defect or irregularity with respect to your tender of old notes for exchange, and no one will be liable for failing to provide such notification.
If the letter of transmittal is signed by a person or persons other than the registered holder or holders of old notes, such old notes must be endorsed or accompanied by powers of attorney signed exactly as the name(s) of the registered holder(s) that appear on the old notes.
If the letter of transmittal or any old notes or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing. Unless waived by us or the exchange agent, proper evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal.
By tendering old notes, you represent to us that, among other things:
- the new notes acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving such new notes, whether or not such person is the holder; and
- neither the holder nor such other person has any arrangement or understanding with any person, to participate in the distribution of the new notes.
In the case of a holder that is not a broker-dealer, that holder, by tendering, will also represent to us that the holder is not engaged in or does not intend to engage in a distribution of the new notes.
If you are our "affiliate," as defined under Rule 405 under the Securities Act, and engage in or intend to engage in or have an arrangement or understanding with any person to participate in a distribution of such new notes to be acquired pursuant to the exchange offer, you or any such other person:
- could not rely on the applicable interpretations of the staff of the SEC; and
- must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. See "Plan of Distribution." The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes properly tendered and will issue the new notes promptly after acceptance of the old notes. See "-- Conditions to the Exchange Offer." For purposes of the exchange offer, we will be deemed to have accepted properly tendered old notes for exchange if and when we give oral (confirmed in writing) or written notice to the exchange agent.
The holder of each old note accepted for exchange will receive a new note in the amount equal to the surrendered old note. Accordingly, holders of new notes on the record date for the first interest payment date following the consummation of the exchange offer will received interest accruing from the most recent date that interest has been paid on the old notes. Holders of new notes will not receive any payment in respect of accrued interest on old notes otherwise payable on any interest payment date, the record date for which occurs on or after the consummation of the exchange offer.
In all cases, issuance of new notes for old notes that are accepted for exchange will only be made after timely receipt by the exchange agent of:
- certificates for such old notes or a timely book-entry confirmation of such old notes into the exchange agent's account at DTC,
- a properly completed and duly executed letter of transmittal or an agent's message in lieu thereof, and
- all other required documents.
If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to the tendering holder or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry procedures described below, the non-exchanged old notes will be credited to an account maintained with DTC, as promptly as practicable after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFERS
For purposes of the exchange offer, the exchange agent will request that an account be established with respect to the old notes at DTC within two business days after the date of this prospectus, unless the exchange agent already has established an account with DTC suitable for the exchange offer. Any financial institution that is a participant in DTC may make book-entry delivery of old notes by causing DTC to transfer such old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Although delivery of old notes may be effected through book-entry transfer at DTC, the letter of transmittal or facsimile thereof or an agent's message in lieu thereof, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and received by the exchange agent at the address set forth under "-- Exchange Agent" on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your old notes and your old notes are not immediately available, or time will not permit your old notes or other required documents to reach the exchange agent before the expiration date, a tender may be effected if:
- prior to the expiration date, the exchange agent received from such Eligible Institution a notice of guaranteed delivery, substantially in the form we provide, by telegram, telex, facsimile transmission, mail or hand delivery, setting forth your name and address, the amount of old notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed appropriate letter of transmittal or facsimile thereof or agent's message in lieu thereof, with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by such Eligible Institution with the exchange agent, and
- the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed appropriate letter of transmittal or facsimile thereof or agent's message in lieu thereof, with any required signature guarantees and all other documents required by the letter of transmittal, are received by the exchange agent within three NYSE trading days after the date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw your tender of old notes at any time prior to the expiration date. To be effective, a written notice of withdrawal must be received by the exchange agent at one of the addresses set forth under "-- Exchange Agent." This notice must specify:
- the name of the person having tendered the old notes to be withdrawn,
- the old notes to be withdrawn, including the principal amount of such old notes, and
- where certificates for old notes have been transmitted, the name in which such old notes are registered, if different from that of the withdrawing holder.
If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution, unless such holder is an Eligible Institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC.
We or the exchange agent will make a final and binding determination on all questions as to the validity, form and eligibility, including time of receipt, of such notices. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes tendered for exchange but not exchanged for any reason will be returned to the holder without cost to the holder, or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described above, the old notes will be credited to an account maintained with DTC for the old notes as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be re-tendered by following one of the procedures
described under "-- Procedures for Tendering Old Notes" above at any time on or prior to the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we are not required to accept for exchange, or to issue new notes in exchange for, any old notes and may terminate or amend the exchange offer, if any of the following events occur prior to acceptance of such old notes:
- the exchange offer violates any applicable law or applicable interpretation of the staff of the SEC;
- an action or proceeding shall have been instituted or threatened in any court or by any governmental agency that might materially impair our ability to proceed with the exchange offer;
- we shall not have received all governmental approvals that we deem necessary to consummate the exchange offer; or
- there has been proposed, adopted, or enacted any law, statute, rule or regulation that, in our reasonable judgment, would materially impair our ability to consummate the exchange offer.
The conditions stated above are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any condition or may be waived by us in whole or in part at any time in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right and each such right will be deemed an ongoing right which may be asserted at any time.
In addition, we will not accept for exchange any old notes tendered, and we will not issue new notes in exchange for any such old notes, if at such time any stop order by the SEC is threatened or in effect with respect to the Registration Statement, of which this prospectus constitutes a part, or the qualification of the indenture under the Trust Indenture Act.
EXCHANGE AGENT
U.S. Bank National Association has been appointed as the exchange agent for the exchange offer. All executed letters of transmittal should be directed to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows:
U.S. Bank National Association, Exchange Agent By Hand, Overnight Delivery or by Mail:
60 Livingston Avenue
St. Paul, Minnesota 55107-2292
Attention: Specialized Finance
By Facsimile Transmission
(for Eligible Institutions only):
(651) 495-8097
Confirm by Telephone:
(800) 934-6802
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The principal solicitation is being made by mail by U.S. Bank National Association, as exchange agent. We will pay the exchange agent customary fees for its services, reimburse the exchange agent for its reasonable out-of-pocket expenses incurred in connection with the provision of these services and pay other registration expenses, including fees and expenses of the trustee under the indenture relating to the new notes, filing fees, blue sky fees and printing and distribution expenses. We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer.
Additional solicitation may be made by telephone, facsimile or in person by our and our affiliates' officers and regular employees and by persons so engaged by the exchange agent.
ACCOUNTING TREATMENT
We will record the new notes at the same carrying value as the old notes, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The expenses of the exchange offer will be amortized over the term of the new notes.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with the tender of old notes in the exchange offer unless you instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder. In those cases, you will be responsible for the payment of any potentially applicable transfer tax.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
If you do not exchange your old notes for new notes in the exchange offer, your old notes will continue to be subject to the provisions of the indenture relating to the notes regarding transfer and exchange of the old notes and the restrictions on transfer of the old notes described in the legend on your certificates. These transfer restrictions are required because the old notes were issued under an exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the old notes may not be offered or sold unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not plan to register the old notes under the Securities Act.
Under existing interpretations of the Securities Act by the SEC's staff contained in several no-action letters to third parties, and subject to the immediately following sentence, we believe that the new notes would generally be freely transferable by holders after the exchange offer without further registration under the Securities Act, subject to certain representations required to be made by each holder of new notes, as set forth below. However, any purchaser of new notes who is one of our "affiliates" as defined in Rule 405 under the Securities Act or who intends to participate in the exchange offer for the purpose of distributing the new notes:
- will not be able to rely on the interpretation of the SEC's staff;
- will not be able to tender its old notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the new notes unless such sale or transfer is made pursuant to an exemption from such requirements. See "Plan of Distribution."
We do not intend to seek our own interpretation regarding the exchange offer, and there can be no assurance that the SEC's staff would make a similar determination with respect to the new notes as it has in other interpretations to other parties, although we have no reason to believe otherwise.
Each broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by it as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
DESCRIPTION OF SENIOR CREDIT FACILITY
As part of the Acquisition, we entered into a senior credit facility to be provided by a syndicate of lenders arranged by Lehman Brothers Inc. and J.P. Morgan Securities Inc. The senior credit facility consists of a $285.0 million term loan facility and a $75.0 million revolving credit facility.
Interest Rate; Fees. All borrowings under the senior credit facility bear
interest, at our option, at a rate per annum equal to (i) the higher of (x) the
prime rate (as quoted on the British Banking Association Telerate Page 5) and
(y) the federal funds effective rate, plus one half percent (0.50%) per annum
plus, in each case applicable margins of 2.00% per annum for the term loan
facility and 2.00% per annum for the revolving credit facility or (ii) the
Eurodollar rate plus applicable margins of 3.00% per annum for the term loan
facility and 3.00% per annum for the revolving credit facility, which rates, in
the case of revolving loans, may be decreased if our leverage ratio is
decreased. In addition to paying interest on outstanding principal under the
senior credit facility, we are required to pay a commitment fee to the lenders
in respect of unutilized loan commitments at a rate of 0.50% per annum.
Guarantees; Security. Our obligations under the senior credit facility are guaranteed by our parent and by each of our domestic subsidiaries. In addition, the senior credit facility is secured by first priority perfected security interests in substantially all of our existing and future assets and the existing and future assets of our subsidiary guarantors, except that only up to 65% of the capital stock of our first-tier foreign subsidiaries has been pledged in favor of the senior credit facility.
Maturity. The term loan facility matures on December 5, 2009. The revolving credit facility matures on December 5, 2008.
Prepayment; Reduction. The senior credit facility permits all or any portion of the loans outstanding thereunder to be prepaid at any time and commitments thereunder to be terminated in whole or in part at our option without premium or penalty. We are required to repay amounts borrowed under the term loan facility in nominal quarterly installments for the first five years and thereafter in substantial quarterly installments until the maturity date of the term loan facility.
Subject to certain exceptions, the senior credit facility requires that 100% of the net proceeds from certain asset sales, casualty insurance, condemnations and debt issuances, 50% of the net proceeds from certain equity offerings and 75% of excess cash flow for each fiscal year (reducing to 50% when our consolidated total debt to consolidated EBITDA is less than or equal to 3.00 to 1.00 and greater than 2.50 to 1.00 and 25% when our consolidated total debt to consolidated EBITDA is less than or equal to 2.50 to 1.00) must be used to pay down outstanding borrowings.
Covenants. The senior credit facility contains customary covenants, including financial tests (including maximum total leverage, minimum fixed charge coverage ratio and maximum capital expenditures) and certain other limitations on our and certain of our subsidiaries' ability 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 our ability to pay dividends or grant liens, engage in transactions with affiliates and change the passive holding company status of our parent.
Events of Default. The senior credit facility contains events of default,
including (subject to customary cure periods and materiality thresholds)
defaults based on (i) the failure to make payments under the senior credit
facility when due, (ii) breach of covenants, (iii) inaccuracies of
representations and warranties, (iv) cross-defaults to other material
indebtedness, (v) bankruptcy events, (vi) material judgments, (vii) certain
matters arising under the Employee Retirement Income Security Act of 1974, as
amended, (viii) the actual or asserted invalidity of documents relating to any
guarantee or security document, (ix) the actual or asserted invalidity of any
subordination terms supporting the senior credit facility and (x) the occurrence
of a change in control. If any such event of default occurs, the lenders under
the senior credit facility are entitled to accelerate the facilities and take
various other actions, including all actions permitted to be taken by a secured
creditor.
DESCRIPTION OF THE NEW NOTES
You can find the definitions of certain terms used in this description under the subheading "-- Certain Definitions." In this description, "we," "our," "us" and "GNC" refer only to General Nutrition Centers, Inc. and not to any of its subsidiaries.
GNC will issue the new notes under an indenture, dated as of December 5, 2003, among itself, as issuer, the Guarantors and U.S. Bank National Association, as trustee. This is the same indenture under which the old notes were issued. The terms of the new notes will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the indenture and the registration rights agreement. It does not restate those agreements in their entirety. Although we believe that we have disclosed in this prospectus all the material provisions of the indenture, we urge you to read the indenture because it, and not this description, define your rights as holders of the new notes. Copies of the indenture are available as set forth in this section under the caption "-- Additional Information." Certain defined terms used in this description but not defined below under "-- Certain Definitions" have the meanings assigned to them in the indenture.
The registered holder of a new note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture.
NEW NOTES VERSUS THE OLD NOTES
The new notes are substantially identical to the old notes except that the transfer restrictions and registration rights provisions do not apply to the new notes.
THE NEW NOTES
The new notes:
- will be general unsecured obligations of GNC;
- will be subordinated in right of payment to all existing and future Senior Indebtedness of GNC;
- will be structurally subordinated to all obligations of our non-guarantor Subsidiaries;
- will be pari passu in right of payment with any existing and future Senior Subordinated Indebtedness of GNC;
- will be senior in right of payment to any future existing and Subordinated Obligations of GNC; and
- will be unconditionally guaranteed by the Guarantors.
THE NOTE GUARANTEES
The new notes will be guaranteed by all of GNC's current and future Domestic Subsidiaries, other than Immaterial Subsidiaries.
Each guarantee of the new notes:
- will be a general unsecured obligation of that Guarantor;
- will be subordinated in right of payment to all existing and future Guarantor Senior Indebtedness of that Guarantor;
- will be pari passu in right of payment with any existing and future Guarantor Senior Subordinated Indebtedness of that Guarantor; and
- will be senior in right of payment to any existing and future Subordinated Obligations of that Guarantor.
As of December 31, 2003, GNC and the Guarantors had total Senior Indebtedness of approximately $299.2 million (excluding $5.4 million of letters of credit, $4.4 million of which were cash collateralized), and GNC had the ability to borrow up to an additional $74.0 million under the Senior Credit Facility, after giving effect to the use of $1.0 million of the revolving credit facility to secure letters of credit, which would be Senior Indebtedness. As indicated above and as discussed in detail below under the subheading "-- Ranking," payments on the new notes and under the Note Guarantees will be subordinated to the payment of Senior Indebtedness and Guarantor Senior Indebtedness. The indenture will permit us and the Guarantors to incur additional Senior Indebtedness and Guarantor Senior Indebtedness.
None of our Foreign Subsidiaries or Immaterial Subsidiaries will Guarantee the new notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. Our non-guarantor Subsidiaries accounted for less than 4.6% of our net revenues for the year ended December 31, 2003, and less than 5.2% of our total assets as of December 31, 2003.
As of the date of the indenture, all of our Subsidiaries were "Restricted Subsidiaries." However, under the circumstances described under "-- Certain Covenants -- Designation of Unrestricted Subsidiaries," we will be permitted to designate certain of our Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries will not guarantee the new notes.
PRINCIPAL, MATURITY AND INTEREST
GNC will issue $215 million in aggregate principal amount of new notes in this offering. The indenture provides that GNC may issue additional notes from time to time after this offering in an unlimited principal amount without the consent of the holders of the notes. Any offering of additional notes is subject to compliance with the provisions of the indenture described below under "-- Certain Covenants -- Limitation on Indebtedness." The notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. GNC will issue notes in denominations of $1,000 and integral multiples of $1,000. The new notes will mature on December 1, 2010.
Interest on each new note will accrue from the last interest payment date
on which interest was paid on the old note surrendered in exchange for the new
note or, if no interest has been paid on such old note, from the date of the old
note's original issue, December 5, 2003, at a rate of 8 1/2% per annum. Interest
on the new notes will be payable semi-annually in arrears on June 1 and December
1, beginning on December 1, 2004. GNC will make each interest payment to the
holders of record of new notes on the immediately preceding May 15 and November
15. Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES
If a holder has given wire transfer instructions to GNC, GNC will pay all principal, interest and premium and Liquidated Damages, if any, on that holder's new notes in accordance with those instructions. See "Book Entry, Delivery and Form -- Same Day Settlement and Payment." All other payments on new notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless GNC elects to make interest payments by check mailed to the holders at their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NEW NOTES
The Trustee will initially act as paying agent and registrar. GNC may change the paying agent or registrar without prior notice to the holders of the new notes, and GNC or any of its Subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange new notes in accordance with the indenture. The registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of new notes. Holders will be required to pay all taxes due on transfer. GNC is not required to transfer or exchange any new note selected for redemption. Also, GNC is not required to transfer or exchange any new note for a period of 15 days before a selection of new notes to be redeemed.
The registered holder of a new note will be treated as the owner of it for all purposes.
OPTIONAL REDEMPTION
At any time prior to December 1, 2006, GNC may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price of 108.500% of the principal amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date with the Net Cash Proceeds of one or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of notes originally issued under the indenture remains outstanding immediately after the occurrence of such redemption (excluding notes held by GNC and its Subsidiaries); and
(2) the redemption occurs within 60 days after the date of the closing of such Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be redeemable at GNC's option prior to December 1, 2007.
Upon not less than 30 nor more than 90 days' notice, the notes are redeemable, at GNC's option, in whole or in part, at any time and from time to time on and after December 1, 2007 and prior to maturity at the following redemption prices, expressed as a percentage of principal amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the 12-month period commencing on December 1 of the years set forth below:
REDEMPTION
PERIOD PRICE
------ ----------
2007........................................................ 104.250%
2008........................................................ 102.125%
2009 and thereafter......................................... 100.000%
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the notes are redeemed pursuant to an optional redemption, selection of the notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. No notes of $1,000 or less may be redeemed in part. Notices of redemption must be mailed by first-class mail at least 30, but not more than 90, days before the redemption date to each holder of notes to be redeemed at the holder's registered address.
If any note is to be redeemed in part only, the notice of redemption that relates to such note must state the portion of the principal amount to be redeemed. A note in a principal amount equal to the unredeemed portion will be issued in the name of the holder upon cancellation of the original note. On and after the redemption date, interest will cease to accrue on notes or portions thereof called for redemption as long as GNC has deposited with the paying agent for the notes funds in satisfaction of the applicable redemption price pursuant to the indenture.
MANDATORY REDEMPTION
GNC is not required to make mandatory redemption or sinking fund payments with respect to the notes.
RANKING
The indebtedness evidenced by the notes:
(1) is unsecured Senior Subordinated Indebtedness of GNC;
(2) is subordinated in right of payment, as set forth in the indenture, to the payment in full in cash when due of all existing and future Senior Indebtedness of GNC, including GNC's obligations under the Senior Credit Facility;
(3) ranks pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of GNC; and
(4) is senior in right of payment to all existing and future Subordinated Obligations of GNC.
In the event that our secured creditors exercise their rights with respect to our pledged assets, the proceeds of the liquidation of those assets will first be applied to repay obligations secured by such assets before any unsecured Indebtedness, including the notes, is repaid.
Although the indenture contains limitations on the amount of additional Indebtedness which GNC may incur, under certain circumstances the amount of such indebtedness could be substantial, and such Indebtedness may be Senior Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness" below.
GNC may not pay principal of, premium, Liquidated Damages, if any, or interest on the notes or make any deposit pursuant to the provisions described under "-- Defeasance" below (except in Permitted Junior Securities or from the trust described under "-- Defeasance") and may not otherwise purchase, redeem or otherwise retire any notes (collectively, "pay the notes") if:
(1) any Senior Indebtedness is not paid when due in cash; or
(2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless (A) the default has been cured or waived and any such acceleration has been rescinded in writing or (B) such Senior Indebtedness has been paid in full in cash.
If any other default occurs under any Designated Senior Indebtedness that permits the holders thereof to declare such Indebtedness due and payable, GNC will not be permitted to pay the notes for a period (the "Payment Blockage Period") beginning upon the receipt by the Trustee of written notice (a "Blockage Notice") of such default from the Designated Senior Indebtedness Representative specifying an election to effect a Payment Blockage Period. This Payment Blockage Period will end on the earliest of:
(1) written notice to the Trustee to terminate the period by the person who gave the Blockage Notice;
(2) the discharge or repayment in full in cash of such Designated Senior Indebtedness;
(3) the date on which the default giving rise to the Blockage Notice is no longer continuing; and
(4) the date on which 179 days have passed following the delivery of the Blockage Notice.
Unless the maturity of the Designated Senior Indebtedness has been accelerated, GNC will be permitted to resume payments on the notes after the end of the Payment Blockage Period. Only one Blockage Notice may be given in a 360-day period, regardless of the number of defaults on the Designated Senior Indebtedness during that period. However, if a Blockage Notice is given by a holder of Designated Senior Indebtedness other than Bank Indebtedness during the 360-day period, a representative of Bank Indebtedness may give another Blockage Notice during the 360-day period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods in the aggregate are in effect exceed 179 days during any 360 consecutive day period.
The holders of Senior Indebtedness are entitled to receive payment in full in cash of all obligations due in respect of Senior Indebtedness (including interest and fees after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness) before the noteholders are entitled to receive any payment upon:
(1) any payment or distribution of the assets of GNC upon a total or partial liquidation, dissolution, reorganization or similar proceeding relating to GNC; or
(2) a bankruptcy, insolvency, receivership or similar proceeding relating to GNC.
Until the Senior Indebtedness is paid in full in cash, any payment or distribution to which the noteholders would be entitled, but for the subordination provisions of the indenture, will be made to the holders of the Senior Indebtedness. If a distribution is made to the noteholders that should not have been made to them as a result of these subordination provisions, the noteholders are required to hold such a distribution in trust for the holders of the Senior Indebtedness and promptly pay it over to them.
If payment of the notes is accelerated because of an Event of Default, GNC is required to promptly notify the holders of the Designated Senior Indebtedness. GNC is not permitted to pay the notes until five Business Days after such holders or the Representative of the Designated Senior Indebtedness receive notice of such acceleration. At that time, GNC may pay the notes only if the subordination provisions of the indenture otherwise permit payment at that time.
As a result of the subordination provisions in the indenture, creditors of GNC who are holders of Senior Indebtedness may recover more, ratably, than the noteholders in the event of insolvency.
NOTE GUARANTEES
Each Guarantor will unconditionally guarantee, jointly and severally, on an unsecured, senior subordinated basis, the full and prompt payment of principal of, premium and Liquidated Damages, if any, and interest on the new notes, and of all other obligations under the indenture.
Ranking. The indebtedness evidenced by each Note Guarantee, including the payment of principal of, premium and Liquidated Damages, if any, and interest on the new notes and other obligations with respect to the new notes, will be subordinated to all Guarantor Senior Indebtedness of such Guarantor on the same basis as the new notes are subordinated to Senior Indebtedness of GNC. Each Note Guarantee will in all respects rank pari passu with all other Guarantor Senior Subordinated Indebtedness of such Guarantor.
Although the indenture contains limitations on the amount of additional Indebtedness that GNC's Restricted Subsidiaries may incur, under certain circumstances, the amount of such Indebtedness could be substantial, and such Indebtedness may be Guarantor Senior Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness" and "-- Ranking."
Limitation on Note Guarantee. The obligation of each Guarantor under its Note Guarantee is limited to the maximum amount as will not constitute a fraudulent conveyance or fraudulent transfer under federal or state law, after giving effect to:
(1) all other contingent and fixed liabilities of the Guarantor, including any Guarantees under the Senior Credit Facility; and
(2) any collections from or payments made by or on behalf of any other Guarantor with respect to the other Guarantor's obligations under its Note Guarantee pursuant to its contribution obligations under the indenture.
Consolidation and Merger. Each Guarantor is permitted to consolidate or merge into or sell its assets to GNC or another Wholly Owned Subsidiary of GNC that is a Guarantor without limitation. Each Guarantor is permitted to consolidate with or merge into or sell all or substantially all of its assets to a corporation,
partnership, trust, limited partnership, limited liability company or other similar entity other than GNC or another Wholly Owned Subsidiary of GNC that is a Guarantor if:
(1) the provisions under the indenture, including the covenant described under "-- Certain Covenants -- Limitations on Sales of Assets," are complied with; and
(2) such Guarantor is released from all of its obligations under the indenture and its Note Guarantee; provided that termination of the Note Guarantee will only occur to the extent that the Guarantor's obligations under the Senior Credit Facility and all of its Guarantees of any other Indebtedness of GNC also terminate.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined below), each holder will have the right to require GNC to repurchase all or any part of such holder's notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of repurchase. GNC will not be obligated to purchase the notes, however, if it has exercised its right to redeem all of the notes as described under "-- Optional Redemption."
Unless GNC has exercised its right to redeem all the notes as described under "-- Optional Redemption," GNC is required, within 30 days following any Change of Control, or at GNC's option, prior to such Change of Control but after the public announcement thereof, to mail a notice to each holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred or will occur and that such holder has, or upon such occurrence will have, the right to require GNC to purchase such holder's notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase, and Liquidated Damages, if any, subject to the right of noteholders of record on a record date to receive interest on the relevant interest payment date;
(2) the circumstances and relevant facts and financial information regarding such Change of Control;
(3) the date of purchase, which will be no earlier than 30 days nor later than 90 days from the date such notice is mailed;
(4) the instructions determined by GNC, consistent with this covenant, that a holder must follow in order to have its notes purchased; and
(5) that, if such offer is made prior to such Change of Control, payment is conditioned on the occurrence of such Change of Control.
GNC will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, GNC will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant as a result of such compliance.
The Change of Control purchase feature is a result of negotiations between GNC and the initial purchasers of the notes. GNC has no present plans to engage in a transaction involving a Change of Control, although it is possible that GNC would decide to do so in the future. Subject to the limitations discussed below, GNC could, in the future, enter into certain transactions, including acquisitions, refinancings or recapitalizations, that would not constitute a Change of Control under the indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect GNC's capital structure or credit ratings.
Prior to repurchasing any notes pursuant to this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, GNC
will either repay all outstanding Senior Indebtedness and Guarantor Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing such
outstanding Senior Indebtedness and Guarantor Senior Indebtedness to permit the repurchase of notes required by this covenant. The occurrence of a Change of Control would constitute a default under the Senior Credit Agreement. Future Senior Indebtedness and Guarantor Senior Indebtedness may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness and Guarantor Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the holders of their right to require GNC to repurchase the notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on GNC. Finally, GNC's ability to pay cash to the holders upon a repurchase may be limited by GNC's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. See "Risk Factors -- Funding Change of Control Offer -- We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture."
The Change of Control provisions described above may deter certain mergers, tender offers and other takeover attempts involving GNC by increasing the capital required to effectuate such transactions. The definition of "Change of Control" includes a disposition of all or substantially all of the property and assets of GNC and its Subsidiaries. With respect to the disposition of property or assets, the phrase "all or substantially all" as used in the indenture varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under New York law and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantially all" of the property or assets of a Person, and therefore it may be unclear as to whether a Change of Control has occurred and whether GNC is required to make an offer to repurchase the notes as described above.
CERTAIN COVENANTS
The indenture contains covenants, including, among others, the following:
LIMITATION ON INDEBTEDNESS
GNC shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that GNC and any Restricted Subsidiary of GNC that is a Guarantor may incur Indebtedness if, on the date of the Incurrence of such Indebtedness, the Consolidated Coverage Ratio would be greater than 2.0 to 1.0.
The first paragraph of this covenant will not prohibit the Incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the Incurrence by GNC and any Guarantor of additional Indebtedness
and letters of credit under one or more Senior Credit Facilities in an
aggregate principal amount at any one time outstanding under this clause
(1) (with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of GNC and its Subsidiaries thereunder)
not to exceed the greater of (a) $400 million less the aggregate amount of
all Net Cash Proceeds of Asset Dispositions applied by GNC or any of its
Restricted Subsidiaries since the date of the indenture to permanently
repay any term Indebtedness under a Senior Credit Facility or to
permanently repay any revolving credit Indebtedness under a Senior Credit
Facility and effect a corresponding commitment reduction thereunder
pursuant to the covenant described below under the caption "-- Certain
Covenants -- Limitation on Sales of Assets" and (b) the amount of the
Borrowing Base as of the date of such Incurrence, in each case less the
aggregate amount of all commitment reductions with respect to any revolving
credit borrowings under a Senior Credit Facility that have been made by GNC
or any of its Restricted Subsidiaries resulting from or relating to the
formation of any Receivables Subsidiary or the consummation of any
Qualified Receivables Transaction;
(2) the Guarantee by GNC or any Guarantor of Indebtedness of GNC or a Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant;
(3) the Incurrence by GNC or any of its Restricted Subsidiaries of intercompany Indebtedness between or among GNC and any of its Restricted Subsidiaries; provided, however, that:
(a) if GNC or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the notes, in the case of GNC, or the applicable Note Guarantee, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than GNC or a Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either GNC or a Restricted Subsidiary, will be deemed, in each case, to constitute an Incurrence of such Indebtedness by GNC or such Restricted Subsidiary, as the case may be, that was not permitted by this clause;
(4) the Incurrence by GNC and the Guarantors of Indebtedness represented by the notes and the related Note Guarantees;
(5) the Incurrence by GNC and any Restricted Subsidiary of Indebtedness existing on the date of the indenture (other than the Mellon Letters of Credit);
(6) the Incurrence by GNC or any of its Restricted Subsidiaries of Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be Incurred under the first paragraph of this covenant or clauses (2), (4), (5), (6), (7) or (14) of this paragraph;
(7) the Incurrence by GNC or any Restricted Subsidiary of Indebtedness represented by Capitalized Lease Obligations, mortgage financings or purchase money obligations, in each case, Incurred for the purpose of financing all or any part of the purchase price or cost of design, construction or improvement of property, plant or equipment used in the business of GNC or a Restricted Subsidiary, in an aggregate principal amount, including all Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (7), not to exceed 2.5% of Consolidated Tangible Assets at any time outstanding measured at the time of Incurrence;
(8) the Incurrence by GNC or any Restricted Subsidiary of Hedging Obligations that are Incurred in the ordinary course of business and not for speculative purposes;
(9) the Incurrence by GNC or any Restricted Subsidiary of Indebtedness evidenced by letters of credit issued in the ordinary course of business of GNC to secure workers' compensation and other insurance coverage;
(10) the Incurrence by the Foreign Subsidiaries of Indebtedness if, at the time of Incurrence of such Indebtedness, and after giving effect thereto, the aggregate principal amount of all Indebtedness of the Foreign Subsidiaries Incurred pursuant to this clause (10) and then outstanding does not exceed the greater of (x) $30 million and (y) an amount equal to 50% of the consolidated book value of the inventories of the Foreign Subsidiaries measured at the time of Incurrence;
(11) the Incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to GNC or to any other Restricted Subsidiary of GNC or their assets (other than such Receivables Subsidiary and its assets and, as to GNC or any Restricted Subsidiary of GNC, other than pursuant to representations, warranties, covenants and indemnities customary for such transactions) and is not Guaranteed by any such Person;
(12) the Incurrence by GNC or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, self-insurance obligations, letters of credit (not supporting Indebtedness for borrowed money), bankers' acceptances, performance and surety bonds in the ordinary course of business;
(13) Indebtedness arising from agreements of GNC or a Restricted Subsidiary providing for indemnification, contribution, adjustment of purchase price, earn out or similar obligations, in each case, incurred or assumed in connection with the disposition of any business or assets of GNC or any
Restricted Subsidiary or Capital Stock of a Restricted Subsidiary; provided that the maximum aggregate liability in respect of all such Indebtedness Incurred pursuant to this clause (13) shall at no time exceed the gross proceeds actually received by GNC and its Restricted Subsidiaries in connection with such dispositions; and
(14) the Incurrence by GNC or any Restricted Subsidiary of Indebtedness, which may include Bank Indebtedness, in an aggregate principal amount not to exceed $35 million outstanding at any one time.
For purposes of determining compliance with this "Limitation on Indebtedness" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above, or is entitled to be Incurred pursuant to the first paragraph of this covenant, GNC will be permitted to classify such item of Indebtedness on the date of its Incurrence, or later reclassify, all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness outstanding under Senior Credit Facilities and under the Mellon Letters of Credit on the date on which notes are first issued and authenticated under the indenture are initially deemed to have been Incurred in reliance on the exception provided by clause (1) of the definition of Permitted Debt. In addition, for purposes of determining compliance with this "Limitation on Indebtedness" covenant, the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant; provided that the amount thereof shall be included in Consolidated Interest Expense of GNC as accrued.
GNC will not permit any Unrestricted Subsidiary to Incur any Indebtedness other than Non-Recourse Debt. However, if any such Indebtedness ceases to be Non-Recourse Debt, then such event shall constitute an Incurrence of Indebtedness by GNC or a Restricted Subsidiary.
LIMITATION ON LAYERING
GNC will not Incur any Indebtedness that is contractually subordinate in right of payment to any Senior Indebtedness, unless such Indebtedness is Senior Subordinated Indebtedness or is subordinated in right of payment to Senior Subordinated Indebtedness by contract.
In addition, no Guarantor will Incur any Indebtedness that is contractually subordinate in right of payment to any Guarantor Senior Indebtedness, unless such Indebtedness is Guarantor Senior Subordinated Indebtedness of such Guarantor, or is subordinated in right of payment to Guarantor Senior Subordinated Indebtedness by contract.
Unsecured Indebtedness is not considered subordinate to Secured Indebtedness merely because it is unsecured, and Indebtedness that is not Guaranteed by a particular person is not deemed to be subordinate to Indebtedness that is so guaranteed, merely because it is not Guaranteed. No Indebtedness will be considered to be senior by virtue of being secured on a first or junior priority basis.
LIMITATION ON RESTRICTED PAYMENTS
(A) GNC shall not, and shall not permit any Restricted Subsidiary to, take any of the following actions:
(1) declare or pay any dividend or make any other payment or distribution on account of GNC's or any of its Restricted Subsidiaries' Capital Stock (including, without limitation, any payment in connection with any merger or consolidation involving GNC or any of its Restricted Subsidiaries) or to the direct or indirect holders of GNC's or any of its Restricted Subsidiaries' Capital Stock in their capacity as such (other than dividends or distributions payable in Capital Stock (other than Disqualified Stock) of GNC or to GNC or a Restricted Subsidiary of GNC and other than payments of dividends on, and mandatory repurchases at Stated Maturity of, Disqualified Stock that was issued after the date of the indenture in compliance with the covenant described under "-- Limitation on Indebtedness");
(2) purchase, redeem, retire or otherwise acquire for value (including, without limitation, in connection with any merger or consolidation involving GNC) any Capital Stock of GNC, of any direct or
indirect parent of GNC or of any Restricted Subsidiary held by Persons other than GNC or another Restricted Subsidiary;
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligation before scheduled maturity, scheduled repayment or scheduled sinking fund payment; provided that this restriction does not apply to a purchase, repurchase, redemption or other acquisition made in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption or acquisition; or
(4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"),
if at the time GNC or its Restricted Subsidiary makes a Restricted Payment:
(1) a Default occurs and continues to occur or would result therefrom;
(2) GNC could not Incur at least $1.00 of additional Indebtedness under the first paragraph of the covenant described under "-- Limitation on Indebtedness;" or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made after the date of the indenture
(excluding Restricted Payments permitted by clauses (1), (2), (3), (5), and
(6) of paragraph (B) below) would exceed, without duplication, the sum of:
(a) 50% of the Consolidated Net Income of GNC accrued during the period, treated as one accounting period, from the beginning of the first fiscal quarter commencing after the date of the indenture to the end of the most recent fiscal quarter ending before the date of such Restricted Payment for which consolidated financial statements of GNC are available, or, if such Consolidated Net Income is a deficit, then minus 100% of such deficit;
(b) 100% of the aggregate Net Cash Proceeds received by GNC since the date of the indenture as a contribution to its common equity capital or from the issue or sale of Capital Stock of GNC (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of GNC that have been converted into or exchanged for such Capital Stock (other than Capital Stock (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of GNC), less the amount of any such Net Cash Proceeds that are utilized for an Investment pursuant to clause (13) of the definition of "Permitted Investments;"
(c) in the case of the disposition or repayment of any Investment constituting a Restricted Investment, without duplication of any amount deducted in calculating the amount of Investments at any time outstanding included in the amount of Restricted Payments, an amount equal to the lesser of the return of capital or similar repayment with respect to such Investment, or the initial amount of such Investment, in either case, less the cost of the disposition of such Investment;
(d) to the extent that any Unrestricted Subsidiary of GNC designated as such after the date of the indenture is redesignated as a Restricted Subsidiary after the date of the indenture, the lesser of (i) the fair market value of GNC's Investment in such Subsidiary as of the date of such redesignation or (ii) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the date of the indenture; and
(e) 50% of any dividends received by GNC or a Guarantor after the date of the indenture from an Unrestricted Subsidiary of GNC, to the extent that such dividends were not otherwise included in the Consolidated Net Income of GNC for such period.
(B) The provisions of paragraph (A) above will not prohibit the following actions:
(1) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Capital Stock of GNC or Subordinated Obligations made by exchange, including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares, for, or out of the proceeds of the substantially concurrent sale of, Capital
Stock of GNC, other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by GNC or any of its Subsidiaries; provided that the Net Cash Proceeds or reduction of Indebtedness from such sale or exchange will be excluded in subsequent calculations of the amount of Restricted Payments;
(2) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations of GNC that is permitted to be Incurred by the covenant described under "-- Limitation on Indebtedness;"
(3) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "-- Limitation on Sales of Assets;"
(4) payment of dividends within 60 days after the date of declaration of such dividends, if at the date of declaration such dividend would have complied with paragraph (A) above;
(5) any purchase or redemption of any shares of Capital Stock of GNC from employees or former employees of GNC and its Restricted Subsidiaries pursuant to the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management or in connection with the termination of employment in an aggregate amount after the date of the indenture not in excess of $5 million in any fiscal year, plus any unused amounts under this clause from prior fiscal years;
(6) the payment of any dividend by a Restricted Subsidiary to the holders of all of its common equity interests on a pro rata basis;
(7) any payments to the Permitted Holder made in connection with, and substantially concurrent with the closing of, the Acquisition by GNC and its Restricted Subsidiaries;
(8) any Permitted Payments to Parent;
(9) Restricted Payments not to exceed $50 million in the aggregate since the date of the indenture; provided that no more than $25 million of such Restricted Payments are made in any calendar year; provided further that, after giving pro forma effect to any such Restricted Payment, GNC would have had a Leverage Ratio of less than 2.5 to 1.00; and
(10) Restricted Payments not to exceed $35 million in the aggregate since the date of the indenture.
The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by GNC or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined by the Board of Directors whose resolution with respect thereto will be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $20 million.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Board of Directors of GNC may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default; provided that in no event will a Subsidiary of GNC that owns or holds the right to use, license or sublicense the "GNC" brand be designated as an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by GNC and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described under "-- Limitation on Restricted Payments" or under one or more clauses of the definition of Permitted Investments, as determined by GNC. That designation will only be permitted if the Investment would be permitted at that
time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of GNC may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.
Any designation of a Subsidiary of GNC as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described under "-- Limitation on Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be Incurred by a Restricted Subsidiary of GNC as of such date and, if such Indebtedness is not permitted to be Incurred as of such date under the covenant described under "-- Limitation on Indebtedness," GNC will be in default of such covenant. The Board of Directors of GNC may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of GNC; provided that such designation will be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of GNC of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under "-- Limitation on Indebtedness," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
Neither GNC nor any Restricted Subsidiary will create or otherwise cause or permit to exist any consensual restriction on the ability of any Restricted Subsidiary to take the following actions:
(1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to GNC or any of its Restricted Subsidiaries;
(2) make any loans or advances to GNC or any of its Restricted Subsidiaries; or
(3) transfer any of its property or assets to GNC or any of its Restricted Subsidiaries.
However, this prohibition does not apply to:
(1) the Senior Credit Facility and any agreements governing Indebtedness existing on the date of the indenture, in each case, as in effect on the date of the indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture;
(2) the indenture, the notes and the Note Guarantees;
(3) any restriction with respect to a Restricted Subsidiary that is either:
(a) pursuant to an agreement relating to any Indebtedness (i) Incurred by a Restricted Subsidiary before the date on which such Restricted Subsidiary was acquired by GNC, or (ii) of another Person that is assumed by GNC or a Restricted Subsidiary in connection with the acquisition of assets from, or merger or consolidation with, such Person and is outstanding on the date of such acquisition, merger or consolidation; provided that any restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to Indebtedness Incurred either as consideration in, or for the provision of any portion of the funds or credit support used to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by GNC, or such acquisition of assets, merger or consolidation shall not be permitted pursuant to this clause (a); or
(b) pursuant to any agreement, not relating to any Indebtedness, existing when a Person becomes a Subsidiary of GNC or acquired by GNC or any of its Subsidiaries, that, in each case, is
not created in contemplation of such Person becoming such a Subsidiary or such acquisition (it being understood for purposes of this clause (b) that if another Person is the Successor Company, any Subsidiary or agreement thereof shall be deemed acquired or assumed by GNC when such Person becomes the Successor Company), and, in the case of clause (a) and (b), which restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the properties or assets of the Person, so acquired;
(4) any restriction with respect to a Restricted Subsidiary pursuant to an agreement (a "Refinancing Agreement") that effects a refinancing, extension, renewal or replacement of Indebtedness under an agreement referred to in this covenant (an "Initial Agreement") or contained in any amendment to an Initial Agreement; provided that the restrictions contained in any such Refinancing Agreement or amendment are not materially more restrictive, taken as a whole, than the restrictions contained in the Initial Agreement or Agreements to which such Refinancing Agreement or amendment relates;
(5) any restriction that is a customary restriction on subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or on the assignment or transfer of any lease, license or other contract;
(6) any restriction by virtue of a transfer, agreement to transfer, option, right, or Lien with respect to any property or assets of GNC or any Restricted Subsidiary not otherwise prohibited by the indenture;
(7) any restriction contained in mortgages, pledges or other agreements securing Indebtedness of GNC or a Restricted Subsidiary to the extent such restriction restricts the transfer of the property subject to such mortgages, pledges or other security agreements;
(8) any restriction with respect to a Restricted Subsidiary, or any of its property or assets, imposed pursuant to an agreement for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary, or the property or assets that are subject to such restriction, pending the closing of such sale or disposition;
(9) any restriction existing by reason of applicable law, rule, regulation or order;
(10) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of GNC's Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements;
(11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(12) restrictions existing under Indebtedness or other contractual requirements of a Receivables Subsidiary in connection with a Qualified Receivables Transaction; provided that such restrictions apply only to such Receivables Subsidiary; or
(13) restrictions contained in Indebtedness incurred by a Foreign Subsidiary pursuant to clause (10) of the second paragraph of the covenant entitled "-- Limitation on Indebtedness;" provided that such restrictions relate only to one or more Foreign Subsidiaries.
LIMITATION ON SALES OF ASSETS
Neither GNC nor any Restricted Subsidiary shall make any Asset Disposition unless:
(1) GNC or such Restricted Subsidiary receives consideration, including relief from, or the assumption of another Person for, any liabilities, contingent or otherwise, at the time of such Asset Disposition at least equal to the fair market value of the shares and assets subject to such Asset Disposition. The Board of Directors shall determine the fair market value, and their determination shall be conclusive, including as to the value of all non-cash consideration;
(2) at least 75% of the consideration for any Asset Disposition received by GNC or such Restricted Subsidiary is in the form of cash. For the purposes of this covenant, the following are deemed to be cash:
(a) Cash Equivalents;
(b) the assumption of Indebtedness of GNC, other than Disqualified Stock of GNC, or any Restricted Subsidiary and the release of GNC or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition;
(c) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that GNC and each other Restricted Subsidiary is released from any Guarantee, or is the beneficiary of any indemnity with respect to such Indebtedness which is secured by any letter of credit or Cash Equivalents, of such Indebtedness in connection with such Asset Disposition;
(d) securities received by GNC or any Restricted Subsidiary from the transferee that are converted by GNC or such Restricted Subsidiary into cash within 60 days after the Asset Disposition;
(e) an amount equal to the fair market value of Indebtedness of GNC or any Restricted Subsidiary received by GNC or a Restricted Subsidiary as consideration for any Asset Disposition, determined at the time of receipt of such Indebtedness by GNC or such Restricted Subsidiary; and
(f) consideration consisting of Additional Assets;
(3) GNC or such Restricted Subsidiary applies an amount equal to 100% of the Net Available Cash from such Asset Disposition in the following manner:
(a) to the extent GNC elects, or is required by the terms of any Senior Indebtedness or Indebtedness, other than Preferred Stock, to prepay, repay or purchase Senior Indebtedness or such Indebtedness, in each case other than the Indebtedness owed to GNC or a Restricted Subsidiary, within 365 days after the date of such Asset Disposition;
(b) to the extent of the balance of Net Available Cash, to the extent GNC or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by GNC or another Restricted Subsidiary) within 365 days from the date of such Asset Disposition, or, if such reinvestment in Additional Assets is a project that is authorized by the Board of Directors within such 365-day period, within 455 days from the date of such Asset Disposition;
(c) to the extent of the balance of such Net Available Cash remaining after application pursuant to clauses (a) or (b) above (the "Excess Proceeds"), to make an offer to purchase notes at a price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the purchase date, and, to the extent required by the terms thereof, any other Senior Subordinated Indebtedness subject to the agreements governing such other Indebtedness at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to the purchase date and liquidated damages, if any; and
(d) to the extent of the balance of such Excess Proceeds after application pursuant to clauses (a), (b) or (c) above for any purpose not prohibited by the indenture.
However, in connection with any prepayments, repayment or purchase of revolving credit Indebtedness pursuant to clauses (a) and (c) above, GNC or such Restricted Subsidiary will cause the related loan commitment, if any, to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.
Pending the final application of any Net Available Cash, GNC may temporarily reduce revolving credit borrowings or otherwise invest the Net Available Cash in any manner that is not prohibited by the indenture.
The provisions of this covenant do not require GNC or the Restricted Subsidiaries to apply any Net Available Cash in accordance with this covenant, except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this covenant exceeds $15 million.
To the extent that the aggregate principal amount of the notes and other Senior Subordinated Indebtedness tendered pursuant to an offer to purchase made in accordance with the third clause above exceeds the amount of Excess Proceeds, the Trustee will select the notes and Senior Subordinated Indebtedness to be purchased on a pro rata basis, based on the aggregate principal amount thereof surrendered in such offer to purchase; provided that when such offer to purchase is complete, the amount of Excess Proceeds shall be reset to zero.
GNC will comply with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to this covenant, in each case, to the extent applicable. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, GNC will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant as a result of such compliance.
The Senior Credit Agreement will restrict GNC from purchasing any notes, and also provides that certain Asset Disposition events would constitute a default under such agreement. Any future credit agreements or other agreements relating to senior indebtedness to which GNC or any of its Restricted Subsidiaries becomes a party may contain similar restrictions and provisions. In the event an Asset Disposition resulting in Excess Proceeds occurs at a time when GNC is prohibited from purchasing notes, GNC could seek the consent of its senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If GNC does not obtain such a consent or repay such borrowings, GNC will remain prohibited from purchasing notes. In such case, GNC's failure to purchase tendered notes would constitute an Event of Default under the indenture which would, in turn, constitute a default under such senior indebtedness. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the holders of notes.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Neither GNC nor any of its Restricted Subsidiaries will engage in any transaction or series of transactions, including the purchase, sale, lease or exchange of any property or the rendering of any service with any Affiliate of GNC (an "Affiliate Transaction") on terms that:
(1) taken as a whole are less favorable to GNC or such Restricted Subsidiary than the terms that could be obtained at the time of such transaction in arm's-length dealings with a nonaffiliate; and
(2) in the event such Affiliate Transaction involves an aggregate amount in excess of $15 million, is not in writing and has not been approved by a majority of the members of the Board of Directors having no material personal financial interest in such Affiliate Transaction. If there are no such Board members, then GNC must obtain a Fairness Opinion. A Fairness Opinion means an opinion from an independent investment banking firm, accounting firm or appraiser of national standing which indicates that the terms of such transaction are fair to GNC or such Restricted Subsidiary from a financial point of view.
In addition, any transaction involving aggregate payments or other transfers by GNC and its Restricted Subsidiaries in excess of $30 million will also require a Fairness Opinion.
The provisions of the paragraphs above shall not prohibit the following actions:
(1) any Restricted Payment permitted by the covenant described under "-- Limitation on Restricted Payments" or any Permitted Investment;
(2) the performance of the obligations of GNC or a Restricted Subsidiary under any employment contract, collective bargaining agreement, service agreement, employee benefit plan, related trust agreement, severance agreement or any other similar arrangement entered into in the ordinary course of business;
(3) payment of compensation, performance of indemnification or contribution obligations in the ordinary course of business;
(4) any issuance, grant or award of stock, options or other securities, to employees, officers or directors;
(5) any transaction between GNC and a Restricted Subsidiary or between Restricted Subsidiaries or any transaction between a Receivables Subsidiary and any Person in which the Receivables Subsidiary has an Investment;
(6) any other transaction arising out of agreements existing on the date of the indenture and described in the "Certain Relationships and Related Party Transactions" section of the Offering Memorandum;
(7) transactions with suppliers or other purchasers or sellers of goods or services, in each case in the ordinary course of business and on terms no less favorable to GNC or the Restricted Subsidiary than those that could be obtained at such time in arm's-length dealings with a nonaffiliate;
(8) the payment of rent due under the Master Lease, dated as of March 23, 1999, between Gustine Sixth Avenue Associates, Ltd. and General Nutrition, Incorporated, as in effect on the date of the indenture or as amended in compliance with the provisions of this covenant; and
(9) so long as no Default has occurred and is continuing, (a) payment of annual management fees to the Permitted Holder in an aggregate amount not to exceed, during any consecutive 12-month period, $1.5 million, (b) the payment of fees to the Permitted Holder for financial advisory and investment banking services rendered to GNC and its Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions, and (c) reimbursement of reasonable out-of-pocket expenses incurred by the Permitted Holder in connection with the services described in clauses (a) and (b) above; provided that the foregoing payments and reimbursements are subordinated to the notes to the same extent as the notes are subordinated to Designated Senior Indebtedness; provided further that if any such Default prevents the payment of any such fees, GNC may pay such deferred fees at the time such Default is cured or waived.
LIMITATION ON THE SALE OR ISSUANCE OF PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES
GNC will not sell any shares of Preferred Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary to issue or sell any shares of its Preferred Stock to any Person, other than to GNC or a Restricted Subsidiary.
LIMITATION ON LIENS
Neither GNC nor any Restricted Subsidiary will create or permit to exist any Lien, other than Permitted Liens, on any of its property or assets, including Capital Stock, whether owned on the date of the indenture or thereafter acquired, securing any Indebtedness that is not Senior Indebtedness (the "Initial Lien"), unless at the same time effective provision is made to secure the obligations due under the indenture and the notes equally and ratably with such obligation for so long as such obligation is secured by such Initial Lien.
Any such Lien created in favor of the notes will be automatically and unconditionally released and discharged upon:
(1) the release and discharge of the Initial Lien to which it relates; or
(2) any sale, exchange or transfer to a non-affiliate of GNC of the property or assets secured by such Initial Lien, or of all of the Capital Stock held by GNC or any Restricted Subsidiary, or all or substantially all of the assets of any Restricted Subsidiary creating such Lien.
REPORTING REQUIREMENTS
Whether or not required by the SEC's rules and regulations, so long as any notes are outstanding, GNC will furnish to the holders of notes, within the time periods specified in the SEC's rules and regulations:
(1) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if GNC were required to file such reports; and
(2) all current reports that would be required to be filed with the SEC on Form 8-K if GNC were required to file such reports.
All such reports will be prepared in all material respects in accordance
with all of the rules and regulations applicable to such reports. Each annual
report on Form 10-K will include a report on GNC's consolidated financial
statements by GNC's certified independent accountants. In addition, following
the consummation of the exchange offer contemplated by the registration rights
agreement, GNC will file a copy of each of the reports referred to in clauses
(1) and (2) above with the SEC for public availability within the time periods
specified in the rules and regulations applicable to such reports (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
If, at any time after consummation of the exchange offer contemplated by the registration rights agreement, GNC is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, GNC will nevertheless continue filing the reports specified in the preceding paragraphs with the SEC within the time periods specified above unless the SEC will not accept such a filing. GNC agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept GNC's filings for any reason, GNC will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if GNC were required to file those reports with the SEC.
In addition, GNC and the Guarantors agree that, for so long as any notes remain outstanding, at any time they are not required to file with the SEC the reports required by the preceding paragraphs, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d) (4) under the Securities Act.
FUTURE GUARANTORS
If GNC or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of the indenture, then that newly acquired or created Domestic Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel within 10 Business Days of the date on which it was acquired or created; provided, however, that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary.
MERGER AND CONSOLIDATION
GNC will not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or convey or transfer all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor Company") will be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia;
(2) the Successor Company, if not GNC, will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of GNC under the notes, the indenture and the registration rights agreement;
(3) immediately after giving effect to such transaction or series of transactions no Default or Event of Default exists;
(4) GNC or the Successor Company, if GNC is not the continuing obligor under the indenture, will, at the time of such transaction or series of transactions and after giving pro forma effect thereto as if such transaction or series of transactions had occurred at the beginning of the applicable four-quarter period, be permitted to Incur at least an additional $1.00 of Indebtedness pursuant to the first paragraph of "-- Limitation on Indebtedness;" and
(5) GNC will have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the indenture; provided that:
(a) in giving such opinion such counsel may rely on such Officer's Certificate as to any matters of fact, including without limitation as to compliance with the foregoing clauses; and
(b) no Opinion of Counsel will be required for a consolidation, merger or transfer described in the last paragraph of this covenant.
In addition, GNC may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.
The Successor Company will be substituted for, and may exercise every right and power of, GNC under the indenture. Thereafter, GNC (if it is not the Successor Company) will be relieved of all obligations and covenants under the indenture, except that, in the case of a conveyance or transfer of less than all its assets, GNC will not be released from the obligation to pay the principal of and interest on the notes.
The provisions of this covenant do not prohibit any Restricted Subsidiary from consolidating with, merging into or transferring all or part of its properties and assets to GNC. Additionally, GNC may merge with an Affiliate incorporated or organized for the purpose of reincorporating or reorganizing GNC in another jurisdiction to realize tax or other benefits.
DEFAULTS
An Event of Default under the indenture is defined as:
(1) a default in any payment of interest on, or Liquidated Damages, if any, with respect to, any note when due, whether or not such payment is prohibited by the provisions described under "-- Ranking" above, continued for 30 days;
(2) a default in the payment of principal of, or premium, if any, on any note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "-- Ranking" above;
(3) the failure by GNC or any of its Restricted Subsidiaries to comply with its obligations under the covenant described under "-- Certain Covenants -- Merger and Consolidation" above;
(4) the failure by GNC or any of its Restricted Subsidiaries to comply for 30 days after written notice from the Trustee or the holders of at least 25% in principal amount of the outstanding notes with any of its obligations under the covenants described under "-- Change of Control" or "-- Certain Covenants -- Limitation on Indebtedness," "-- Certain Covenants -- Limitation on Restricted Payments," or "-- Certain Covenants -- Limitation on Sales of Assets" above, in each case, other than a failure to purchase notes;
(5) the failure by GNC or any of its Restricted Subsidiaries to comply with its other agreements contained in the notes or the indenture for 60 days after written notice from the Trustee or the holders of at least 25% in principal amount of the outstanding notes;
(6) the failure by GNC or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20 million (the "Cross Acceleration Provision");
(7) events of bankruptcy, insolvency or reorganization of GNC or a Significant Subsidiary (the "Bankruptcy Provisions");
(8) the rendering of any judgment or decree for the payment of money in an amount, net of any insurance or indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful, in excess of $20 million against GNC or a Significant Subsidiary that is not discharged, bonded or insured by a third Person if either an enforcement proceeding thereon is commenced, or such judgment or decree remains outstanding for a period of 90 days and is not discharged, waived or stayed (the "Judgment Default Provision"); or
(9) the failure of any Guarantee of the notes by a Guarantor that is a Significant Subsidiary to be in full force, except as contemplated by the terms thereof or of the indenture, or the denial in writing by any such Guarantor of its obligations under the indenture or any such Guarantee if such Default continues for 10 days.
The events listed above will constitute Events of Default regardless of their reasons, whether voluntary or involuntary or whether effected by operation of law or pursuant to any judgment, decree, order, rule or regulation of any administrative or governmental body.
If an Event of Default, other than a Default relating to certain events of bankruptcy, insolvency or reorganization of GNC, occurs and is continuing, either the Trustee, by notice to GNC, or the holders of at least a majority in principal amount of the outstanding notes, by notice to GNC and the Trustee, may declare the principal of and accrued but unpaid interest on all of such notes to be due and payable.
Upon such a declaration, such principal and interest will be due and payable immediately; provided that so long as any Designated Senior Indebtedness is outstanding, such acceleration will not be effective until the earlier of (1) the acceleration of such Designated Senior Indebtedness and (2) five Business Days after the holders of such Designated Senior Indebtedness or the Representative thereof receive notice from GNC of the acceleration with respect to the payment of the notes. If an Event of Default relating to events of bankruptcy, insolvency or reorganization of GNC occurs and is continuing, the notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any holder. Under certain circumstances, the holders of a majority in principal amount of the outstanding notes may rescind any such acceleration with respect to the notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any of the holders, unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium and Liquidated Damages, if any, or interest when due, no holder may pursue any remedy with respect to the indenture or the notes unless:
(1) such holder has previously given the Trustee notice that an Event of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount of the applicable notes have not given the Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount of the notes outstanding are given the right to direct the time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that:
(1) conflicts with law or the indenture;
(2) the Trustee determines is unduly prejudicial to the rights of any other holder; or
(3) would involve the Trustee in personal liability.
Before taking any action under the indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.
The indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each holder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of, premium and Liquidated Damages, if any, or interest on any note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the noteholders. In addition, GNC is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default or Event of Default that occurred during the previous year. GNC also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute a Default, its status and what action GNC is taking or proposes to take in respect thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of GNC or any Guarantor, as such, will have any liability for any obligations of GNC or any Guarantor under the notes, the indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture or the notes may be amended or supplemented with the consent of the holders of a majority in principal amount of the notes then outstanding. Additionally, any past default on any provisions may be waived with the consent of the holders of a majority in principal amount of the notes then outstanding. However, without the consent of each holder, no amendment, supplement or waiver may, among other things:
(1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on any note;
(3) reduce the principal amount of or extend the Stated Maturity of any note;
(4) reduce the premium payable upon the redemption or repurchase of any note or change the time at which any note may be redeemed as described under "-- Optional Redemption" above;
(5) make any note payable in money other than that stated in the note;
(6) make any change to the subordination provisions of the indenture that adversely affects the rights of any holder;
(7) make any change in the provisions of the indenture relating to the rights of holders of, notes to receive payment of principal of, and interest, premium or Liquidated Damages on, the notes on or after the respective due dates expressed in the notes or impair the rights of any holder of notes to sue for the enforcement of any payment of principal of, or interest, premium or Liquidated Damages on, such holder's notes on or after the respective due dates;
(8) release any Guarantor from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; or
(9) make any change in the amendment provisions that require each holder's consent or in the waiver provisions.
Without the consent of any holder, GNC, the Guarantors and the Trustee may amend or supplement the indenture or notes in the following manner:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the obligations of GNC under the indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes; provided, however, that the uncertificated notes are
issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated notes are described in Section 163
(f) (2) (B) of the Code;
(4) to add Guarantees with respect to the notes, to secure the notes, to add to the covenants of GNC for the benefit of the noteholders or to surrender any right or power conferred upon GNC;
(5) to make any change that does not adversely affect the rights of any holder;
(6) to comply with any requirement of the SEC in connection with the qualification of the indenture under the TIA; or
(7) to conform the text of the indenture, the Note Guarantees or the notes to any provision of this Description of Notes to the extent that such provision in this Description of Notes was intended to be a verbatim recitation of a provision of the indenture, the Note Guarantees or the notes.
However, no amendment may be made to the subordination provisions of the indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness, or any group or representative thereof authorized to give a consent, consent to such change.
The consent of the noteholders is not necessary under the indenture to approve the particular form of any proposed amendment, supplement or waiver. It is sufficient if such consent approves the substance of the proposed amendment, supplement or waiver. After an amendment, supplement or waiver under the indenture becomes effective, GNC is required to mail to the applicable noteholders a notice briefly describing such amendment, supplement or waiver. However, the failure to give such notice to all such noteholders, or any defect in such notice, will not impair or affect the validity of the amendment, supplement or waiver.
DEFEASANCE
GNC at any time may terminate all its obligations and the obligations of the Guarantors under the notes and the indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the notes, to replace mutilated, destroyed, lost or stolen notes and to maintain a registrar and paying agent in respect of the notes. GNC at any time may terminate its obligations and the obligations of the Guarantors under the covenants described under "-- Certain Covenants" (other than under "-- Certain Covenants -- Merger and Consolidation" except as set forth below), the operation of the Cross-Acceleration Provision, the Bankruptcy Provisions with respect to Significant Subsidiaries and the Judgment Default Provision described under "-- Defaults" above and the limitations contained in the third and fourth clauses under "-- Certain Covenants -- Merger and Consolidation" above ("covenant defeasance").
GNC may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If GNC exercises its legal defeasance option, payment of the notes may not be accelerated because of an Event of Default. If GNC exercises its covenant defeasance option, payment of the notes may not be accelerated because of an Event of Default specified in clauses four, five, six, seven, but only with
respect to certain bankruptcy events of a Significant Subsidiary, eight or nine under "-- Defaults" above or because of the failure of GNC to comply with clause three or four under "-- Certain Covenants -- Merger and Consolidation" above.
Either defeasance option may be exercised before any redemption date or the maturity date for the notes. In order to exercise either defeasance option, GNC must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or Government Obligations, or a combination thereof, for the payment of principal of, and premium and Liquidated Damages, if any, and interest on, the applicable notes to redemption or maturity, as the case may be. Additionally, GNC must comply with other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax in the same amount and in the same manner and times as would have been the case if such deposit and defeasance had not occurred. In the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law since the date of the indenture.
CONCERNING THE TRUSTEE
U.S. Bank National Association will serve as the Trustee for the notes. The Trustee has been appointed by GNC as Registrar and Paying Agent with regard to the notes.
GOVERNING LAW
Both the indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York. Principles of conflicts of law will not apply to the extent that such principles would require the application of the law of another jurisdiction.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture without charge by writing to General Nutrition Centers, Inc., 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222; Attention: Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Old notes that are issued in the form of one or more global certificates will be exchanged for new notes, issued in the form of one or more global certificates, known as "global notes." Except as described below, the new notes will be initially represented by one or more global notes in fully registered form without interest coupons. The global notes will be deposited with, or on behalf of DTC, and registered in the name of Cede & Co., as nominee of DTC, or will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee.
Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for definitive notes in registered certificated form ("certificated notes") except in the limited circumstances described below. See "-- Exchange of Global Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in certificated form. In addition, transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. GNC takes no responsibility for these
operations and procedures or description thereof and urges investors to contact the system or their participants directly to discuss these matters.
DTC has advised GNC that DTC is a limited-purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants.
DTC has also advised GNC that, pursuant to procedures established by it:
(1) upon deposit of the global notes, DTC will credit the accounts of the Participants designated by the initial purchasers with portions of the principal amount of the global notes; and
(2) ownership of these interests in the global notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the global notes).
Investors in the global notes who are Participants may hold their interests therein directly through DTC. Investors in the global notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants. Euroclear and Clearstream will hold interests in the global notes on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Euroclear Bank S.A./N.V., as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in a global note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to such Persons will be limited to that extent. Because DTC can act only on behalf of the Participants, which in turn act on behalf of the Indirect Participants, the ability of a Person having beneficial interests in a global note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium, if any, and Liquidated Damages, if any, on, a global note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, GNC and the Trustee will treat the Persons in whose names the notes, including the global notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither GNC, the Trustee nor any agent of GNC or the Trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the global notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the global notes; or
(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.
DTC has advised GNC that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or GNC. Neither GNC nor the Trustee will be liable for any delay by DTC or any of the Participants or the Indirect Participants in identifying the beneficial owners of the notes, and GNC and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between the Participants will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by their respective depositaries; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised GNC that it will take any action permitted to be taken by a holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the global notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the global notes for legended notes in certificated form, and to distribute such notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of GNC, the Trustee and any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A global note is exchangeable for certificated notes if:
(1) DTC (a) notifies GNC that it is unwilling or unable to continue as depositary for the global notes or (b) has ceased to be a clearing agency registered under the Exchange Act and, in either case, GNC fails to appoint a successor depositary;
(2) GNC, at its option, notifies the Trustee in writing that it elects to cause the issuance of the certificated notes; or
(3) there has occurred and is continuing a Default or Event of Default with respect to the notes.
In addition, beneficial interests in a global note may be exchanged for certificated notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the indenture. In all cases, certificated notes delivered in exchange for any global note or beneficial interests in global notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated notes may not be exchanged for beneficial interests in any global note unless the transferor first delivers to the Trustee a written certificate (in the form provided in the indenture).
SAME DAY SETTLEMENT AND PAYMENT
GNC will make payments in respect of the notes represented by the global notes (including principal, premium, if any, interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by DTC or its nominee. GNC will make all payments of principal, interest and premium, if any, and Liquidated Damages, if any, with respect to certificated notes by wire transfer of immediately available funds to the accounts specified by the holders of the certificated notes or, if no such account is specified, by mailing a check to each such holder's registered address. The notes represented by the global notes are expected to be eligible to trade in The PORTAL(SM) Market and to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. GNC expects that secondary trading in any certificated notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a global note from a Participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a Business Day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised GNC that cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream participant to a Participant will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the Business Day for Euroclear or Clearstream following DTC's settlement date.
CERTAIN DEFINITIONS
"Acquisition" means the acquisition of General Nutrition Companies, Inc. pursuant to the Acquisition Agreement.
"Acquisition Agreement" means the Purchase Agreement, dated October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as in effect on the date of the indenture.
"Additional Assets" means
(l) any property or assets (other than Indebtedness and Capital Stock) to be used by GNC or a Restricted Subsidiary in a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by GNC or another Restricted Subsidiary; provided that such Restricted Subsidiary is primarily engaged in a Related Business;
(3) Capital Stock of any Person that at such time is a Restricted Subsidiary, acquired from a third party; provided that such Restricted Subsidiary is primarily engaged in a Related Business; and
(4) Capital Stock or Indebtedness of any Person which is primarily engaged in a Related Business; provided, however, for purposes of the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets," the aggregate amount of Net Available Cash permitted to be invested pursuant to this clause (4) shall not exceed at any one time outstanding 2.5% of Consolidated Tangible Assets.
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. No Person (other than GNC or any Subsidiary of GNC) in whom a Receivables Subsidiary makes an Investment in connection with a Qualified Receivables Transaction will be deemed to be an Affiliate of GNC or any of its Subsidiaries solely by reason of such Investment.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary, other than directors' qualifying shares, property or other assets, each referred to for the purposes of this definition as a "disposition," by GNC or any of its Restricted Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction, other than:
(1) a disposition by a Restricted Subsidiary to GNC or by GNC or a Restricted Subsidiary to a Restricted Subsidiary;
(2) a disposition of inventory, equipment, obsolete assets or surplus personal property in the ordinary course of business;
(3) the sale of Cash Equivalents in the ordinary course of business;
(4) a transaction or a series of related transactions in which the fair market value of the assets disposed of, in the aggregate, does not exceed $2 million;
(5) the sale or discount, with or without recourse, and on commercially reasonable terms, of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable for notes receivable;
(6) the licensing of intellectual property in the ordinary course of business;
(7) for purposes of the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets" only, a disposition subject to the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments;"
(8) a disposition of property or assets that is governed by the provisions described under "-- Merger and Consolidation;"
(9) the sale of franchisee accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Subsidiary for the fair market value thereof, including cash in an amount at least equal to 75% of the book value thereof as determined in accordance with GAAP, it being understood that, for the purposes of this clause (9), notes received in exchange for the transfer of franchisee accounts receivable and related assets will be deemed cash if the Receivables Subsidiary or other payor is required to repay said notes as soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that are not Affiliates of GNC entered into as part of a Qualified Receivables Transaction;
(10) the transfer of franchise accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction;
(11) any surrender or waiver of contract rights or the settlement release or surrender of contract, tort or other litigation claims in the ordinary course of business;
(12) the granting of Liens (and foreclosure thereon) not prohibited by the indenture;
(13) the closure and disposition of retail stores or distribution centers and any sales of a store owned by GNC to a franchisee, in each case in the ordinary course of business; and
(14) any sublease of real property by GNC or any Restricted Subsidiary to a franchisee in the ordinary course of business.
"Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the date of the indenture or thereafter Incurred, payable under or in respect of the Senior Credit Facility and all obligations under Specified Hedging Obligations (as defined in the Senior Credit Agreement), including, without limitation, principal, premium, if any, interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to GNC or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings, penalties, fees, charges, expenses, indemnifications, damages, reimbursement obligations, Guarantees, other monetary obligations of any nature and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, as of any date, an amount equal to:
(1) 75% of the face amount of all accounts receivable owned by GNC and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 60 days past due; provided, however, that any franchise accounts receivable owned by a Receivables Subsidiary, or that GNC or any of its Subsidiaries has agreed to transfer to a Receivables Subsidiary, shall be excluded for purposes of determining such amount; plus
(2) 50% of the book value of all inventory, net of reserves, owned by GNC and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date.
"Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease.
"Cash Equivalents" means any of the following:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Senior Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than any Permitted Holder or its Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or a Successor Company, as defined below, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a Wholly Owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an Equity Offering that is an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Restricted Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the ratio of
(1) the aggregate amount of EBITDA of GNC and its Restricted Subsidiaries for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of GNC are available, to
(2) Consolidated Interest Expense of GNC for such four fiscal quarters; provided, however, that:
(a) if GNC or any Restricted Subsidiary:
(i) has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period, except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation shall be computed based on:
(A) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or
(B) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation, and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, or
(ii) has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness, in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such discharge had occurred on the first day of such period;
(b) if since the beginning of such period GNC or any Restricted Subsidiary has made any Asset Disposition of any company or any business or any business segment, the EBITDA for such period shall be reduced by an amount equal to the EBITDA, if positive, directly attributable to the company, business or business segment that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA, if negative, directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of GNC or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to GNC and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period, and, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent GNC and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale;
(c) if since the beginning of such period GNC or any Restricted Subsidiary, by merger or otherwise, has made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquired any company or any business or any group of assets, including any such acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Investment or acquisition occurred on the first day of such period; and
(d) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into GNC or any Restricted Subsidiary since the beginning of such period, has made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (b) or (c) above if made by GNC or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with
Regulation S-X of the Securities Act, as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an Asset Disposition, Investment or acquisition of assets, or any transaction governed by the provisions described under "-- Certain Covenants -- Merger and Consolidation," or the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred or repaid, repurchased, defeased or otherwise discharged in connection therewith, the pro forma calculations in respect thereof shall be as determined in good faith by a responsible financial or accounting officer of GNC, based on reasonable assumptions. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated at a fixed rate as if the rate in effect on the date of determination had been the applicable rate for the entire period, taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months. If any Indebtedness bears, at the option of GNC or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be computed by applying, at the option of GNC or such Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness which is being given pro forma effect was Incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, as to any Person, for any period, the total consolidated interest expense of such Person and its Restricted Subsidiaries determined in accordance with GAAP, minus, to the extent included in such interest expense, amortization or write-off of financing costs plus, to the extent Incurred by such Person and its Restricted Subsidiaries in such period but not included in such interest expense, without duplication:
(1) interest expense attributable to Capitalized Lease Obligations determined as if such lease were a capitalized lease, in accordance with GAAP;
(2) amortization of debt discount;
(3) interest in respect of Indebtedness of any other Person that has been Guaranteed by such Person or any Restricted Subsidiary, but only to the extent that such interest is actually paid by such Person or any Restricted Subsidiary;
(4) non-cash interest expense;
(5) net costs associated with Hedging Obligations;
(6) the product of:
(a) mandatory Preferred Stock cash dividends in respect of all Preferred Stock of Restricted Subsidiaries of such Person and Disqualified Stock of such Person held by Persons other than such Person or a Restricted Subsidiary, multiplied by
(b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, determined on a consolidated basis in accordance with GAAP; and
(7) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest to any Person, other than the referent Person or any Subsidiary thereof, in connection with Indebtedness Incurred by such plan or trust; provided, however, that as to GNC, there shall be excluded therefrom any such interest expense of any Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by GNC or any Restricted Subsidiary.
For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received by such Person and its Subsidiaries with respect to Interest Rate Agreements.
"Consolidated Net Income" means, as to any Person, for any period, the consolidated net income (loss) of such Person and its Subsidiaries before preferred stock dividends, determined in accordance with GAAP; provided, however, that there shall not be included in such Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not (as to GNC) a Restricted Subsidiary and, as to any other Person, an unconsolidated Person, except that:
(a) the referent Person's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the referent Person or a Subsidiary as a dividend or other distribution, subject, in the case of a dividend or other distribution to a Subsidiary, to the limitations contained in clause (3) below, and
(b) the net loss of such Person shall be included to the extent of the aggregate Investment of the referent Person or any of its Restricted Subsidiaries in such Person;
(2) any net income (loss) of any Restricted Subsidiary, as to GNC, or of any Subsidiary, as to any other Person, if in either case such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to GNC, except that:
(a) such Person's equity in the net income of any such Subsidiary for such period shall be included in Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Subsidiary during such period to such Person or another Subsidiary as a dividend, subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause, and
(b) the net loss of such Subsidiary shall be included in determining Consolidated Net Income;
(3) any extraordinary gain or loss (together with any provision for taxes related thereto);
(4) the cumulative effect of a change in accounting principles;
(5) any reduction to the Consolidated Net Income of any Person caused by the amount, if any, of (a) non-cash charges relating to the exercise of options and (b) non-cash losses (or minus non-cash gains) from foreign currency translation;
(6) any decrease in net income caused by the increase in the book value of assets as a result of the Acquisition as reflected on GNC's balance sheet solely as a result of the application of SFAS No. 141;
(7) any gain (or loss), together with any related provision for taxes on such gain (or loss), realized in connection with any asset sale (other than in the ordinary course of business);
(8) costs related to the closing of stores in connection with the Acquisition as described in the Offering Memorandum; and
(9) costs incurred by GNC relating to an election made under Section 338(h)(10) of the Code (and any corresponding election under state, local, and foreign income tax laws), as provided in the Acquisition Agreement, in an amount not to exceed $10 million.
"Consolidated Tangible Assets" means, as of any date of determination, the total assets, less goodwill and other intangibles, other than patents, trademarks, copyrights, licenses and other intellectual property, shown on the balance sheet of GNC and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP less all write-ups, other than write-ups in connection with acquisitions, subsequent to the date of the indenture in the book value of any asset, except any such intangible assets, owned by GNC or any of its Restricted Subsidiaries.
"Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement, including derivative agreements or arrangements, as to which such Person is a party or a beneficiary.
"Default" means any event or condition that is, or after notice or passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means
(1) the Bank Indebtedness; and
(2) any other Senior Indebtedness or Guarantor Senior Indebtedness which, at the date of determination, has an aggregate principal amount of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated by GNC in the instrument evidencing or governing such Indebtedness as "Designated Senior Indebtedness" for purposes of the indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms, or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable, or upon the happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified Stock; or
(3) is redeemable at the option of the holder thereof, in whole or in part;
in the case of clauses (1), (2) and (3), on or prior to the 91st day after the Stated Maturity of the new notes. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require GNC to repurchase such Capital Stock upon the occurrence of a change of control or asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that GNC may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under "Certain Covenants -- Limitation on Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary of GNC that was formed under the laws of the United States or any state of the United States or the District of Columbia or that Guarantees or otherwise provides direct credit support for any Indebtedness of GNC.
"EBITDA" means, as to any Person, for any period, the Consolidated Net Income for such period, plus the following to the extent included in calculating such Consolidated Net Income:
(1) income tax expense;
(2) Consolidated Interest Expense (including the amortization of any debt issuance costs to the extent such costs are included in the calculation of Consolidated Interest Expense);
(3) depreciation expense;
(4) amortization expense (including the amortization of any debt issuance costs to the extent such costs are included in the calculation of Consolidated Interest Expense);
(5) other non-cash charges or non-cash losses; and
(6) any fees or expenses paid in connection with the Acquisition as described in the Offering Memorandum.
"Equity Offering" means any issuance or sale of Capital Stock (other than Disqualified Stock and other than to GNC or any of its Subsidiaries), or a contribution to the equity capital (other than by a Subsidiary of GNC), of GNC, in each case, that results in net proceeds to GNC of at least $100 million.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means, with respect to a series of notes, any securities of GNC containing terms identical to the notes of such series (except that such Exchange Notes shall be registered under the Securities
Act) that are issued and exchanged for the notes pursuant to the registration rights agreement or the indenture.
"Foreign Subsidiary" means any Restricted Subsidiary of GNC that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles in the United States of America as in effect on the date of the indenture, for purposes of the definitions of the terms "Consolidated Coverage Ratio," "Consolidated Interest Expense," "Consolidated Net Income" and "EBITDA," all defined terms in the indenture to the extent used in or relating to any of the foregoing definitions, and all ratios and computations based on any of the foregoing definitions, and as in effect from time to time, for all other purposes of the indenture, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the indenture shall be computed in conformity with GAAP.
"Government Obligations" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness, including any such obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay, or advance or supply funds for the purchase or payment of, such Indebtedness or such other obligation of such other Person, whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise; or
(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part; provided, however, that the term"Guarantee" shall not include endorsements for collection or deposits made in the ordinary course of business.
The term "Guarantee" used as a verb has a correlative meaning.
"Guarantor" means
(1) GNC's direct and indirect Domestic Subsidiaries existing on the date of the indenture; and
(2) any Domestic Subsidiary created or acquired by GNC after the date of the indenture, other than any Immaterial Subsidiary.
"Guarantor Senior Indebtedness" means, with respect to a Guarantor, the following obligations, whether outstanding on the date of the indenture or thereafter Incurred, without duplication:
(1) Bank Indebtedness; and
(2) all obligations consisting of the principal of and premium and liquidated damages, if any, and accrued and unpaid interest, including interest accruing on or after the filling of any petition in bankruptcy or for reorganization relating to the Guarantor regardless of whether post-filing interest is allowed in such proceeding, on, and fees and other amounts owing in respect of, all other Indebtedness of the Guarantor, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the obligations of such Guarantor under the Note Guarantee; provided, however, that Guarantor Senior Indebtedness will not include:
(a) any obligations of such Guarantor to any Subsidiary or any other Affiliate of such Guarantor or any such Affiliate's Subsidiaries;
(b) any liability for Federal, state, local, foreign or other taxes owed or owing by such Guarantor;
(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business, including Guarantees thereof or instruments evidencing such liabilities;
(d) any Indebtedness, Guarantee or obligation of such Guarantor that is expressly subordinate or junior to any other Indebtedness, Guarantee or obligation of such Guarantor, including any Guarantor Senior Subordinated Indebtedness and any Subordinated Obligations of such Guarantor;
(e) Indebtedness that is represented by redeemable Capital Stock; or
(f) that portion of any Indebtedness that is Incurred in violation of the indenture; provided that any Guarantee of Indebtedness under the Senior Credit Facility will not cease to be Guarantor Senior Indebtedness under this clause (f) if the lenders of such Indebtedness obtained a certificate from an Officer of GNC as of the date of Incurrence of such Indebtedness to the effect that such Indebtedness was permitted to be Incurred by the indenture.
If any Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of the U.S. Code or any applicable state fraudulent conveyance law, such Designated Senior Indebtedness nevertheless will constitute Guarantor Senior Indebtedness.
"Guarantor Senior Subordinated Indebtedness" means with respect to a Guarantor, the obligations of such Guarantor under the Note Guarantee and any other Indebtedness of such Guarantor, whether outstanding on the date of the indenture or thereafter Incurred, that:
(1) specifically provides that such Indebtedness is to rank pari passu in right of payment with the obligations of such Guarantor under the Note Guarantee; and
(2) is not expressly subordinated by its terms in right of payment to any Indebtedness or other obligation of such Guarantor that is not Guarantor Senior Indebtedness of such Guarantor.
"Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Immaterial Subsidiary" means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $2 million and whose total revenues for the most recent 12-month period do not exceed $2 million; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of GNC.
"Incur" means issue, assume, enter into any Guarantee of, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary, whether by merger, consolidation, acquisition or otherwise, shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. Any Indebtedness issued at a discount, including Indebtedness on which interest is payable through the issuance of additional Indebtedness, shall be deemed Incurred at the time of original issuance of the Indebtedness at the initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of determination, without duplication:
(1) the principal of Indebtedness of such Person for borrowed money if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(2) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(3) all reimbursement obligations of such Person, including reimbursement obligations in respect of letters of credit or other similar instruments, the amount of such obligations being equal at any time to
the aggregate then undrawn and unexpired amount of such letters of credit or other instruments plus the aggregate amount of drawings thereunder that have not then been reimbursed;
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables, which purchase price is due more than one year after the date of placing such property in final service or taking final delivery and title thereto or the completion of such services if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(5) all Capitalized Lease Obligations of such Person;
(6) the redemption, repayment or other repurchase amount of such Person with respect to any Disqualified Stock or, if such Person is a Subsidiary of GNC, any Preferred Stock of such Subsidiary, but excluding, in each case, any accrued dividends, the amount of such obligation to be equal at any time to the maximum fixed involuntary redemption, repayment or repurchase price for such Capital Stock, or if such Capital Stock has no fixed price, to the involuntary redemption, repayment or repurchase price therefor calculated in accordance with the terms thereof as if then redeemed, repaid or repurchased, and if such price is based upon or measured by the fair market value of such Capital Stock, such fair market value shall be as determined in good faith by the Board of Directors or the board of directors of the issuer of such Capital Stock;
(7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of:
(a) the fair market value of such asset at such date of determination; and
(b) the amount of such Indebtedness of such other Persons;
(8) all Indebtedness of other Persons to the extent Guaranteed by such Person; and
(9) to the extent not otherwise included in this definition, net Hedging Obligations of such Person, such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such time.
The amount of Indebtedness of any Person at any date shall be determined as set forth above or otherwise provided in the indenture, or otherwise in accordance with GAAP.
"Initial Notes" means the first $215,000,000 aggregate principal amount of Notes issued under the indenture on December 5, 2003.
"Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement, including derivative agreements or arrangements, as to which such Person is party or a beneficiary; provided, however, any such agreements entered into in connection with the notes shall not be included.
"Investment" in any Person by any other Person means any direct or indirect advance, loan or other extension of credit (other than to customers, suppliers, directors, officers or employees of any Person in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such Person. If GNC or any Restricted Subsidiary of GNC sells or otherwise disposes of any Capital Stock of any direct or indirect Restricted Subsidiary of GNC such that, after giving effect to any such sale or disposition, such entity is no longer a Subsidiary of GNC, GNC shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Subsidiary not sold or disposed of.
"Leverage Ratio" means, on any date of determination, the ratio of:
(1) the aggregate amount of Indebtedness of GNC and its Restricted Subsidiaries on a consolidated basis as of such date, to
(2) the aggregate amount of EBITDA of GNC and its Restricted Subsidiaries for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of GNC are available; provided, however, that:
(a) if since the beginning of such period GNC or any Restricted Subsidiary has made any Asset Disposition of any company or any business or any business segment, the EBITDA for such period shall be reduced by an amount equal to the EBITDA, if positive, directly attributable to the company, business or business segment that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA, if negative, directly attributable thereto for such period;
(b) if since the beginning of such period GNC or any Restricted Subsidiary, by merger or otherwise, has made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquired any company or any business or any business segment, including any such acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, EBITDA for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Investment or acquisition occurred on the first day of such period; and
(c) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into GNC or any Restricted Subsidiary since the beginning of such period, has made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (a) or (b) above if made by GNC or a Restricted Subsidiary during such period, EBITDA for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including any conditional sale or other title retention agreement or lease in the nature thereof.
"Liquidated Damages" means the liquidated damages then owing under the registration rights agreement.
"Mellon Letters of Credit" means the letter of credit facility between Mellon Bank, N.A. and General Nutrition, Incorporated existing on the date of the indenture and the letters of credit issued thereunder.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received, including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other noncash form, therefrom, in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, including, without limitation, fees and expenses of legal counsel, accountants and financial advisors, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness that is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or that must by its terms, or in
order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition or to any other Person, other than GNC or any Restricted Subsidiary, owning a beneficial interest in the assets disposed of in such Asset Disposition; and
(4) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by GNC or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or sale of any securities of GNC or any Subsidiary by GNC or any Subsidiary, or any capital contribution, the cash proceeds of such issuance, sale or contribution net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees and expenses actually incurred in connection with such issuance, sale or contribution and net of taxes paid or payable as a result thereof.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither GNC nor any Restricted Subsidiary;
(a) provides any Guarantee or credit support of any kind, including any undertaking, Guarantee, indemnity, agreement or instrument that would constitute Indebtedness; or
(b) is directly or indirectly liable, as a guarantor or otherwise; and
(2) no default with respect to which, including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary, would permit, upon notice, lapse of time or both, any holder of any other Indebtedness of GNC or any Restricted Subsidiary to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.
"Note Guarantee" means, individually, any Guarantee of payment of the notes by a Guarantor pursuant to the terms of the indenture, and, collectively, all such Guarantees. Each such Guarantee will be in the form prescribed in the indenture.
"Offering Memorandum" means GNC's offering memorandum, dated November 25, 2003, related to the issuance and sale of the Initial Notes.
"Officer" means the Chief Executive Officer, President, Chief Financial Officer, any Vice President, Controller, Secretary or Treasurer of GNC.
"Officer's Certificate" means a certificate signed by at least one Officer.
"Opinion of Counsel" means a written opinion from legal counsel satisfactory to the Trustee. The counsel may be an employee of or counsel to GNC or the Trustee.
"Parent" means General Nutrition Centers Holding Company and its successors and assigns.
"Permitted Holder" means Apollo.
"Permitted Investment" means:
(1) any Investment by GNC or any Restricted Subsidiary in a Restricted Subsidiary, GNC or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;
(2) any Investment by GNC or any Restricted Subsidiary in another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, GNC or a Restricted Subsidiary;
(3) any Investment by GNC or any Restricted Subsidiary in Cash Equivalents;
(4) any Investment by GNC or any Restricted Subsidiary in receivables owing to GNC or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as GNC or any such Restricted Subsidiary deems reasonable under the circumstances;
(5) any Investment by GNC or any Restricted Subsidiary in securities or other Investments received as consideration in sales or other dispositions of property or assets made in compliance with the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets;"
(6) any Investment by GNC or any Restricted Subsidiary in securities or other Investments received in settlement of debts created in the ordinary course of business and owing to GNC or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments, including in connection with any bankruptcy proceeding or other reorganization of another Person;
(7) Investments in existence or made pursuant to legally binding written commitments in existence on the date of the indenture;
(8) any Investment by GNC or any Restricted Subsidiary in Hedging Obligations, which obligations are Incurred in compliance with the covenant described under "-- Certain Covenants -- Limitations on Indebtedness;"
(9) any Investment by GNC or any Restricted Subsidiary in pledges or deposits:
(a) with respect to leases or utilities provided to third parties in the ordinary course of business; or
(b) otherwise described in the definition of "Permitted Liens;"
(10) Investments in a Related Business in an amount not to exceed $35 million (measured at the time each such Investment is made without giving effect to subsequent changes in value) in the aggregate at any time outstanding (after giving effect to any such Investments that are returned to GNC or any Restricted Subsidiary, including through redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary);
(11) loans by GNC or any Restricted Subsidiary to franchisees in an aggregate principal amount not to exceed $75 million at any one time outstanding;
(12) the acquisition by a Receivables Subsidiary in connection with a Qualified Receivables Transaction of Capital Stock of a trust or other Person established by such Receivables Subsidiary to effect such Qualified Receivables Transaction; and any other Investment by GNC or a Restricted Subsidiary of GNC in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Transaction; provided that such other Investment is in the form of a note or other instrument that the Receivables Subsidiary or other Person is required to repay as soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that are not Affiliates of GNC entered into as part of a Qualified Receivables Transaction;
(13) any Investment in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Subsidiary of GNC or an employee stock ownership plan or similar trust) of Capital Stock of GNC (other than Disqualified Stock); provided that the amount of any Net Cash Proceeds that are utilized for any such Investment will be excluded from clause 3(b) of the first paragraph set forth under "Certain Covenants -- Restricted Payments"; provided, however, that the value of any non-cash net proceeds shall be as conclusively determined by the Board of Directors in good faith, except that in the event the value of any non-cash net proceeds shall be $20 million or more, the value shall be as determined in writing by an independent investment banking firm of nationally recognized standing;
(14) any sublease of real property to a franchisee, any advertising cooperative with franchisees and any trade credit extended to franchisees, in each case in the ordinary course of business;
(15) any Investments received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of GNC or any Restricted Subsidiary, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b) litigation, arbitration or other disputes with Persons who are not Affiliates; and
(16) any Investments representing amounts held for employees of GNC and its Restricted Subsidiaries under GNC's deferred compensation plan; provided that the amount of such Investments (excluding income earned thereon) shall not exceed the amount otherwise payable to such employees the payment of which was deferred under such plan and any amounts matched by GNC under such plan.
"Permitted Junior Securities" means (1) common equity interests in GNC or any Guarantor or (2) debt or preferred equity securities of GNC or any Guarantor issued pursuant to a plan of reorganization consented to by each class of Senior Indebtedness; provided that all such securities are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the notes and the Guarantees are subordinated to Senior Indebtedness under the indenture.
"Permitted Liens" means:
(1) Liens on properties or assets of (a) GNC securing Senior Indebtedness and (b) any Guarantor securing Guarantor Senior Indebtedness, in each case, that was permitted by the terms of the indenture to be incurred;
(2) Liens for taxes, assessments or other governmental charges not yet delinquent or the nonpayment of which in the aggregate would not be reasonably expected to have a material adverse effect on GNC and its Restricted Subsidiaries, or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of GNC or such Subsidiary, as the case may be, in accordance with GAAP;
(3) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations that are not overdue for a period of more than 60 days or that are bonded or that are being contested in good faith and by appropriate proceedings;
(4) pledges, deposits or Liens in connection with workers' compensation, unemployment insurance and other social security legislation and/or similar legislation or other insurance-related obligations, including, without limitation, pledges or deposits securing liability to insurance carriers under insurance or self-insurance arrangements;
(5) pledges, deposits or Liens to secure the performance of bids, tenders, trade, government or other contracts, other than for borrowed money, obligations and deposits for or under or in respect of utilities, leases, licenses, statutory obligations, surety, judgment and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(6) easements, including reciprocal easement agreements, rights-of-way, building, zoning and similar restrictions, utility agreements, covenants, reservations, restrictions, encroachments, changes, and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in the aggregate materially interfere with the ordinary conduct of the business of GNC and its Subsidiaries, taken as a whole;
(7) Liens existing on, or provided for underwritten arrangements existing on, the date of the indenture, or, in the case of any such Liens securing Indebtedness of GNC or any of its Subsidiaries existing or arising under written arrangements existing on the date of the indenture, securing any Refinancing Indebtedness in respect of such Indebtedness so long as the Lien securing such Refinancing
Indebtedness is limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or under such written arrangements could secure, the original Indebtedness;
(8) Liens securing Hedging Obligations Incurred in compliance with the covenant described under "-- Certain Covenants -- Limitation on Indebtedness;"
(9) Liens arising out of judgments, decrees, orders or awards in respect of which GNC shall in good faith be prosecuting an appeal or proceedings for review which appeal or proceedings shall not have been finally terminated, or the period within which such appeal or proceedings may be initiated shall not have expired and Liens arising from final judgments only to the extent, in an amount and for a period not resulting in an Event of Default with respect thereto;
(10) Liens existing on property or assets of a Person at the time such Person becomes a Subsidiary of GNC, or at the time GNC or a Restricted Subsidiary acquires such property or assets; provided, however, that such Liens are not created in connection with, or in contemplation of, such other Person becoming such a Subsidiary, or such acquisition of such property or assets, and that such Liens are limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or, under the written arrangements under which such Liens arose, could secure, the obligations to which such Liens relate;
(11) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;
(12) Liens securing the notes or the Note Guarantees;
(13) Liens on assets of GNC or a Receivables Subsidiary incurred in connection with a Qualified Receivables Transaction;
(14) Liens securing Refinancing Indebtedness Incurred in respect of any Indebtedness secured by, or securing any refinancing, refunding, extension, renewal or replacement, in whole or in part, of any other obligation secured by, any other Permitted Liens; provided that any such new Lien is limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or, under the written arrangements under which the original Lien arose, could secure, the obligations to which such Liens relate;
(15) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
(16) Liens to secure Indebtedness permitted by clause (7) of the second paragraph of the covenant described under "-- Certain Covenants -- Limitation on Indebtedness"; provided that (a) any such Lien attaches to such assets concurrently with or within 180 days after the acquisition, construction or capital improvement thereof, (b) such Lien attaches solely to the assets so acquired, constructed or improved in such transaction and (c) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such assets;
(17) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods in the ordinary course of business;
(18) licenses of intellectual property granted in the ordinary course of business;
(19) Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and
(20) Liens in favor GNC or any Restricted Subsidiary.
"Permitted Payments to Parent" means, without duplication as to amounts:
(1) payments to the Parent to permit the Parent to pay reasonable directors fees and expenses when due and reasonable accounting, legal and administrative expenses of the Parent when due in an aggregate amount not to exceed $250,000 per annum; and
(2) for so long as GNC is a member of a group filing a consolidated,
combined or other similar group tax return with the Parent, payments to the
Parent in respect of an allocable portion of the tax liabilities of such
group that is attributable to GNC and its Subsidiaries ("Tax Payments").
The Tax Payments shall not exceed the lesser of (i) the amount of the
relevant tax (including any penalties and interest) that GNC would owe if
GNC and its Subsidiaries were filing a separate tax return (or a separate
consolidated or combined return with its Subsidiaries that are members of
the consolidated or combined group), taking into account any carryovers and
carrybacks of tax attributes (such as net operating losses) of GNC and such
Subsidiaries from other taxable years (as reduced by the use of such
carryovers and carrybacks by the group of which the Parent is a member) and
(ii) the amount of the relevant tax, taking into account any allowed tax
credits, that the Parent actually owes to the appropriate taxing authority.
Any Tax Payments received from GNC shall be paid over to the appropriate
taxing authority within 30 days of the Parent's receipt of such Tax
Payments or refunded to GNC.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Qualified Receivables Transaction" means any transaction or series of transactions entered into by GNC or any of its Restricted Subsidiaries pursuant to which GNC or any of its Restricted Subsidiaries sells, conveys or otherwise transfers to (1) a Receivables Subsidiary (in the case of a transfer by GNC or any of its Restricted Subsidiaries) and (2) any other Person (in the case of a transfer by a Receivables Subsidiary), or grants a security interest in, any franchise accounts receivable (whether now existing or arising in the future) of GNC or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such franchise accounts receivable, all contracts and all guarantees or other obligations in respect of such franchise accounts receivable, proceeds of such franchise accounts receivable and other assets that are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving franchise accounts receivable.
"Receivables Subsidiary" means a Restricted Subsidiary that engages in no activities other than in connection with the financing of franchise accounts receivable and that is designated by the Board of Directors (as provided below) as a Receivables Subsidiary:
(1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which:
(a) is guaranteed by GNC or any Restricted Subsidiary (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction);
(b) is recourse to or obligates GNC or any Restricted Subsidiary in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction; or
(c) subjects any property or asset of GNC or any Restricted Subsidiary (other than franchise accounts receivable and related assets as provided in the definition of "Qualified Receivables Transaction"), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction;
(2) with which neither GNC nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding other than on terms no less favorable to GNC or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of GNC, other than fees payable in the ordinary course of business in connection with servicing franchise accounts receivable; and
(3) with which neither GNC nor any Restricted Subsidiary has any obligation to maintain or preserve such Subsidiary's financial condition or cause such Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors will be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend, including pursuant to any defeasance or discharge mechanism (collectively, "refinances," and "refinanced" shall have a correlative meaning), any Indebtedness existing on the date of the indenture or Incurred in compliance with the indenture, including Indebtedness of GNC that refinances Indebtedness of any Restricted Subsidiary, to the extent permitted in the indenture, and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary, including Indebtedness that refinances Refinancing Indebtedness; provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced;
(3) if the Indebtedness being refunded, refinanced, replaced, renewed, repaid, extended, defeased or discharged is Subordinated Obligations, such Refinancing Indebtedness is subordinated in right of payment to the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being refunded, refinanced, replaced, renewed, repaid, extended, defeased or discharged;
(4) such Refinancing Indebtedness is Incurred in an aggregate principal amount, or if issued with original issue discount, an aggregate issue price, that is equal to or less than the aggregate principal amount, or if issued with original issue discount, the aggregate accreted value, then outstanding of the Indebtedness being refinanced, plus fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such Refinancing Indebtedness; provided further, however, that Refinancing Indebtedness shall not include:
(a) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of GNC; or
(b) Indebtedness of GNC or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary; and
(5) in the case of Indebtedness of GNC or a Guarantor, such Refinancing Indebtedness is Incurred by GNC, a Guarantor or by the Subsidiary who is the obligor on the Indebtedness being refinanced.
"Related Business" means those businesses in which GNC or any of its Subsidiaries is engaged on the date of the indenture or that are reasonably related or incidental thereto.
"Related Party" means:
(1) any controlling equityholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Representative" means the Trustee, agent or representative, if any, for an issue of Senior Indebtedness.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of GNC other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of GNC or its Subsidiaries secured by a Lien.
"Senior Credit Agreement" means the credit agreement dated as of December 5, 2003, among GNC, the Parent, the banks and other financial institutions party thereto from time to time, Lehman Commercial Paper Inc., as administrative agent, JPMorgan Chase Bank, as syndication agent, and the other parties thereto, as such agreement may be assumed by any successor in interest, and as such agreement may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with GNC, or any subsidiary of GNC as borrower, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior Credit Agreement, any Loan Documents, as defined therein, any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, intellectual property security agreement, mortgages, letter of credit applications and other security agreements and collateral documents, and other instruments and documents, executed and delivered pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time, whether in whole or in part, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior Credit Agreement or otherwise. Without limiting the generality of the foregoing, the term "Senior Credit Facility" shall include any agreement:
(1) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby;
(2) adding Subsidiaries of GNC as additional borrowers or guarantors thereunder;
(3) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder; or
(4) otherwise altering the terms and conditions thereof.
"Senior Indebtedness" means the following obligations of GNC, whether outstanding on the date of the indenture or thereafter Incurred, without duplication:
(1) Bank Indebtedness; and
(2) all obligations consisting of the principal of and premium and liquidated damages, if any, and accrued and unpaid interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to GNC regardless of whether post-filing interest is allowed in such proceeding, on, and fees and other amounts owing in respect of, all other Indebtedness of GNC, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the notes; provided, however, that Senior Indebtedness will not include:
(a) any obligations of GNC to any Subsidiary or any other Affiliate of GNC, or any such Affiliate's Subsidiaries;
(b) any liability for Federal, state, foreign, local or other taxes owed or owing by GNC;
(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business, including Guarantees thereof or instruments evidencing such liabilities;
(d) any Indebtedness, Guarantee or obligation of GNC that is expressly subordinate or junior to any other Indebtedness, Guarantee or obligation of GNC, including any Senior Subordinated Indebtedness and any Subordinated Obligations of GNC;
(e) Indebtedness that is represented by redeemable Capital Stock; or
(f) that portion of any Indebtedness that is Incurred in violation of the indenture; provided that Indebtedness under the Senior Credit Facility will not cease to be Senior Indebtedness under this clause (f) if the lenders of such Indebtedness obtained a certificate from an Officer of GNC as of the date of Incurrence of such Indebtedness to the effect that such Indebtedness was permitted to be Incurred by the indenture.
If any Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of the U.S. Code or any applicable state fraudulent conveyance law, such Designated Senior Indebtedness nevertheless will constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means the notes and any other Indebtedness of GNC, whether outstanding on the date of the indenture or thereafter Incurred, that:
(1) specifically provides that such Indebtedness is to rank pari passu in right of payment with the notes; and
(2) is not expressly subordinated by its terms in right of payment to any Indebtedness or other obligation of GNC that is not Senior Indebtedness.
"Significant Subsidiary" means:
(1) any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the indenture; and
(2) any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred.
"Subordinated Obligation" means any Indebtedness of GNC or any Guarantor, whether outstanding on the date of the indenture or thereafter Incurred, which is expressly subordinate or junior in right of payment to the notes or the Note Guarantees pursuant to a written agreement.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
"Successor Company" shall have the meaning assigned thereto in clause (1) under "-- Merger and Consolidation."
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.
"Trustee" means the party named as such in the indenture until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of the indenture.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of GNC that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of GNC, including any newly acquired or newly formed Subsidiary of GNC, to be an Unrestricted Subsidiary unless at the time of such designation such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, GNC or any other Subsidiary of GNC that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either:
(a) the Subsidiary to be so designated has total consolidated assets of $100,000 or less; or
(b) if such Subsidiary has consolidated assets greater than $100,000, then such designation would be permitted under "-- Certain Covenants -- Limitation on Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation:
(a) GNC could Incur at least $1.00 of additional Indebtedness under the first paragraph of the covenant described under "-- Certain Covenants -- Limitation on Indebtedness;" and
(b) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of GNC's Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing provisions.
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of GNC all the Capital Stock of which, other than directors' qualifying shares, is owned by GNC or another Wholly Owned Subsidiary.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the anticipated material United States federal income tax consequences to a holder of old notes relating to the exchange of old notes for new notes. This summary is based upon existing United States federal income tax law, which is subject to change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances, such as notes held by investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, and foreign or domestic tax-exempt organizations (including private foundations)), or to persons that hold the old notes as part of a straddle, hedge, conversion, constructive sale, or other integrated security transaction for United States federal income tax purposes or that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not address any state, local, or non-United States tax considerations. Each prospective investor is urged to consult his tax advisor regarding the United States federal, state, local, and non-United States income and other tax considerations of the acquisition, ownership, and disposition of the new notes.
EXCHANGE OF OLD NOTES FOR NEW NOTES
An exchange of old notes for new notes pursuant to the exchange offer will be ignored for United States federal income tax purposes. Consequently, a holder of old notes will not recognize gain or loss, for United States federal income tax purposes, as a result of exchanging old notes for new notes pursuant to the exchange offer. The holding period of the new notes will be the same as the holding period of the old notes and the tax basis in the new notes will be the same as the adjusted tax basis in the old notes as determined immediately before the exchange.
MATERIAL ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code impose certain requirements on employee benefit plans and certain other plans and arrangements, including individual retirement accounts and annuities, Keogh plans and certain collective investment funds or insurance company general or separate accounts in which such plans, accounts or arrangements are invested, that are subject to the fiduciary responsibility provisions of ERISA and/or Section 4975 of the Code (collectively, "Plans"), and on persons who are fiduciaries with respect to Plans, in connection with the investment of "plan assets" of any Plan ("Plan Assets"). ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan's investments be made in accordance with the documents governing the Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions involving Plan Assets and persons ("parties in interest" under ERISA and "disqualified persons" under the Code, collectively, "Parties in Interest") who have certain specified relationships to a Plan or its Plan Assets, unless a statutory or administrative exemption is available. Parties in Interest that participate in a prohibited transaction may be subject to a penalty imposed under ERISA and/or an excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or administrative exemption is available. These prohibited transactions generally are set forth in Section 406 of ERISA and Section 4975 of the Code.
The issuer may be a Party in Interest with respect to a number of Plans in addition to Plans sponsored by the issuer. Accordingly, subject to the considerations described below, the notes are eligible for purchase with Plan Assets of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the
notes with Plan Assets of any Plan should determine whether such purchase is
consistent with its fiduciary duties and whether such purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code. The prospective Plan investor, any fiduciary or other Plan investor
considering whether to purchase or hold the notes should consult with its
counsel regarding the necessity for and availability of exemptive relief under
U.S. Department of Labor ("DOL") Prohibited Transaction Class Exemption 96-23
(relating to transactions determined by "in-house asset managers"), 95-60
(relating to transactions involving insurance company general accounts), 91-38
(relating to transactions involving bank collective investment funds), 90-1
(relating to transactions involving insurance company pooled separate accounts)
or 84-14 (relating to transactions determined by independent "qualified
professional asset managers") or any other prohibited transaction exemption
issued by the DOL. A purchaser of the notes should be aware, however, that even
if the conditions specified in one or more of the above-referenced exemptions
are met, the scope of the exemptive relief provided by the exemption might not
cover all acts which might be construed as prohibited transactions.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the notes without
regard to the ERISA considerations described herein, subject to the provisions
or other applicable federal and state law. However, any such plan that is
qualified and exempt from taxation under the Sections 401(a) and 501(a) of the
Code is subject to the prohibited transaction rules set forth in Section 503 of
the Code.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 200--, all dealers effecting transactions in the new notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transaction:
- in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the new notes, or
- a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of new notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of new notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Any broker-dealer that resells new notes that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of those new notes may be deemed to be an underwriter within the meaning of the Securities Act and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the new notes. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
Furthermore, any broker-dealer that acquired any of the old notes directly from us:
- may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983); and
- must also be named as a selling noteholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.
For a period of 180 days after the expiration of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the old notes) other than commissions or concessions of any broker-dealer and will indemnify the holders of the old notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters as to the validity and enforceability of the new notes and the guarantees by certain guarantors will be passed upon for General Nutrition Centers, Inc., General Nutrition Companies, Inc., General Nutrition Distribution Company, General Nutrition Government Services, Inc., General Nutrition International, Inc., General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC, Limited, GNC US Delaware, Inc. and GN Investment, Inc. by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California. Certain legal matters relating to the guarantees will be passed upon for General Nutrition Corporation, General Nutrition Distribution, L.P., General Nutrition, Incorporated and GNC Franchising, LLC by Pepper Hamilton, LLP, in Pittsburgh, Pennsylvania. Certain legal matters relating to the guarantees will be passed upon for General Nutrition Investment Company and General Nutrition Sales Corporation by Lewis and Roca LLP, Phoenix, Arizona. Certain legal matters relating to the guarantees will be passed upon for Informed Nutrition, Inc. by Holland & Knight LLP Tallahassee, Florida. Certain legal matters relating to the guarantees will be passed upon for Nutra Manufacturing, Inc. by Kennedy Covington Lobdell & Hickman, L.L.P., Rock Hill, South Carolina.
EXPERTS
The consolidated financial statements of General Nutrition Centers, Inc. and its subsidiaries as of December 31, 2003 and the period from December 5, 2003 through December 31, 2003 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of General Nutrition Companies, Inc. and its subsidiaries as of December 31, 2002 and for the period from January 1, 2003 through December 4, 2003, and for each of the two years in the period ended December 31, 2002, included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-2 Consolidated balance sheets as of December 31, 2002 and December 31, 2003......................................... F-4 Consolidated statements of operations and comprehensive income for years ended December 31, 2001 and December 31, 2002, and for the periods from January 1, 2003 through December 4, 2003 and the 27 days ended December 31, 2003...................................................... F-5 Consolidated statements of stockholder's (deficit) equity for years ended December 31, 2001 and December 31, 2002 and for the periods from January 1, 2003 through December 4, 2003 and the 27 days ended December 31, 2003........... F-6 Consolidated statements of cash flows for years ended December 31, 2001 and December 31, 2002 and the periods from January 1, 2003 through December 4, 2003 and the 27 days ended and December 31, 2003.......................... F-7 Notes to Consolidated Financial Statements.................. F-8 |
REPORT OF INDEPENDENT AUDITORS
To the Supervisory Board of Royal Numico N.V. and the Stockholder of General Nutrition Companies, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and comprehensive income, of stockholder's equity and of cash flows presents fairly, in all material respects, the financial position of General Nutrition Companies, Inc., and its subsidiaries (the "Company") at December 31, 2002, and the results of their operations and their cash flows for the period from January 1, 2003 through December 4, 2003, and for each of the two years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under item 21(b), represents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 5 to the consolidated financial statements, the Company changed its method of accounting for goodwill and intangible assets in 2002.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania March 1, 2004 |
REPORT OF INDEPENDENT AUDITORS
To the Stockholder and Board of Directors of General Nutrition Centers, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheet and the related consolidated statement of operations and comprehensive income, of stockholder's equity and of cash flows presents fairly, in all material respects, the financial position of General Nutrition Centers, Inc., and its subsidiaries (the "Company") at December 31, 2003, and the results of their operations and their cash flows for the period from December 5, 2003 through December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under item 21(b), represents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania March 23, 2004 |
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
Current assets:
Cash and cash equivalents................................. $ 38,765 $ 33,176
Receivables, net (Note 1)................................. 208,334 87,984
Inventories (Note 2)...................................... 285,622 256,000
Deferred tax assets (Note 17)............................. 20,291 15,946
Other current assets (Note 3)............................. 26,826 27,480
----------- ----------
Total current assets................................... 579,838 420,586
Long-term assets:
Goodwill, net (Note 5).................................... 248,838 83,089
Brands, net (Note 5)...................................... 666,000 212,000
Other intangible assets, net (Note 5)..................... 70,469 32,667
Property, plant and equipment, net (Note 4)............... 284,638 201,280
Deferred financing fees, net.............................. -- 19,796
Deferred tax assets (Note 17)............................. -- 15,289
Other long-term assets (Note 6)........................... 28,527 34,160
----------- ----------
Total long-term assets................................. 1,298,472 598,281
----------- ----------
Total assets......................................... $ 1,878,310 $1,018,867
=========== ==========
Current liabilities:
Accounts payable (Note 7)................................. $ 121,992 $ 88,263
Accrued payroll and related liabilities................... 18,745 33,277
Accrued income taxes...................................... 37,156 438
Accrued interest.......................................... -- 1,799
Current portion, long-term debt (Note 9).................. 175,906 3,830
Other current liabilities (Note 8)........................ 72,465 92,934
----------- ----------
Total current liabilities.............................. 426,264 220,541
Long-term liabilities:
Deferred tax liabilities (Note 17)........................ 251,261 --
Long-term debt (Note 9)................................... 1,664,172 510,374
Other long-term liabilities............................... 30,365 9,796
----------- ----------
Total long-term liabilities............................ 1,945,798 520,170
Total liabilities.................................... 2,372,062 740,711
Commitments and contingencies (Note 18)
Stockholder's (deficit) equity:
Common stock authorized, issued and outstanding 1,000
shares at $.01 par..................................... -- --
Paid-in-capital........................................... 690,955 277,500
Retained (deficit) earnings............................... (1,183,231) 354
Accumulated other comprehensive (loss) income (Note 11)... (1,476) 302
----------- ----------
Total stockholder's (deficit) equity................... (493,752) 278,156
----------- ----------
Total liabilities and stockholder's (deficit)
equity.............................................. $ 1,878,310 $1,018,867
=========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS)
PREDECESSOR SUCCESSOR
---------------------------------------- -------------
PERIOD 27 DAYS
TWELVE MONTHS ENDED ENDED ENDED
DECEMBER 31, DECEMBER 4, DECEMBER 31,
------------------------ ------------ -------------
2001 2002 2003 2003
---------- ---------- ------------ -------------
Revenue.......................................... $1,509,144 $1,424,976 $1,340,209 $89,288
Cost of sales, including costs of warehousing,
distribution and occupancy..................... 1,013,392 969,908 934,860 63,580
---------- ---------- ---------- -------
Gross profit..................................... 495,752 455,068 405,349 25,708
Compensation and related benefits................ 246,639 245,165 234,990 16,719
Advertising and promotion........................ 41,870 52,026 38,413 514
Other selling, general and administrative........ 140,747 86,048 70,938 5,098
Other (income) expense........................... (3,476) (216,284) (10,085) 22
Impairment of goodwill and intangible assets
(Note 5)....................................... -- 222,000 709,367 --
---------- ---------- ---------- -------
Operating income (loss).......................... 69,972 66,113 (638,274) 3,355
Interest expense, net (Note 9)................... (139,930) (136,353) (121,125) (2,773)
(Loss) income before income taxes................ (69,958) (70,240) (759,399) 582
Income tax benefit (expense) (Note 17)........... 14,099 (996) 174,478 (228)
---------- ---------- ---------- -------
Net (loss) income before cumulative effect of
accounting change.............................. (55,859) (71,236) (584,921) 354
Loss from cumulative effect of accounting change,
net of tax (Note 5)............................ -- (889,621) -- --
---------- ---------- ---------- -------
Net (loss) income................................ (55,859) (960,857) (584,921) 354
Other comprehensive income (loss) (Note 11)...... 1,745 (1,853) 1,603 302
---------- ---------- ---------- -------
Comprehensive (loss) income...................... $ (54,114) $ (962,710) $ (583,318) $ 656
========== ========== ========== =======
|
The accompanying notes are an integral part of the consolidated financial statements.
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY
(IN THOUSANDS)
RETAINED OTHER TOTAL
COMMON ADDITIONAL (DEFICIT) COMPREHENSIVE STOCKHOLDER'S
STOCK PAID-IN-CAPITAL EARNINGS (LOSS)/INCOME (DEFICIT) EQUITY
------ --------------- ----------- ------------- ----------------
PREDECESSOR
BALANCE AT JANUARY 1, 2001.... $-- $690,955 $ (166,515) $(1,368) $ 523,072
Net loss...................... -- -- (55,859) -- (55,859)
Unrealized appreciation on
marketable securities, net
of tax...................... -- -- -- 2,145 2,145
Foreign currency
translation................. -- -- -- (400) (400)
-- -------- ----------- ------- -----------
BALANCE AT DECEMBER 31,
2001........................ $-- $690,955 $ (222,374) $ 377 $ 468,958
Net loss...................... -- -- (960,857) -- (960,857)
Unrealized (depreciation) on
marketable securities, net
of tax...................... -- -- -- (2,145) (2,145)
Foreign currency
translation................. -- -- -- 292 292
-- -------- ----------- ------- -----------
BALANCE AT DECEMBER 31,
2002........................ $-- $690,955 $(1,183,231) $(1,476) $ (493,752)
Net loss...................... -- -- (584,921) -- (584,921)
Foreign currency
translation................. -- -- -- 1,603 1,603
-- -------- ----------- ------- -----------
BALANCE AT DECEMBER 4, 2003... $-- $690,955 $(1,768,152) $ 127 $(1,077,070)
---------------------------------------------------------------------------------------------------------
SUCCESSOR
General Nutrition Centers
Holding Company investment
in General Nutrition
Centers, Inc. .............. -- 277,500 -- -- 277,500
Net income.................... -- -- 354 -- 354
Foreign currency
translation................. -- -- -- 302 302
-- -------- ----------- ------- -----------
BALANCE AT DECEMBER 31,
2003........................ $-- $277,500 $ 354 $ 302 $ 278,156
== ======== =========== ======= ===========
|
The accompanying notes are an integral part of the consolidated financial statements.
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
PREDECESSOR SUCCESSOR
----------------------------------- -------------
TWELVE MONTHS ENDED PERIOD ENDED 27 DAYS ENDED
DECEMBER 31, DECEMBER 4, DECEMBER 31,
-------------------- ------------ -------------
2001 2002 2003 2003
-------- --------- ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income.................................... $(55,859) $(960,857) $(584,921) $ 354
Depreciation expense............................... 46,137 46,461 50,880 1,950
Loss from cumulative effect of accounting change,
net of tax....................................... -- 889,621 -- --
Impairment of goodwill and intangible assets....... -- 222,000 709,367 --
Amortization of goodwill and intangible assets..... 75,940 11,536 8,171 303
Amortization of deferred financing fees............ -- -- -- 224
Inventory non-cash decrease........................ 25,256 33,911 27,701 2,237
Changes in stock-based compensation................ 14,582 (2,030) -- --
Stock appreciation rights compensation............. -- -- 4,347 --
Increase in allowance for doubtful accounts........ 1,815 5,285 1,953 767
Gain on sale of marketable securities.............. -- (5,043) -- --
Increase in net deferred taxes..................... (24,469) (44,908) (197,629) (210)
Changes in assets and liabilities:
(Increase) decrease in receivables................. (2,940) (132,581) 57,933 2,119
Decrease (increase) in inventory, net.............. 46,263 (11,695) 1,258 1,581
Decrease in franchise note receivables, net........ 7,995 8,069 1,546 1,326
(Increase) decrease in other assets................ (1,080) 9,125 (5,597) (4,950)
(Decrease) increase in accounts payable............ (48,183) 18,800 (3,245) (5,342)
(Decrease) increase in accrued taxes............... (2,422) 25,541 5,638 438
(Decrease) increase in interest payable............ (3,853) -- -- 1,799
(Decrease) increase in accrued liabilities......... (3,378) (2,200) 15,466 2,092
-------- --------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........ 75,804 111,035 92,868 4,688
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (29,183) (51,899) (31,020) (1,827)
Proceeds from disposal of assets................... 6,179 4,254 2,760 24
Store acquisition costs............................ (21,863) (4,055) (3,193) (81)
Investments, loans and advances to investees....... (3,280) (200) -- --
Acquisition of General Nutrition Companies, Inc.... -- -- -- (738,117)
Proceeds from sale of marketable securities........ -- 7,443 -- --
-------- --------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES............ (48,147) (44,457) (31,453) (740,001)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
General Nutrition Centers Holding Company
investment in General Nutrition Centers, Inc..... -- -- -- 277,500
(Decrease) increase in cash overdrafts............. (12,797) (1,112) 1,915 1,735
Short-term borrowings -- related party............. 62,341 -- -- --
Payments on short-term debt -- related party....... (20,000) (42,341) -- --
Payments on long-term debt -- related party........ (50,000) -- (91,794) --
Payments on long-term debt -- third parties........ (1,132) (847) (887) --
Borrowings from senior credit facility............. -- -- -- 285,000
Proceeds from senior subordinated notes............ -- -- -- 215,000
Deferred financing fees............................ -- -- -- (20,020)
-------- --------- --------- ---------
NET CASH (USED)/PROVIDED BY FINANCING
ACTIVITIES..................................... (21,588) (44,300) (90,766) 759,215
-------- --------- --------- ---------
Effect of exchange rates on cash..................... (231) 175 12 (152)
-------- --------- --------- ---------
Net increase (decrease) in cash...................... 5,838 22,453 (29,339) 23,750
Beginning balance, cash.............................. 10,474 16,312 38,765 9,426
-------- --------- --------- ---------
Ending balance, cash................................. $ 16,312 $ 38,765 $ 9,426 $ 33,176
======== ========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL NATURE OF BUSINESS. General Nutrition Centers, Inc. (the "Company"), a Delaware corporation, is a leading specialty retailer of vitamin, mineral and herbal supplements, diet and sports nutrition products and specialty supplements. The Company is also a provider of personal care and other health related products. The Company's organizational structure is vertically integrated as the operations consist of purchasing raw materials, formulating and manufacturing products, and selling the finished products through its retail, franchising and manufacturing/wholesale segments. The Company operates primarily in three business segments: Retail, Franchising and Manufacturing/Wholesale. Corporate retail store operations are located in North America and Puerto Rico. Franchise stores are located in the United States and Canada and 34 international markets. The Company operates a manufacturing facility in South Carolina and distribution centers in Arizona, Pennsylvania and South Carolina. The Company also operates a smaller manufacturing facility in Australia. The Company manufactures the majority of its branded products, but also merchandises various third-party products. Additionally, the Company licenses the use of its trademarks and trade names. The processing, formulation, packaging, labeling and advertising of the Company's products are subject to regulation by one or more federal agencies, including the Food and Drug Administration ("FDA"), Federal Trade Commission ("FTC"), Consumer Product Safety Commission, United States Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various agencies of the states and localities in which the Company's products are sold.
ACQUISITION OF THE COMPANY. In August 1999, General Nutrition Companies, Inc. (GNCI) was acquired by Numico Investment Corp. ("NIC"), which subsequent to the acquisition, was merged into GNCI. NIC was a wholly owned subsidiary of Numico U.S. L.P., which was merged into Nutricia USA, Inc. ("Nutricia") in 2000. Nutricia (now known as Numico USA, Inc.) is a wholly owned subsidiary of Koninklijke (Royal) Numico N.V. ("Numico"), a Dutch public company headquartered in Zoetermeer, Netherlands. The results of GNCI were reported as part of the consolidated Numico financial statements from August 1999 to December 4, 2003.
On October 16, 2003, the Company entered into a purchase agreement (the "purchase agreement") with Numico and Numico USA, Inc. to acquire 100% of the outstanding equity interest of GNCI from Numico USA Inc., a subsidiary of Numico ("the Acquisition"). The purchase equity contribution was made by GNC Investors, LLC, ("GNC LLC") an affiliate of Apollo, together with additional institutional investors and certain management of the Company. The equity contribution from GNC LLC was recorded on General Nutrition Centers Holding Company ("GNCH"). GNCH utilized this equity contribution to purchase the investment in the Company. The Company is a wholly owned subsidiary of GNCH. The transaction closed on December 5, 2003 and was accounted for under the purchase method of accounting. The net purchase price was $733.2 million, which was paid from total proceeds via a combination of cash, and the proceeds from the issuance of senior subordinated notes and borrowings under a senior credit facility, and is summarized herein. Apollo Management LP ("Apollo") and certain institutional investors, through GNC LLC and GNCH, contributed a cash equity investment of $277.5 million to the Company. In connection with the Acquisition on December 5, 2003, the Company also issued $215 million aggregate principal amount of its 8 1/2% Senior Subordinated Notes, due 2010, resulting in net proceeds to the Company of $207.1 million. In addition, the Company obtained a new secured senior credit facility consisting of a $285.0 million term loan facility and a $75 million revolving credit facility. The Company borrowed the entire $285.0 million under the term loan facility to fund a portion of the acquisition price, which netted proceeds to the Company of $275.8 million. These total proceeds were reduced by certain debt issuance and other transaction costs. Subject to certain limitations in accordance with the purchase agreement, Numico and Numico USA, Inc. agreed to indemnify the Company on losses arising from, among other items, breaches of representations, warranties, covenants and other certain liabilities relating to the business of GNCI, arising prior to December 5, 2003 as well as
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
any losses payable in connection with certain litigation including ephedra related claims. The Company utilized these proceeds to purchase GNCI with the remainder of $19.8 million used to fund operating capital.
In conjunction with the acquisition, fair value adjustments were made to the Company's financial statements as of December 5, 2003. As a result of the acquisition by Apollo and fair values assigned by the appraisal specialist, the accompanying financial statements as of December 31, 2003 reflect adjustments made in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. The following table summarizes the fair values assigned at December 5, 2003 to the Company's assets and liabilities in connection with the acquisition.
Fair value Opening Balance Sheet at December 5, 2003:
(IN THOUSANDS)
Assets:
Current assets............................................ $ 438,933
Goodwill.................................................. 83,089
Other intangible assets................................... 244,970
Property, plant and equipment............................. 201,287
Other assets.............................................. 54,426
----------
Total assets........................................... 1,022,705
----------
Liabilities:
Current liabilities....................................... 217,033
Long-term debt............................................ 513,217
Other liabilities......................................... 14,955
----------
Total liabilities...................................... 745,205
----------
General Nutrition Centers Holding Company investment in
General Nutrition Centers, Inc............................ $ 277,500
==========
|
BASIS OF PRESENTATION. The accompanying financial statements for the period from December 5, 2003 to December 31, 2003 include the accounts of General Nutrition Centers, Inc. and its wholly owned subsidiaries. Included in this period are fair value adjustments to assets and liabilities, including inventory, goodwill, other intangible assets and property, plant and equipment. Also included is the corresponding effect these adjustments had to cost of sales, depreciation and amortization expenses. Accordingly, the accompanying financial statements for the periods prior to the Acquisition are labeled as "Predecessor" and the periods subsequent to the Acquisition are labeled as "Successor".
For the period from August 8, 1999 to December 4, 2003 the consolidated financial statements of GNCI were prepared on a carve-out basis and reflect the consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America. The financial statements for this period reflected amounts that were pushed down from Nutricia and Numico in order to depict the financial position, results of operations and cash flows of GNCI based on these carve-out principles. As a result of the sale of GNCI to Apollo, all related party term debt was settled in full. As a result of recording these amounts, the financial statements of GNCI may not be indicative of the results that would be presented if GNCI had operated as an independent, stand-alone entity. See Note 22 for further discussion of GNCI's related party transactions with Nutricia, Numico and other related entities.
The Company's normal reporting period is based on a 52-week calendar year. Therefore, the Predecessor results of operations presented in the accompanying financial statements for the period from January 1, 2003 to December 4, 2003 are not necessarily indicative of the results that would be expected for the full reporting
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year. In the opinion of management, all material adjustments consisting of normal recurring transactions, necessary to reflect a fair presentation of the financial statements, have been included.
Certain reclassifications have been made to the financial statements to ensure consistency in reporting and conformity between prior year and current year amounts.
THE FOLLOWING IS A SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES ADOPTED BY THE COMPANY. THERE HAVE BEEN NO SIGNIFICANT CHANGES IN ACCOUNTING POLICIES SINCE THE ACQUISITION.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The equity method of accounting is used for investment ownership ranging from 20 to 50 percent. Investment ownership of less than 20 percent is accounted for on the cost method. All intercompany transactions have been eliminated in consolidation.
USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Accordingly, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of the most significant estimates pertaining to the Company include the valuation of inventories, the allowance for doubtful accounts, income tax valuation allowances and the recoverability of long-lived assets. On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
REVENUE RECOGNITION. The Company operates predominately as a retailer, through Company-owned and franchised stores, and to a lesser extent through wholesale operations. For all years and periods presented herein, the Company has complied with and adopted Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition".
The Retail segment recognizes revenue at the moment a sale to a customer is recorded. These revenues are recorded via the Company's point of sale system. Gross revenues are netted (decreased) by actual customer returns and an allowance for expected customer returns. The Company records a reserve for expected customer returns based on management's estimate, which is derived from historical return data. Revenue is deferred on sales of the Company's Gold Cards and subsequently amortized over 12 months. The length of the amortization period is determined based on matching the discounts associated with the Gold Card program to the revenue deferral during the twelve month membership period. For an annual fee, the card provides customers with a 20% discount on all products purchased, both on the date the card is purchased and certain specified days of every month. The Company also defers revenue for sales of gift cards until such time the gift cards are redeemed for products.
The Company's Franchise segment generates revenues from franchise fees (see Note 14 Franchise Revenue), product sales to franchisees, royalties, and interest income on the financing of the franchise locations. The franchisees purchase a majority of the products they sell from the Company at wholesale prices. Revenue on product sales to franchisees is recognized when risk of loss, title and insurable risks have transferred to the franchisee. Franchise fees are recognized by the Company at the time of a franchise store opening. Interest on the financing of franchisee notes receivable is recorded as it becomes due and payable. In accordance with the American Institute of Certified Public Accountants Statement of Position No. 01-6, "Accounting by Certain Entities That Lend to or Finance the Activities of Others", the franchisee financing activity is further discussed in Note 6 Other Long-Term Assets. Gains from the sale of company-owned stores to franchisees are recognized in accordance with SFAS No. 66, "Accounting for Sales of Real Estate". This standard requires gains on sales of corporate stores to franchisees to be deferred until certain criteria are
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
satisfied regarding the collectibility of the related receivable and the seller's remaining obligations. Remaining sources of franchise income, including royalties, are recognized as earned.
The Manufacturing/Wholesale segment sells product primarily to the other Company segments, third party customers and historically to certain related parties. Revenue is recognized when risk of loss, title and insurable risks have transferred to the customer. All intercompany transactions are eliminated in the enclosed consolidated financial statements.
The Company also has a consignment arrangement with certain customers and revenue is recognized when products are sold to the ultimate customer.
VENDOR ALLOWANCES. The Company receives allowances from various vendors based on either sales or purchase volumes. In accordance with Emerging Issues Task Force ("EITF") No. 02-16, "Accounting by a Reseller for Cash Consideration Received from a Vendor", the Company has properly included this consideration received from vendors in cost of sales.
DISTRIBUTION AND SHIPPING COSTS. The Company charges franchisees and third party customers shipping and transportation costs and reflects these charges in revenue. The costs that are associated with these charges are included in cost of goods sold.
RESEARCH AND DEVELOPMENT. Research and development costs arising from internally generated projects are expensed by the Company as incurred. The Company recorded $0.1 million in research and development costs for the 27 days ended December 31, 2003. GNCI recorded research and development amounts charged by Numico directly to expense during the Predecessor period. Research and development costs, recorded by GNCI, for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 were $5.1, $6.1 and $5.3 million respectively. These costs are included in Other selling, general and administrative costs in the accompanying financial statements. See Note 22 Related Party Transactions.
CASH AND CASH EQUIVALENTS. The Company considers cash and cash equivalents to include all cash and liquid deposits and investments with a maturity of three months or less. Cash requirements are met utilizing funds provided by the Company's operations. Overnight investments in certain sweep accounts generate interest income earned from cash.
INVESTMENT SECURITIES. The Company's investments consisted of equity securities that were classified as available-for-sale. In accordance with SFAS No. 115, "Accounting for Certain Investments for Debt and Equity Securities", these securities were stated at fair value based on quoted market prices. Unrealized gains and losses were recorded, net of applicable taxes, as a separate component of stockholder equity (deficit) in other comprehensive income. The investment balance of $5.7 million as of December 31, 2001 represented stock purchased, in July 1999, in connection with a business cooperation agreement with a leading on-line drugstore entity. In accordance with an agreement entered into at the time of the investment, the shares were subject to a mandatory holding period that prohibited the immediate sale of the stock. For the year ended December 31, 2001, an unrealized pre-tax gain was recorded on these investment securities of $3.3 million. For the year ended December 31, 2002, a realized pre-tax gain of $5.0 million was recognized upon the sale of all of the investment securities.
INVENTORIES. Cost is determined using a standard costing system which approximates actual costs. Inventories are stated at the lower of cost or market on a FIFO (first in, first out) basis. Inventory components consist of raw materials, finished product and packaging supplies. The Company reviews its inventory levels in order to identify slow moving and short dated products, expected length of time for product sell through and future expiring product. Upon analysis, the Company has established certain valuation allowances to reserve for such inventory. When allowances are considered necessary, after such reviews, the inventory balances are adjusted and reflected net in the accompanying financial statements.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company sells product to its franchisees and, to a lesser extent, various third parties. See Note 1 Receivables, for the components of accounts receivable. To determine the allowance for doubtful accounts, factors that affect collect ability from the Company's franchisees or customers include their financial strength, payment history, reported sales and the overall retail economy. The Company establishes an allowance for doubtful accounts for franchisees based on an assessment of the franchisees' operations which includes analysis of their current year to date operating cash flows, retail sales levels, and status of amounts due to the Company, such as rent, interest and advertising. An allowance for international franchisees is calculated based on unpaid, unsecured amounts associated with their receivable balance. An allowance for receivable balances due from third parties is recorded, if considered necessary, based on facts and circumstances. These allowances are deducted from the related receivables and reflected net in the accompanying financial statements.
NOTES RECEIVABLE. The Company offers financing to qualified franchisees in connection with the initial purchase of a franchise store. The notes offered by the Company to its franchisees are demand notes, payable monthly over a period ranging from five to seven years. Interest accrues principally at an annual rate that ranges from 11.25% to 13.75%, based on the amount of initial deposit, and is payable monthly. Allowances for these receivables are recorded in accordance with the Company's policy described in the Accounts Receivable and Allowance for Doubtful Accounts policy.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment expenditures are recorded at cost. Depreciation and amortization are recorded using the straight-line method over the estimated useful life of the property. Fixtures are depreciated over three to eight years, and equipment is generally depreciated over ten years. Computer equipment and software costs are generally depreciated over three years. Amortization of improvements to retail leased premises is recorded using the straight-line method over the estimated useful life of the improvements, or over the life of the related leases, whichever period is shorter. Buildings are depreciated over 40 years and building improvements are depreciated over the remaining useful life of the building. The Company records tax depreciation in conformity with the provisions of applicable tax law.
Expenditures that materially increase the value or clearly extend the useful life of property, plant and equipment are capitalized in accordance with the policies outlined above. Repair and maintenance costs incurred in the normal operations of business are expensed as incurred. Gains from the sale of property, plant and equipment are recorded in current operations. Periodically, the Company receives varying amounts of reimbursements from landlords to compensate the Company for costs incurred in the construction of stores. Improvements to the leased premises which are recorded by the Company as fixed assets are reduced by the amount of these reimbursements.
The Company recorded depreciation expense of property, plant and equipment of $2.0 million for the 27 days ended December 31, 2003. GNCI recorded $50.9, $46.5 and $46.1 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 respectively.
GOODWILL AND INTANGIBLE ASSETS. Goodwill represents the excess of purchase price over the fair value of identifiable net assets of acquired entities. In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Intangible Assets". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations after June 30, 2001 and provides guidance on the initial recognition and measurement of goodwill and intangible assets resulting from business combinations. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. The Company adopted SFAS No. 142 as of January 1, 2002. Prior to 2002, goodwill and other intangible assets were amortized over periods not exceeding 40 years. Other intangible assets with finite lives are amortized on a straight-line basis over periods not exceeding 20 years. The Company records goodwill upon the acquisition of franchisee stores when the acquisition price exceeds the fair value of the
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
identifiable assets acquired and liabilities assumed of the store. This goodwill is accounted for in accordance with the above policy. See Note 5 Goodwill and Intangible Assets.
IMPAIRMENT OF LONG-LIVED ASSETS. In August 2001, the FASB issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long Lived Assets". SFAS No.
144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets
and Long-lived Assets to be Disposed of", and the provisions required by
Accounting Principles Board Opinion (APB) No. 30, "Reporting Results of
Operations and Discontinued Events and Extraordinary Items". SFAS No. 144 is
based on the framework established by SFAS No. 121, but also includes provisions
requiring that assets held for sale be presented separately in the consolidated
balance sheet and broadens the reporting of discontinued operations. SFAS No.
144 was effective for the year beginning January 1, 2002. This standard requires
that certain assets be reviewed for impairment and if impaired, be re-measured
at fair value whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The adoption of SFAS No.
144 had no effect in the Company's financial statements.
ADVERTISING EXPENDITURES. The Company recognizes advertising, promotion and marketing program expenses as they are incurred. Television production costs are recognized during the period the commercial initially airs. The Company administers national advertising funds on behalf of its franchisees. In accordance with the franchisee contracts, the Company collects advertising funds from the franchisee and utilizes the proceeds to coordinate various advertising and marketing campaigns. The Company previously participated with its franchisees in a cooperative advertising program that was discontinued as of January 2001. The Company recorded $0.5 million in advertising expense for the 27 days ended December 31, 2003. GNCI recorded advertising expense of $38.4, $52.0 and $41.9 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 respectively.
The Company has a balance of unused advertising barter credits on account with a third party advertising agency. These available credits are not recognized as assets in the accompanying financial statements because their fair value cannot be reasonably estimated. The credits can be used to offset the cost of cable advertising. As of December 31, 2003, and December 31, 2002 the available credit balance was $16.6 and $18.8 million respectively.
LEASES. The Company has various operating leases for Company owned and franchised store locations and equipment. Store leases generally include amounts relating to base rental, percent rent and other charges such as common area maintenance fees and real estate taxes. The Company leases its warehouse facilities in Pennsylvania and Arizona. The Company also has operating leases for their fleet of distribution tractors and trailers and fleet of field management vehicles. The expense associated with leases that have escalating payment terms is recognized on a straight-line basis over the life of the lease. We also lease a 630,000 square foot complex located in Anderson, South Carolina, for packaging, materials receipt, lab testing, warehousing, and distribution. Both the Greenville and Anderson facilities are leased on a long-term basis pursuant to "fee-in-lieu-of-taxes" arrangements with the counties in which the facilities are located, but we retain the right to purchase each of the facilities at any time during the lease for $1.00, subject to a loss of tax benefits. We also lease a 210,000 square foot distribution center in Leetsdale, Pennsylvania and a 112,000 square foot distribution center in Phoenix, Arizona. We conduct additional manufacturing that we perform for wholesalers or retailers of third-party products, as well as certain additional warehousing at a leased facility located in New South Wales, Australia. See Note 16 Long-Term Lease Obligations.
PRE-OPENING EXPENDITURES. The Company recognizes the cost associated with the opening of new stores as incurred. These costs are charged to expense and are not material for the periods presented. Franchise store pre-opening costs are incurred by the franchisees.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED FINANCING FEES. Costs related to the financing of the senior credit facility and senior subordinated notes were capitalized and are being amortized over the term of the respective debt utilizing the straight line method. Accumulated amortization at December 31, 2003 is $0.2 million.
INCOME TAXES. The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes". As prescribed by SFAS No. 109, the Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. See Note 17 Income Taxes.
For the period December 5, 2003 to December 31, 2003 the Company will be participating in a consolidated federal income tax return as a subsidiary of GNCH. For state income tax purposes, the Company will file on both a consolidated and separate return basis in the states in which they conduct business.
For the period ended December 4, 2003 and the years ended December 31, 2002 and 2001, GNCI was a member of a consolidated filing group for federal income tax purposes. The filing group included GNCI, Nutricia and two other U.S. based affiliates, Rexall Sundown, Inc. ("Rexall") and Unicity Network, Inc. ("Unicity"), both also wholly owned by Numico. An informal tax sharing agreement existed among the members of the consolidated filing group that provided for each entity to be responsible for a portion of the consolidated tax liability equal to the amount that would have been determined on a separate return basis. The agreement also provided for each company to be paid for any decreases in the consolidated federal income tax liability resulting from the utilization of deductions, losses and credits from current or prior years that were attributable to each entity. The current and deferred tax expense for the period ended December 4, 2003 and the years ended December 31, 2002 and 2001 are presented in the accompanying consolidated financial statements and was determined as if GNCI were a separate taxpayer. For state income tax purposes, the Company files on both a consolidated and separate return basis in the states in which they conduct business. Amounts due to Numico for taxes were settled in conjunction with the acquisition. According to the purchase agreement, Numico has agreed to indemnify the Company for any subsequent tax liabilities arising from periods prior the acquisition.
SELF-INSURANCE. Prior to the acquisition, GNCI was included as an insured under several of Numico's global insurance policies. Subsequent to the acquisition, the Company has procured insurance independently for such areas as general liability, product liability, directors and officers liability, property insurance, and ocean marine insurance. The Company is self-insured with respect to its medical benefits. As part of this coverage, the Company contracts with national service providers to provide benefits to its employees for all medical, dental, vision and prescription drug services. The Company then reimburses these service providers as claims are processed from Company employees. The Company maintains a specific stop loss provision of $200,000 per incident. The Company's liability for medical claims is included as a component of accrued payroll and related liabilities and was $3.0 and $3.5 million as of December 31, 2003 and December 31, 2002, respectively. The Company carries general product liability insurance with a deductible of $1.0 million per claim with an aggregate cap on retained losses of $10.0 million. The Company is self-insured for its worker's compensation coverage in the State of New York with a stop loss of $250,000. The Company's liability for worker's compensation in New York was not significant as of December 31, 2003 and December 31, 2002. The Company is self-insured for physical damage to the Company's tractors, trailers and fleet vehicles for field personnel use. The Company is self-insured for any physical damages that may occur at the corporate store locations. The Company's associated liability for this self-insurance was not significant as of December 31, 2003 and December 31, 2002.
STOCK COMPENSATION. In accordance with APB No. 25, "Accounting for Stock
issued to Employees", the Company accounts for stock-based employee compensation
using the intrinsic value method of
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting. For the period from December 5, 2003 to December 31, 2003, stock compensation represents shares of GNCH stock per the new General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (See Note 21). The stock associated with this plan is not traded on any exchange. Stock compensation for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 represents shares of Numico stock under the Numico 1999 Share Option Plan. SFAS No. 123, "Accounting for Stock-based Compensation", prescribes that companies utilize the fair value method of valuing stock based compensation and recognize compensation expense accordingly. It does not require, however, that the fair value method be adopted and reflected in the financial statements. As an alternative, pro forma information is to be disclosed in the accompanying footnotes to reflect results as if SFAS No. 123 had been adopted. The Company has elected to continue accounting for stock-based compensation using the intrinsic value method and has disclosed the additional information required by SFAS No. 123 in Note 21, "Stock-Based Compensation Plans". The Company has adopted the disclosure requirements of SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123" by illustrating compensation costs in the following table.
Had compensation costs for stock options been determined using the fair market value method of SFAS No. 123, the effect on net loss for each of the periods presented would have been as follows:
PREDECESSOR SUCCESSOR
----------------------------------- -------------
TWELVE MONTHS ENDED
DECEMBER 31, PERIOD ENDED 27 DAYS ENDED
-------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
-------- --------- ------------ -------------
(IN THOUSANDS)
Net (loss) income as reported........ $(55,859) $(960,857) $(584,921) $354
Less: total stock based employee
compensation costs determined using
fair value method, net of related
tax effects........................ (1,682) (657) (215) (70)
-------- --------- --------- ----
Adjusted net (loss) income........... $(57,541) $(961,514) $(585,136) $284
======== ========= ========= ====
|
FOREIGN CURRENCY TRANSLATION. For all foreign operations, the functional currency is the local currency. In accordance with SFAS No. 52, "Foreign Currency Translation", assets and liabilities of those operations, denominated in foreign currencies, are translated into U.S. dollars using period-end exchange rates, and income and expenses are translated using the average exchange rates for the reporting period. Gains or losses resulting from foreign currency transactions are included in results of operations. In accordance with SFAS No. 130, "Reporting Comprehensive Income", translation adjustments are recorded as a separate component of stockholder equity (deficit) in other comprehensive income. For the 27 days ended December 31, 2003, the foreign currency translation amount was $0.3 million.
INVESTMENT IN EQUITY INVESTEES. During 2000, GNCI made an investment of $1.0 million in a vitamin company. GNCI made additional advances of $8.0 million to this company during 2000 and 2001. These advances were comprised of $5.5 million in investments (see Note 6 Other Long-Term Assets) and $3.5 million in accounts receivable. Due to subsequent changes in facts and circumstances, the Company assessed the realizability of this investment and established a reserve for the entire amount of the investment and advances in 2002. As of the Acquisition on December 5, 2003, no value was attributed to this investment.
COMPREHENSIVE INCOME. Comprehensive Income is composed of net income, adjusted for changes in other comprehensive income items such as foreign currency translation adjustments and unrealized gains or losses in certain investments in debt and equity securities. In accordance with SFAS No. 130, "Reporting Comprehensive Income", the Company has identified and reported comprehensive income in the Consolidated
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of Stockholder's (Deficit) Equity and in a separate note. See Note 11 Other Comprehensive Income.
NEW ACCOUNTING PRONOUNCEMENTS. In December 2003, the FASB revised SFAS No.
132. The revised standards relate to additional disclosures about pension plans
and other postretirement benefit plans. GNCI had previously adopted the
disclosure requirements of SFAS No. 132. The adoption of this revised standard
did not have a material impact on GNCI's consolidated financial position or
results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It is effective for reporting years beginning after June 15, 2002. The adoption of this standard did not have a material impact on its consolidated financial position or results of operations. As the operation of the Company's manufacturing facility and distribution centers constitute a material portion of the Company's business, other obligations may arise in the future. Since these operations have indeterminate lives, an asset retirement obligation cannot be reasonably estimated. Therefore, any additional liabilities associated with potential obligations cannot be estimated and thus, have not been accrued for in the accompanying financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This statement applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS No. 144. It is effective for transactions after December 31, 2002. The adoption of this standard did not have a material impact on the Company's consolidated financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This interpretation clarifies existing guidance relating to a guarantor's accounting for and disclosure of, the issuance of certain types of guarantees. FIN No. 45 requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee. FIN No. 45 is effective on a prospective basis for guarantees issued or modified after December 31, 2002, except for the disclosure provisions which were adopted by the Company for the year ended December 31, 2002. The adoption of the remaining provisions of FIN No. 45 did not have a material impact on the Company's consolidated financial position or results of operations.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities -- an interpretation of ARB No. 51". This interpretation addresses the consolidation of variable interest entities ("VIEs") and its intent is to achieve greater consistency and comparability of reporting between business enterprises. It defines the characteristics of a business enterprise that qualifies as a primary beneficiary of a variable interest entity. In December 2003, the FASB issued a modification to FIN 46, titled FIN 46R. FIN 46R delayed the effective date for certain entities and also provided technical clarifications related to implementation issues. In summary, a primary beneficiary is a business enterprise that is subject to the majority of the risk of loss from the VIE, entitled to receive a majority of the VIE's residual returns, or both. The implementation of FIN No. 46 has been deferred for non-public entities. For non-public entities, such as the Company, FIN No. 46 requires immediate application to all VIEs created after December 31, 2003. For all other VIEs, the Company is required to adopt FIN No. 46 by no later than the beginning of the first period beginning after December 15, 2004. FIN No. 46 also requires certain disclosures in financial statements regardless of the date on which the VIE was created if it is reasonably possible that the business enterprise will be required to disclose the activity of the VIE once the interpretation becomes effective. The
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company has evaluated the effect of FIN No. 46 for potential VIEs. As a result, the Company believes that the adoption of FIN No. 46 will not be material to its financial statements.
In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies the accounting for and reporting of derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. SFAS No. 149 is effective for contracts entered into after June 30, 2003. As of December 31, 2003, the Company has not identified any financial instruments that fall within the scope of SFAS No. 149, thus the adoption of SFAS No. 149 does not have a material impact on the accompanying consolidated financial statements or results of operations.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." This statement clarifies and defines how certain financial instruments that have both the characteristics of liabilities and equity be accounted for. Many of these instruments that were previously classified as equity will now be recorded as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and must be adopted for financial statements issued after June 15, 2003. As of December 31, 2003, the Company has not identified any financial instruments that fall within the scope of SFAS No. 150, thus the adoption of SFAS No. 150 does not have a material impact on the accompanying consolidated financial statements or results of operations.
In December 2003, the Securities and Exchange Commission issued SAB No. 104 "Revenue Recognition". This SAB revises or rescinds certain portions of interpretative guidance included in Topic 13 of the codification of staff accounting bulletins. These changes make SAB 104 guidance consistent with current accounting regulations promulgated under U.S. generally accepted accounting principles. As stated in the Revenue Recognition accounting policy, the Company has adopted SAB No. 104 for all periods presented herein. The adoption of SAB No. 104 did not have a material impact on the accompanying consolidated financial statements or results of operations.
NOTE 1. RECEIVABLES
Receivables at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Settlement receivable....................................... $134,800 $ --
Trade receivables........................................... 59,277 77,481
Related party receivables................................... 12,058 --
Contingent purchase price receivable........................ -- 12,711
Other....................................................... 12,628 5,536
Allowance for doubtful accounts............................. (10,429) (7,744)
-------- -------
$208,334 $87,984
======== =======
|
The settlement receivable was held in escrow for GNCI as of December 31, 2002. The entire balance was received in January 2003. The Contingent purchase price receivable is per the purchase agreement and was settled in 2004. See Note 22 Related Party Transactions.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INVENTORIES
Inventories at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Finished product ready for sale............................. $253,419 $235,607
Unpackaged bulk product and raw materials................... 43,225 35,615
Packaging supplies.......................................... 3,690 3,652
Less: reserves.............................................. (14,712) (18,874)
-------- --------
$285,622 $256,000
======== ========
|
NOTE 3. OTHER CURRENT ASSETS
Other current assets at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Current portion of franchise note receivables............... $ 9,200 $ 7,635
Less: allowance for doubtful accounts..................... (734) (971)
Prepaid rent................................................ 11,774 11,525
Other current assets........................................ 6,586 9,291
------- -------
$26,826 $27,480
======= =======
|
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Land, buildings and improvements............................ $ 80,010 $ 59,655
Machinery and equipment..................................... 114,117 57,110
Leasehold improvements...................................... 77,876 35,560
Furniture and fixtures...................................... 94,373 39,990
Software.................................................... 21,154 8,964
Construction in progress.................................... 2,816 1,951
--------- --------
Total property, plant and equipment......................... $ 390,346 $203,230
Less: accumulated depreciation.............................. (105,708) (1,950)
--------- --------
Net property, plant and equipment........................... $ 284,638 $201,280
========= ========
|
General Nutrition Inc., a subsidiary of the Company, is a 50% limited partner in a partnership that owns and manages the building that houses the Company's corporate headquarters. The Company occupies the majority of the available lease space of the building. The general partner is responsible for the operation and management of the property and reports the results of the partnership to the Company. The Company has
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated the limited partnership, net of elimination adjustments, in the accompanying financial statements. No minority interest has been reflected in the accompanying financial statements as the partnership has sustained cumulative net losses from inception through December 31, 2003.
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
As described in the Summary of Significant Accounting Policies, Goodwill and Intangible Assets, GNCI adopted SFAS No. 142 on January 1, 2002. As a result, for subsequent periods including the Successor period, the Company no longer amortizes goodwill and brands. SFAS No. 142 requires that goodwill and other intangible assets with indefinite lives no longer be subject to amortization, but instead are to be tested at least annually for impairment. To accomplish this, GNCI identified its reporting units and their respective carrying values based on the carrying value of the assets and liabilities underlying each. The Company consulted with an independent appraisal firm and determined the fair value of each reporting unit and compared these values to the carrying value. The fair value of each reporting unit was estimated by discounting its projected future cash flows at an appropriately determined discount rate for GNCI. The carrying amount of each reporting unit exceeded its fair value upon adoption of the new standard, thus indicating a transitional impairment charge was necessary. The transitional impairment resulted from several factors including the declining performance of GNCI and the overall industry, increased competition and diminished contract manufacturing growth. Therefore, upon adoption of SFAS No. 142, GNCI recorded a one-time, non-cash charge of $1.06 billion (pre-tax) to reduce the carrying amount of goodwill and other intangibles to their implied fair value. This charge is reflected as a cumulative effect of a change in accounting principle in the accompanying financial statements.
During 2002, deterioration in market conditions and financial results caused further decrease in expectations regarding growth and profitability. As of December 31, 2002, GNCI recorded an additional impairment charge of $222.0 million (pre-tax) for goodwill and other intangibles in accordance with SFAS No. 142.
During 2003, increased competition from the mass market, negative publicity by the media on certain supplements, and increasing pressure from the Federal Trade Commission on the industry as a whole caused a further decrease in expectations regarding growth and profitability. Accordingly, management initiated an evaluation of the carrying value of its long-lived intangible assets. As a result of valuations performed by an independent appraisal specialist as of September 30, 2003, GNCI recorded an additional impairment charge of $709.4 million (pre-tax) for goodwill and other intangibles in accordance with SFAS No. 142.
As stated in the Summary of Significant Accounting Policies, Acquisition of the Company section, fair value adjustments were made to the Company's Successor
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statements as of December 5, 2003. The following table summarizes the Company's goodwill activity, including the changes in the net book value of Goodwill arising from the acquisition:
MANUFACTURING/
RETAIL FRANCHISING WHOLESALE TOTAL
--------- ----------- -------------- ----------
(IN THOUSANDS)
PREDECESSOR
Balance at January 1, 2002........... $ 387,775 $ 483,709 $ 138,202 $1,009,686
========= ========= ========= ==========
Impairment recognized upon adoption
of SFAS No. 142.................... (265,180) (252,803) (134,582) (652,565)
Additional impairment recognized
during 2002........................ (90,000) (20,000) -- (110,000)
Goodwill recorded related to
franchisee store purchases......... 1,717 -- -- 1,717
--------- --------- --------- ----------
Balance at December 31, 2002......... 34,312 210,906 3,620 248,838
Additional impairment recognized
during 2003........................ (34,312) (199,435) (3,620) (237,367)
--------- --------- --------- ----------
Goodwill recorded related to
franchisee store purchases......... 914 -- -- 914
--------- --------- --------- ----------
Balance at December 4, 2003.......... $ 914 $ 11,471 $ -- $ 12,385
========= ========= ========= ==========
--------------------------------------------------------------------------------------------
SUCCESSOR
Balance at December 5, 2003.......... $ 19,086 $ 63,563 $ 440 $ 83,089
========= ========= ========= ==========
Balance at December 31, 2003......... $ 19,086 $ 63,563 $ 440 $ 83,089
========= ========= ========= ==========
|
Brand intangibles were previously amortized over 40 years. Upon the adoption of SFAS No. 142 on January 1, 2002, brands were assigned an indefinite life and are no longer subject to amortization. Intangible
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets other than goodwill consisted of the following at each respective period. Differences in the cost basis of the intangibles between periods were primarily a result of impairment charges as previously discussed.
RETAIL FRANCHISE OPERATING
GOLD CARD BRAND BRAND AGREEMENTS OTHER TOTAL
--------- --------- --------- ---------- ------- ----------
(IN THOUSANDS)
PREDECESSOR
Balance at January 1,
2002...................... $ 2,725 $ 740,801 $ 449,494 $75,632 $ 3,648 $1,272,300
======= ========= ========= ======= ======= ==========
Franchise impairment
recognized upon adoption
of SFAS No. 142........... -- -- (121,494) -- -- (121,494)
Retail impairment recognized
upon adoption of SFAS No.
142....................... -- (290,801) -- -- -- (290,801)
Amortization expense........ (2,725) -- -- (7,411) (1,400) (11,536)
Additional franchise
impairment recognized
during 2002............... -- -- (22,000) -- -- (22,000)
Additional retail impairment
recognized during 2002.... -- (90,000) -- -- -- (90,000)
------- --------- --------- ------- ------- ----------
Balance at December 31,
2002...................... $ -- $ 360,000 $ 306,000 $68,221 $ 2,248 $ 736,469
Amortization expense........ -- -- -- (6,873) (1,298) (8,171)
Additional franchise
impairment recognized
during 2003............... -- -- (149,000) -- -- (149,000)
Additional retail impairment
recognized during 2003.... -- (323,000) -- -- -- (323,000)
------- --------- --------- ------- ------- ----------
Balance at December 4,
2003...................... $ -- $ 37,000 $ 157,000 $61,348 $ 950 $ 256,298
======= ========= ========= ======= ======= ==========
---------------------------------------------------------------------------------------------------
SUCCESSOR
Balance at December 5,
2003...................... $ 2,570 $ 49,000 $ 163,000 $30,400 $ -- $ 244,970
Amortization expense........ (85) -- -- (218) (303)
------- --------- --------- ------- ------- ----------
Balance at December 31,
2003...................... $ 2,485 $ 49,000 $ 163,000 $30,182 $ -- $ 244,667
======= ========= ========= ======= ======= ==========
|
As stated in the Summary of Significant Accounting Policies, Acquisition of the Company section, utilizing an independent appraisal specialist, fair value adjustments were made to the Company's financial statements as of December 5, 2003. In connection with the acquisition, fair values were assigned to various other intangible assets. The Company's brands were assigned a fair value representing the longevity of the Company name and general recognition of the product lines. The Gold Card program was assigned a fair value representing the underlying customer listing, for both the Retail and Franchise segments. The retail agreements were assigned fair value reflecting the opportunity to expand the Company stores within a major drug store chain and on military facilities. A fair value was assigned to the agreements with the Company's franchisees, both domestic and international, to operate stores for a contractual period. Fair values were assigned to the Company's manufacturing and wholesale segments for production and continued sales to certain customers.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table represents future estimated amortization expense of intangible assets with definite lives:
ESTIMATED
AMORTIZATION
YEARS ENDING DECEMBER 31, EXPENSE
------------------------- --------------
(IN THOUSANDS)
2004........................................................ $ 4,014
2005........................................................ 3,843
2006........................................................ 3,457
2007........................................................ 2,943
Thereafter.................................................. 18,410
-------
Total....................................................... $32,667
=======
|
Prior to the adoption of SFAS No. 142, GNCI amortized goodwill over periods not exceeding 40 years. The following table outlines the impact of SFAS No. 142 on the reported net loss as a result of the non-amortization of goodwill beginning on January 1, 2002:
PREDECESSOR SUCCESSOR
------------------------------------ ------------
TWELVE MONTHS ENDED 27 DAYS
DECEMBER 31, PERIOD ENDED ENDED
--------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
-------- --------- ------------ ------------
(IN THOUSANDS)
(Loss) income before cumulative
effect of accounting change........ $(55,859) $ (71,236) $(584,921) $ 354
Add back brand amortization.......... 31,652 -- -- --
Add back goodwill amortization....... 26,508 -- -- --
-------- --------- --------- --------
Adjusted income (loss) before
cumulative effect of accounting
change (net of tax)................ 2,301 (71,236) (584,921) 354
Loss from cumulative effect of
accounting change (net of tax)..... -- (889,621) -- --
-------- --------- --------- --------
Adjusted net income (loss)......... $ 2,301 $(960,857) $(584,921) $ 354
======== ========= ========= ========
|
NOTE 6. OTHER LONG-TERM ASSETS
Other assets at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Long term franchise notes receivables....................... $25,921 $30,078
Investment in and advances to equity investees.............. 5,480 --
Long term deposit........................................... 269 9,070
Other....................................................... 3,386 1,287
Allowance for doubtful accounts............................. (6,529) (6,275)
------- -------
$28,527 $34,160
======= =======
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in investments in and advances to equity investees is a note receivable resulting from an investment in a vitamin company. GNCI had previously provided an allowance for the remaining balance of this receivable. GNCI made total investments and advances to the equity investee of $5.5 million; $2.0 million in 2000 and $3.5 million in 2001, which was fully reserved in 2002. As of December 5, 2003, no value was attributed to this investment. The Company had outstanding receivable balances of $4.3 and $4.0 million as of December 31, 2003 and December 31, 2002 which have also been fully reserved at each respective period. Included in long term deposits at December 31, 2003 are $4.4 million in cash collateralized letters of credit deposits, $4.0 million in cash collateral insurance deposits, and $0.6 million in other deposits.
Annual maturities of the Company's long term financing receivables at December 31, 2003 are as follows:
YEAR ENDING RECEIVABLES
----------- --------------
(IN THOUSANDS)
2004................................................... $ 7,635
2005................................................... 6,798
2006................................................... 6,333
2007................................................... 5,952
2008 and thereafter.................................... 10,995
-------
Total.................................................. $37,713
=======
|
NOTE 7. ACCOUNTS PAYABLE
Accounts payable at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Trade payables.............................................. $ 37,951 $88,263
Related party payables...................................... 84,041 --
-------- -------
Total....................................................... $121,992 $88,263
======== =======
|
As of December 31, 2003, the Related party payable was settled in full in conjunction with the Acquisition. See Note 22 Related Party Transactions.
NOTE 8. OTHER CURRENT LIABILITIES
Other current liabilities at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Deferred revenue............................................ $29,354 $31,077
Accrued occupancy........................................... 4,415 4,352
Accrued acquisition costs................................... -- 7,750
Accrued store closing costs................................. -- 7,600
Other current liabilities................................... 38,696 42,155
------- -------
Total....................................................... $72,465 $92,934
======= =======
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred revenue consists primarily of Gold Card and gift card deferrals. In conjunction with the Acquisition, the Company recorded a liability related to a store closure program. This liability includes costs associated with terminating leases for stores identified with this program. As of December 31, 2003 the balance of $7.6 million represents stores scheduled to be closed in 2004.
NOTE 9. LONG-TERM DEBT
In connection with the Acquisition, the Company entered into a new senior
credit facility with a syndicate of lenders. The senior credit facility consists
of a $285 million term loan facility and a $75 million revolving credit
facility. All borrowings under the senior credit facility bear interest at a
rate per annum equal to either (a) the greater of the prime rate as quoted on
the British Banking Association Telerate, and the federal funds effective rate
plus one half percent per annum, plus in each case, additional margins of 2.0%
per annum for both the term loan facility and the revolving credit facility, or
(b) the Eurodollar rate plus additional margins of 3.0% per annum for both the
term loan facility and the revolving credit facility. In addition to paying the
above stated interest rates, the Company is also required to pay a commitment
fee relating to the unused portion of the revolving credit facility at a rate of
0.5% per annum. The senior credit facility matures on December 5, 2009 and
permits the Company to prepay a portion or all of the outstanding balance
without incurring penalties. The revolving credit facility matures on December
5, 2008. The senior credit facility payment maturity schedule is structured so
that minimal payments are made quarterly for the first five years and a balloon
payment is scheduled to be paid in the final year. (refer to the maturity
schedule following). In general, the senior credit facility requires that
certain net proceeds related to the sale of assets, insurance reimbursements,
other proceeds and excess cash flow be used to pay down the outstanding balance.
The senior credit facility contains normal and customary covenants including
financial tests, (including maximum total leverage, minimum fixed charge
coverage ratio and maximum capital expenditures) and certain other limitations
such as the Company's ability to incur additional debt, guarantee other
obligations, grant liens on assets, make investments, acquisitions or mergers,
dispose of assets, make optional payments or modifications of other debt
instruments, and pay dividends or other payments on capital stock. The senior
credit facility also contains covenants requiring the Company to submit to each
agent and lender certain audited financial reports within 90 days of each fiscal
year end and certain unaudited statements within 45 days after the end of each
quarter. The Company is also required to submit to the Administrative Agent
monthly management sales and revenue reports. Also, the Company is required to
submit to the Trustee certain Compliance Certificates within 120 days of the
fiscal year end.
To fund part of the Acquisition, the Company borrowed the entire $285 million under the term loan facility. This indebtedness has been guaranteed by the Company's parent, GNCH, and its domestic subsidiaries. In addition, the senior credit facility is secured by first priority perfected security interests in primarily all of the Company's assets and also the assets of the subsidiary guarantors, except that the capital stock of the first-tier foreign subsidiaries is secured only up to 65%. None of the $75 million revolving credit facility was utilized in the acquisition. At December 31, 2003, $74.0 million of the revolving credit facility was available, as $1.0 million was utilized for letters of credit. At December 31, 2003, the average interest rate on this debt was 4.2%.
In conjunction with the Acquisition, the Company also issued $215 million of 8 1/2% senior subordinated notes. These notes mature on December 1, 2010 and were used to fund a portion of the Acquisition. The senior subordinated notes carry a fixed interest rate of 8 1/2% per annum which is payable semi-annually in arrears on June 1 and December 1 of each year, beginning with the first payment due on June 1, 2004. Prior to December 1, 2006 the Company may redeem up to 35% of the aggregate principal amount at a redemption price of 108.50% of the principal amount, plus any accrued and unpaid interest. The Company may also
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redeem all or part of the senior subordinated notes on or after December 1, 2007 according to the following redemption table, which includes the principal amount plus accrued and unpaid interest:
REDEMPTION
PERIOD PRICE
------ ----------
2007........................................................ 104.250%
2008........................................................ 102.125%
2009 and after.............................................. 100.000%
|
The senior subordinated notes are general unsecured obligations and are guaranteed on a senior subordinated basis by certain of the Company's domestic subsidiaries and rank secondary to the Company's senior credit facility. The senior subordinated notes contain customary covenants including certain limitations and restrictions on the Company's ability to incur additional indebtedness beyond certain levels, dispose of assets, grant liens on assets, make investments, acquisitions or mergers, and declare or pay dividends. The senior subordinated notes also contain covenants requiring the Company to submit to the Trustee or holders of the notes certain financial reports that would be required to be filed with the Securities and Exchange Commission, such as Forms 10K, 10Q and 8K. Also, the Company is required to submit to the Trustee certain Compliance Certificates within 120 days of the fiscal year end.
Long-term debt at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Mortgage.................................................... $ 15,067 $ 14,160
Capital leases.............................................. 11 44
Senior credit facility...................................... -- 285,000
Related party term loan..................................... 1,825,000 --
Senior subordinated notes................................... -- 215,000
Less: current maturities.................................... (175,906) (3,830)
---------- --------
Total....................................................... $1,664,172 $510,374
========== ========
|
At December 31, 2003, the Company's total long-term debt principal maturities are as follows:
MORTGAGE SENIOR SENIOR
LOAN/CAPITAL CREDIT SUBORDINATED
LEASES FACILITY NOTES TOTAL
------------ -------- ------------ --------
(IN THOUSANDS)
2004................................... $ 980 $ 2,850 $ -- $ 3,830
2005................................... 1,041 2,850 -- 3,891
2006................................... 1,115 2,850 -- 3,965
2007................................... 1,195 2,850 -- 4,045
2008................................... 1,281 2,850 -- 4,131
2009 and after......................... 8,592 270,750 215,000 494,342
------- -------- -------- --------
$14,204 $285,000 $215,000 $514,204
======= ======== ======== ========
|
Prior to 1999, GNCI moved its corporate offices into a new building and financed the move with its internal cash and a credit facility. Subsequent to the move, in May of 1999, GNCI secured a mortgage through the 50% owned partnership that owns and manages the building. The original principal amount was $17.9 million, which carries a fixed annual interest rate of 6.95%, with principal and interest payable monthly
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
over a period of 15 years. In conjunction with the Acquisition, the Company assumed the outstanding balance of this mortgage as part of the purchase price. The outstanding balance as of December 31, 2003 was $14.2 million.
The Company's net interest expense for each respective period is as follows:
PREDECESSOR SUCCESSOR
------------------------------------ -------------
TWELVE MONTHS
ENDED DECEMBER 31, PERIOD ENDED 27 DAYS ENDED
--------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
--------- --------- ------------ -------------
(IN THOUSANDS)
Composition of interest expense:
Interest on mortgage.............. $ (1,136) $ (1,078) $ (972) $ (72)
Interest on senior credit
facility....................... -- -- -- (1,111)
Interest on senior subordinated
notes.......................... -- -- -- (1,371)
Interest on related party term
loan........................... (140,625) (136,875) (121,542) --
Deferred financing fees........... -- -- -- (224)
Interest income -- other.......... 1,831 1,600 1,389 5
--------- --------- --------- -------
Interest expense, net............... $(139,930) $(136,353) $(121,125) $(2,773)
========= ========= ========= =======
|
PREDECESSOR DEBT:
In connection with GNCI's acquisition by Numico in August 1999, GNCI's immediate parent, Nutricia, formerly Numico U.S. L.P., ("the borrower") entered into a Loan Agreement with an affiliated financing company of Numico, Nutricia International B.V. ("the lender"). The loan agreement provided that the lender make available to the borrower a term loan in a principal amount totaling $1.9 billion. The loan term was 10 years and was scheduled to mature on August 10, 2009. Interest accrued at a rate of 7.5% per annum, with interest payable semi-annually and principal payable annually in arrears. This loan was settled in full upon the Acquisition.
GNCI was not a party to the Loan Agreement and had no assets collateralized by the agreement. GNCI was, however, a guarantor of the loan between Nutricia and the lender. GNCI had historically made both principal and interest payments indirectly to Numico through payments to Nutricia. Nutricia is a holding company with no operational sources of cash. Accordingly, the debt was pushed down to GNCI and was reflected as if GNCI had directly entered into the external loan agreement since inception.
The Loan Agreement contained both affirmative and negative covenants related to Nutricia as the borrower requiring, among other items, minimum net worth and maximum leverage ratio. Nutricia had not been in compliance with these covenants. Additionally, Nutricia had failed to make a portion of the principal payments as scheduled, thus creating an event of default under the terms of the agreement. The lender had provided waivers for all events of default, had not required any acceleration of payment obligations and had waived all covenant requirements for the remaining term of the loan agreement. Additionally, GNCI's ultimate parent, Numico, had provided a letter of support indicating its intention to fund GNCI's operating cash flow needs, if required. In January 2003, GNCI remitted the $75.0 million principal payment that was due December 31, 2002 on behalf of Nutricia. As a result of the Acquisition on December 5, 2003, these amounts were settled in full.
LETTERS OF CREDIT
The Company issues letters of credit as a guarantee of payment to third party vendors in accordance with specified terms and conditions. It also issues letters of credit for various insurance contracts. From June
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 to June 2003, GNCI funded these letters of credit through a $15.0 million facility with a local lender. Beginning in June, 2003, all letters of credit facilities were collateralized via a long term cash deposit account in GNCI's name with the same local lender referred to above. At December 31, 2003 and 2002, the outstanding balance under the letter of credit facility was $4.4 million. As of December 31, 2003 the Company utilizes the $75 million revolving credit facility to secure letters of credit. The Company pays interest based on the aggregate available amount of the credit facility at a per annum rate equal to the applicable margin in effect with respect to the Eurodollar loan rate. As of December 31, 2003, this rate was 0.5%. The Company also pays an additional interest rate of 1/4 of 1% per annum on all outstanding letters of credit issued. As of December 31, 2003, $1.0 million of the revolving credit facility was utilized to secure letters of credit.
NOTE 10. RETENTION AND SEVERANCE
During the year ended December 31, 2002, GNCI incurred a general reduction in force, primarily at the corporate headquarters. Severance costs associated with this reduction were $4.3 million and are reflected in compensation and related benefits in the accompanying financial statements. In 2003, GNCI incurred $10.4 million in retention and severance costs primarily related to employees at the corporate headquarters. At December 4, 2003, the Company recorded $8.7 million of retention payments for maintaining key management personnel related to the Acquisition. The remaining $1.7 million resulted from corporate employees terminated in 2003. Of this amount, $2.2 million was remaining as a liability as of December 31, 2003. These costs are reflected in compensation and related benefits in the accompanying financial statements. In conjunction with the Acquisition, certain management of the company were granted change in control payments. These payments accrue ratably over six months beginning December 5, 2003 and are payable in 2004. According to the provisions included in the purchase agreement, the Company will be reimbursed for these payments from Numico.
CHANGE IN CONTROL/
RETENTION SEVERANCE TOTAL
------------------ --------- -------
PREDECESSOR
Balance at January 1, 2002....................... $ -- $ 1,530 $ 1,530
Severance accruals............................... -- 4,274 4,274
Severance payments............................... -- (3,386) (3,386)
------ ------- -------
Balance at December 31, 2002..................... $ -- $ 2,418 $ 2,418
Severance accruals............................... -- 1,713 1,713
Severance payments............................... -- (3,207) (3,207)
Change in control/retention accrual.............. 8,673 -- 8,673
------ ------- -------
Balance at December 4, 2003...................... $8,673 $ 924 $ 9,597
-------------------------------------------------------------------------------------------
SUCCESSOR
Severance accruals............................... -- 1,400 1,400
Change in control accrual........................ 563 -- 563
Severance payments............................... -- (126) (126)
------ ------- -------
Balance at December 31, 2003..................... $9,236 $ 2,198 $11,434
====== ======= =======
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. OTHER COMPREHENSIVE INCOME
The accumulated balances of other comprehensive income and their related tax effects included as part of the consolidated financial statements are as follows:
TAX BENEFIT NET OTHER COMPREHENSIVE
BEFORE TAX AMOUNT (EXPENSE) INCOME (LOSS)
------------------------- ----------- -----------------------------------
UNREALIZED UNREALIZED UNREALIZED
FOREIGN GAIN/(LOSS) GAIN/(LOSS) FOREIGN GAIN/(LOSS)
CURRENCY ON ON CURRENCY ON
TRANSLATION SECURITIES SECURITIES TRANSLATION SECURITIES TOTAL
----------- ----------- ----------- ----------- ----------- -------
PREDECESSOR
Balance at January 1, 2002... $(1,768) $ 3,300 $(1,155) $(1,768) 2,145 377
Foreign currency translation
adjustment................. 292 -- -- 292 -- 292
Unrealized appreciation
(depreciation) in
marketable equity
securities, net of tax..... -- (3,300) 1,155 -- (2,145) (2,145)
------- ------- ------- ------- ------- -------
Balance at December 31,
2002....................... $(1,476) $ -- $ -- $(1,476) $ -- $(1,476)
Foreign currency translation
adjustment................. 1,603 -- -- 1,603 -- 1,603
------- ------- ------- ------- ------- -------
Balance at December 4,
2003....................... $ 127 $ -- $ -- $ 127 $ -- $ 127
------- ------- ------- ------- ------- -------
SUCCESSOR
Foreign currency translation
adjustment................. 302 -- -- 302 -- 302
------- ------- ------- ------- ------- -------
Balance at December 31,
2003....................... $ 302 $ -- $ -- $ 302 $ -- $ 302
======= ======= ======= ======= ======= =======
|
NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION
GNCI remitted cash payments for federal and state income taxes of $2.5, $30.7 and $15.6 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. These payments were made to Nutricia in accordance with the informal tax sharing agreement between the Company and Nutricia. See Income Taxes in the Summary of Significant Accounting Policies section. The Company remitted no tax payments for the 27 days ended December 31, 2003.
The Company remitted cash payments for interest expense related to the senior credit facility of $0.7 million for the 27 days ended December 31, 2003. GNCI remitted cash payments to Numico for interest expense of $122.5, $138.0 and $145.6 million, primarily related to the push down debt from Numico, for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. GNCI converted $4.3 million of accounts receivable to long-term notes receivable in 2003.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is a reconciliation of the net cash purchase price of the acquisition of the Company by Apollo and the adjusted purchase price based on the purchase agreement.
(IN THOUSANDS)
PURCHASE PRICE RECONCILIATION:
Cash paid at acquisition.................................... $ 738,117
Accrued acquisition costs................................... 7,750
Contingent purchase price receivable........................ (12,711)
----------
Adjusted net purchase price................................. $ 733,156
==========
Fair value of assets acquired............................... $1,022,705
Less liabilities............................................ (245,205)
----------
Cash paid................................................... 777,500
Less acquisition fees....................................... (19,633)
Less cash acquired.......................................... (19,750)
----------
Net cash paid............................................... $ 738,117
==========
|
NOTE 13. RETIREMENT PLANS
The Company sponsors a 401(k) defined contribution savings plan covering substantially all employees. Full time employees who have completed 30 days of service and part time employees who have completed 1,000 hours of service are eligible to participate in the plan. The plan provides for employee contributions of 1% to 20% of individual compensation into deferred savings, subject to IRS limitations. The plan provides for Company contributions of 100% of the first 3% of participant's contributions, upon the employee meeting the eligibility requirements. The contribution match was temporarily suspended as of June 30, 2003.
An employee becomes vested in the Company match portion as follows:
YEARS OF SERVICE PERCENT VESTED ---------------- -------------- 0-1......................................................... 0% 1-2......................................................... 33% 2-3......................................................... 66% 3+.......................................................... 100% |
GNCI made cash contributions of $1.1, $2.2 and $2.4 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 respectively. As the match was suspended, the Company made no cash contributions to the plan for the 27 days ended December 31, 2003.
The Company has a non-qualified Executive Retirement Arrangement Plan that covers key employees. Under the provisions of this plan, certain eligible key employees are granted cash compensation, which in the aggregate was not significant for any year presented.
The Company has a non-qualified Deferred Compensation Plan that provides benefits payable to certain qualified key employees upon their retirement or their designated beneficiaries upon death. The Plan allows participants the opportunity to defer pretax amounts ranging from 2% to 100% of their base compensation plus bonuses. The plan is funded entirely by elective contributions made by the participants. The Company has elected to finance any potential plan benefit obligations using corporate owned life insurance policies. As of December 31, 2003, plan assets exceed liabilities.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. FRANCHISE REVENUE
The Company enters into franchise agreements with initial terms of ten years. The Company charges franchisees three types of flat fees associated with stores: initial, transfer and renewal. The initial franchise fee is payable prior to the franchise store opening as consideration for the initial franchise rights and services performed by the Company. Transfer fees are paid as consideration for the same rights and services as the initial fee and occur when a former franchisee transfers ownership of the franchise location to a new franchisee. This is typically a reduced fee compared to the initial franchise fee. The renewal franchise fee is charged to existing franchisees upon renewal of the franchise contract. This fee is similar to, but typically less than the initial fee.
Once the franchised store is opened, transferred or renewed, the Company has no further obligations under these fees to the franchisee. Therefore, all initial, transfer and renewal franchise fee revenue is recognized in the period in which a franchise store is opened, transferred or date the contract period is renewed. GNCI recorded initial franchise fees of $3.0, $3.2 and $5.1 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. The Company recorded $0.3 million in franchise fees for the 27 days ended December 31, 2003.
NOTE 15. FINANCIAL INSTRUMENTS
At December 31, 2003 and 2002, the Company's financial instruments consisted of cash and cash equivalents, receivables, franchise notes receivable, accounts payable, certain accrued liabilities and long-term debt. The carrying amount of cash and cash equivalents, receivables, accounts payable and the accrued liabilities approximates their fair value because of the short maturity of these instruments. Based on the interest rates currently available and their underlying risk, the carrying value of the franchise notes receivable approximates their fair value. These fair values are reflected net of reserves, which are recorded according to Company policy. The carrying amount of the senior credit facility, senior subordinated notes, and mortgage is considered to approximate fair value since it carries an interest rate that is currently available to the Company for issuance of debt with similar terms and remaining maturities. The Numico related party debt was borrowed at rates and terms that are not the same as those rates and terms that would result from similar transactions with unrelated parties. Accordingly, it was not practical for GNCI to estimate the fair value of the related party notes payable as of December 31, 2002. The Company determined the estimated fair values by using currently available market information and estimates and assumptions where appropriate. Accordingly, as considerable judgment is required to determine these estimates, changes in the assumptions or methodologies may have an effect on these estimates. The actual and estimated fair values of the Company's financial instruments are as follows:
PREDECESSOR SUCCESSOR
-------------------- ------------------
DECEMBER 31, DECEMBER 31,
2002 2003
-------------------- ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ------- -------- -------
(IN THOUSANDS)
Cash and cash equivalents................... $ 38,765 $38,765 $33,176 $33,176
Receivables................................. 208,334 208,334 87,984 87,984
Accounts payable............................ 121,995 121,995 88,263 88,263
Long term debt.............................. 15,078 15,078 514,204 514,204
Numico related party debt, not practicable
to estimate fair value.................... 1,825,000 -- -- --
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. LONG-TERM LEASE OBLIGATIONS
The Company enters into operating leases covering its retail store locations. The Company is the primary lessor of the majority of all leased retail store locations and sublets the locations to individual franchisees. The leases generally provide for an initial term of between five and ten years, and may include renewal options for varying terms thereafter. The leases require minimum monthly rental payments and a pro rata share of landlord allocated common operating expenses. Most retail leases also require additional rentals based on a percentage of sales in excess of specified levels ("Percent Rent"). According to the individual lease specifications, real estate taxes, insurance and other related costs may be included in the rental payment or charged in addition to rent. Other lease expenses relate to and include transportation equipment, data processing equipment and distribution facilities.
The composition of the Company's rental expense for all periods presented included the following components:
PREDECESSOR SUCCESSOR
---------------------------------- -------------
TWELVE MONTHS
ENDED DECEMBER 31, PERIOD ENDED 27 DAYS ENDED
------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
-------- -------- ------------ -------------
(IN THOUSANDS)
Retail stores:
Rent on long-term operating leases,
net of sublease income.............. $ 97,385 $101,261 $ 89,672 $ 7,104
Landlord related taxes................ 13,767 14,311 13,927 1,065
Common operating expenses............. 26,231 27,626 27,443 1,920
Percent rent.......................... 10,143 8,696 7,751 507
-------- -------- -------- -------
147,526 151,894 138,793 10,596
Truck fleet........................... 4,935 5,475 5,451 366
Other................................. 10,129 10,022 10,602 595
-------- -------- -------- -------
$162,590 $167,391 $154,846 $11,557
======== ======== ======== =======
|
Minimum future obligations for non-cancelable operating leases with initial or remaining terms of at least one year in effect at December 31, 2003 are as follows:
COMPANY FRANCHISE
RETAIL RETAIL SUBLEASE
STORES STORES OTHER INCOME CONSOLIDATED
-------- --------- ------- --------- ------------
(IN THOUSANDS)
2004........................... $ 91,691 $ 35,664 $ 7,510 $ (35,664) $ 99,201
2005........................... 75,096 30,716 5,175 (30,716) 80,271
2006........................... 61,065 23,938 2,428 (23,938) 63,493
2007........................... 46,247 16,333 1,759 (16,333) 48,006
2008........................... 31,880 9,348 1,270 (9,348) 33,150
Thereafter..................... 48,704 5,605 175 (5,605) 48,879
-------- -------- ------- --------- --------
$354,683 $121,604 $18,317 $(121,604) $373,000
======== ======== ======= ========= ========
|
NOTE 17. INCOME TAX (EXPENSE)/BENEFITS
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities at each respective period consisted of the following:
PREDECESSOR SUCCESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
2002 2003
------------ ------------
(IN THOUSANDS)
Deferred tax:
Current assets/liabilities:
Operating reserves..................................... $ 3,504 $ --
Inventory capitalization............................... 2,463 4,603
Deferred revenue....................................... 7,977 11,343
Interest............................................... 34,841 --
Other.................................................. 6,347 --
Valuation allowance.................................... (34,841) --
--------- -------
Total current.......................................... $ 20,291 $15,946
========= =======
Non-current assets/liabilities:
Intangibles............................................ $(252,701) $ (475)
Inventory capitalization............................... -- --
Stock based compensation............................... 11,051 --
Fixed assets........................................... (9,611) 11,629
Other.................................................. -- 4,135
--------- -------
Total non-current........................................... $(251,261) $15,289
========= =======
Total net deferred taxes.................................... $(230,970) $31,235
========= =======
|
At December 31, 2002, the valuation allowance relates to tax assets that were associated with the interest expense on the related party push down debt that was only deductible in future years upon generation of sufficient taxable income. As of December 31, 2002, GNCI believed, based on available evidence, that it was more likely than not, that future taxable income would not be sufficient to utilize these carryforwards, and the net deferred tax asset related to the debt would not be fully realizable. As discussed in Note 9 Long-Term Debt, debt had been pushed down to GNCI from Nutricia as of December 31, 2002. This deferred tax asset relates to interest deductions recorded by GNCI, but was a tax attribute of Nutricia. As a result of the acquisition of the Company by Apollo, Numico has retained certain tax obligations. As of December 31, 2003, the Company believes, based on current available evidence, that it is more likely than not, that future taxable income will be sufficient to utilize the net deferred tax assets which have been adjusted to reflect the new basis of accounting for both book and tax basis.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax (expense)/ benefits for all periods consisted of the following components:
PREDECESSOR SUCCESSOR
---------------------------------- ------------
TWELVE MONTHS ENDED 27 DAYS
DECEMBER 31, PERIOD ENDED ENDED
------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
-------- -------- ------------ ------------
Current:
Federal.............................. $ (8,834) $(43,637) $ (22,145) $(420)
State................................ (1,536) (2,267) (1,006) (18)
-------- -------- ------------ -----
(10,370) (45,904) (23,151) (438)
Deferred:
Federal.............................. 32,060 40,856 218,770 202
State................................ 1,936 4,052 12,904 8
-------- -------- ------------ -----
33,996 44,908 231,674 210
Valuation allowance.................... (9,527) -- (34,045) --
-------- -------- ------------ -----
Total.................................. $ 14,099 $ (996) $ 174,478 $(228)
======== ======== ============ =====
|
The following table summarizes the differences between the Company's effective tax rate for financial reporting purposes and the federal statutory tax rate.
PREDECESSOR SUCCESSOR
------------------------------ ------------
TWELVE MONTHS
ENDED PERIOD 27 DAYS
DECEMBER 31, ENDED ENDED
--------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
----- ----- ------------ ------------
Percent of pretax earnings:
Statutory federal tax rate................ 35.0% 35.0% 35.0% 35.0%
Increase/(decrease):
Goodwill amortization, impairment......... (4.6)% (37.6)% (9.6)% 0.0%
State income tax, net of federal tax
benefit................................ 1.0% 0.8% 0.5% 0.6%
Other....................................... 2.4% 0.4% 1.6% 3.6%
Valuation allowance......................... (13.6)% 0.0% (4.5)% 0.0%
----- ----- ---- ----
Effective income tax rate................... 20.2% (1.4)% 23.0% 39.2%
===== ===== ==== ====
|
NOTE 18. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is engaged in various legal actions, claims and complaints arising out of the normal course of business. Potential exposures resulting from the Company's business activities include breach of contracts, product liabilities, intellectual property matters and employment related issues. As is inherent with such actions, an estimation of any possible and or ultimate liability cannot be determined at the present time. The Company is currently of the opinion that the amount of any potential liability resulting from these actions, when taking into consideration the Company's general and product liability coverage, as a named insured of Numico, will not have a material adverse impact on its financial position, results of operations or liquidity.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company, like other retailers, distributors and manufacturers of products that are ingested, faces an inherent risk of exposure to product liability claims in the event that, among other things, the use of its products results in injury. To summarize the product liability coverage as of December 31, 2003, the Company, has a primary products liability policy of $1.0 million per occurrence and a $10.0 million aggregate cap on the retained losses, followed by an additional umbrella liability insurance coverage. There can be no assurances that such insurance will continue to be available at a reasonable cost, or if available will be adequate to cover liabilities.
As part of the purchase agreement between the Company and Numico, Numico has agreed to indemnify the Company for various claims arising out of litigation incurred prior to the Company purchasing GNCI.
The Company places "best by" dates on its product labels; however, there is no state or federal requirement that any such date appear on the labels. The Florida Attorney General became concerned that there may be expired product in certain of the Florida stores beyond the "best buy" dates and instituted an investigation of the Company. This investigation has concluded with a payment to the Florida Attorney General's Office in the amount of $1.0 million, reinforced communications to the stores of the Company's return policies and the procedures to ensure that past dated products are removed from the shelves. After the Florida Attorney General's investigation was concluded, substantially identical class action lawsuits were filed in the state courts of the States of Florida, Connecticut and Pennsylvania alleging that the Company engaged in a continuous practice of including false and misleading "best by" dates on product labels and/or selling products after the expiration of the purported "best by" dates. By agreement of the parties, the Connecticut and Pennsylvania actions have been stayed pending the outcome of the Florida case. The Florida case was submitted to mediation but no resolution was obtained. The Company is currently of the opinion that the amount of any potential liability resulting from these actions will not have a material adverse impact on its financial statements, results of operations or liquidity. Furthermore, in connection with the acquisition, the Company is also entitled to indemnification by Numico and Nutricia for these actions alleging the purchase of expired product.
In November 2001, a former store manager brought a case on behalf of himself and a purported class of other similarly situated California store employees alleging that those California employees were not properly paid overtime wages. In October 2003, an amended complaint was filed adding another plaintiff as well as claims for failure to provide meal periods and rest periods from managers at our company-owned stores. This case is in the discovery phase and will be vigorously defended. The Company is currently of the opinion that the amount of any potential liability resulting from this action will not have a material adverse impact on its financial statements, results of operations or liquidity.
Beginning in 1997, several franchisees brought a purported class actions
against GNCI alleging, among other things, certain deceptive trade practices and
unreasonable wholesale prices for inventory sold to franchisees. On October 26,
2001 resolution was reached on these three class actions. The major terms of the
settlement include: (1) product purchase credits for GNC proprietary product,
(2) payment of Plaintiffs attorneys fees, and (3) several changes to the
operation of GNCI's franchise system. All of the franchisee class actions were
fully dismissed in October 2002.
On July 29, 2001, subsequently identical class actions were filed in the state courts of Florida, New York, New Jersey, Pennsylvania and Illinois against GNCI and various manufacturers of products containing pro-hormones, including androstendione. Plaintiffs allege that the Company has distributed or published periodicals that contain advertisements claiming that various pro-hormone products promote muscle growth. The complaint alleges that GNCI knew the advertisements and label claims promoting muscle growth were false, but nonetheless continued to sell the products to consumers. GNCI has tendered these cases to the various manufacturers for defense and indemnification. Based upon the information available to the Company at the present time, the Company believes that these matters will not have a material adverse effect upon the liquidity, financial condition or results of operations.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's manufacturing subsidiary was a plaintiff in a lawsuit brought in Federal Court seeking direct damages against various raw material suppliers for allegedly selling raw materials at artificially inflated prices. These claims have been resolved and have resulted in a recovery to the Company, net of attorney fees, which is primarily the amount reflected in other income in the accompanying financial statements for the years ended December 31, 2003, 2002 and 2001, respectively.
The Company and/or one of its subsidiaries are currently named as defendants in numerous lawsuits alleging damages from the ingestion of products containing ephedra. These cases have been tendered to the various suppliers of those products for indemnification and defense pursuant to certain vendor supplier agreements. The outcome of this litigation is uncertain and taking into consideration the available product liability coverage, no provisions have been made in the consolidated financial statements for any possible loss. Furthermore, in connection with the Acquisition, the Company is also entitled to indemnification by Numico and Nutricia for certain losses arising from all claims related to products containing ephedra.
COMMITMENTS
The Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled. Future commitments related to information technology equipment, services and maintenance agreements as of December 31, 2003 totaled $1.2 million and various purchase commitments with third-party vendors of $30.3 million. Other commitments related to the Company's business operations cover varying periods of time and are not significant. All of these commitments are expected to be fulfilled with no adverse consequences to the Company's operations or financial condition.
CONTINGENCIES
Due to the nature of the Company's business operations having a presence in multiple taxing jurisdictions, the Company periodically receives inquiries and/or audits from various state and local taxing authorities. Any probable and reasonably estimable liabilities that may arise from these inquiries have been accrued and reflected in the accompanying financial statements. In conjunction with the Acquisition by Apollo, certain other contingencies will be indemnified by Numico.
NOTE 19. BUSINESS COMBINATIONS
For the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, GNCI acquired 58, 61 and 131 stores, respectively, from non-corporate, franchisee store locations. These acquisitions were accounted for utilizing the purchase method of accounting, and GNCI recorded total costs associated with these acquisitions of $3.2, $4.1 and $21.9 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. Goodwill associated with these purchases of $0.9, $1.7 and $14.1 million was recognized in the consolidated financial statements for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. For the 27 days ended December 31, 2003, the Company recorded $0.1 million in acquisition costs.
NOTE 20. STOCKHOLDER'S EQUITY
In connection with the Acquisition by Apollo on December 5, 2003, the Company issued 1,000 shares of common stock with a par value of $.01. The stock is owned 100% by the Company's parent GNCH. GNCH also contributed $277.5 million in additional paid in capital in conjunction with the acquisition.
In connection with the prior acquisition by NIC and subsequent merger into Nutricia, GNCI issued 100 shares of common stock, par value $.01 in August 1999. All shares were outstanding as of December 31, 2002. Nutricia also had contributed $691.0 million of additional paid in capital in 1999.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21. STOCK-BASED COMPENSATION PLANS
STOCK OPTIONS
On December 5, 2003 the Board of Directors of the Company's parent, General Nutrition Centers Holding Company approved and adopted the General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (the "Plan"). The purpose of the Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the success of the Company. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock, deferred stock and performance shares. The Plan is available to certain eligible employees as determined by the Board of Directors of GNCH. The total number of shares of common stock reserved and available for the Plan is 4.0 million shares of GNCH. The stock options carry a four year vesting schedule and expire after seven years from date of grant. As of December 31, 2003 the number of stock options granted at fair value is 2.6 million. No stock appreciation rights, restricted stock, deferred stock or performance shares were granted under the Plan as of December 31, 2003. The weighted average fair value of options granted under the Plan was $2.40 per share.
The following table outlines the total stock options granted, effective on December 5, 2003:
WEIGHTED
AVERAGE
TOTAL EXERCISE
OPTIONS PRICE
--------- --------
Outstanding at December 31, 2002............................ -- $ --
Granted December 5, 2003.................................. 2,604,974 6.00
Forfeited................................................. -- --
--------- -----
Outstanding at December 31, 2003............................ 2,604,974 $6.00
========= =====
|
The Company has adopted the disclosure requirements of SFAS No. 148, but
has elected to continue to measure compensation expense using the intrinsic
value method for accounting for stock-based compensation as outlined by APB No.
25. In accordance with SFAS No. 148, pro forma information regarding net income
is required to be disclosed as if the Company had accounted for its employee
stock options using the fair value method of SFAS No. 123. Refer to the Summary
of Significant Accounting Policies for this disclosure. There were no options
vested or exercisable under the Plan at December 31, 2003.
Fair value information for the Plan was estimated using the Black-Scholes option-pricing model based on the following assumptions for the options granted in 2003:
2003
-------
Dividend yield.............................................. 0.00%
Expected option life........................................ 5 years
Volatility factor percentage of market price................ 40.00%
Discount rate............................................... 3.27%
|
Because the Black-Scholes option valuation model utilizes certain estimates and assumptions, the existing models do not necessarily represent the definitive fair value of options for future periods.
PREDECESSOR:
During 1999 and 2000, the Executive Board of Numico, under approval of the Supervisory Board, had granted certain key employees of GNCI options to purchase depository receipts of Numico shares under the Numico Share Option Plan ("Numico Plan"). These options were granted with an exercise price determined by the Numico Executive Board. The difference between the exercise price of the option and the fair market value of Numico's common shares on the date of the option grant was expensed ratably over the option vesting period. These amounts were not material for the years ended December 31, 2002 and 2001. The
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Numico Plan options expire five years after the date of grant and became vested and exercisable after three years from the date of grant. The Numico Plan options became fully vested in 2003, and remain a liability of Numico.
Following is a table outlining the total number of shares that were granted under the Numico Plan:
WEIGHTED
AVERAGE
TOTAL EXERCISE
OPTIONS PRICE
------- --------
Outstanding at December 31, 2000............................ 742,000 $39.27
Exercised................................................. (17,332) 37.15
Forfeited................................................. (90,668) 40.10
------- ------
Outstanding at December 31, 2001............................ 634,000 40.22
Exercised................................................. --
Forfeited................................................. (99,000) 40.91
------- ------
Outstanding at December 31, 2002............................ 535,000 40.09
Exercised................................................. --
Forfeited................................................. --
------- ------
Outstanding at December 4, 2003............................. 535,000 $40.09
======= ======
|
The weighted average fair value of the Numico Plan options granted in 2000 was $15.25 per share. For the years ended December 31, 2002 and 2001, GNCI adopted the disclosure requirements of SFAS No. 123, but elected to continue to measure compensation expense using the intrinsic value method for accounting for stock-based compensation as outlined by APB No. 25. In accordance with SFAS No. 123, pro forma information regarding net income is required to be disclosed as if GNCI had accounted for its employee stock options using the fair value method of SFAS No. 123. Refer to the Summary of Significant Accounting Policies for this disclosure. The number of options exercisable under the Numico Plan at December 31, 2002 and December 4, 2003 was 240,000 and 535,000, respectively. Fair value information for the Numico Plan stock options was estimated using the Black-Scholes option-pricing model based on the following assumptions for the options granted in 2000:
2000
-------
Dividend yield.............................................. 1.75%
Expected option life........................................ 5 years
Volatility factor percentage of market price................ 33.25%
Discount rate............................................... 6.52%
|
Because the Black-Scholes option valuation model utilizes certain estimates and assumptions, the existing models do not necessarily represent the definitive fair value of options for future periods. No options were granted in 2003, 2002 or 2001.
NUMICO STOCK APPRECIATION RIGHTS
As was previously approved by the Executive Board of Numico, stock appreciation rights ("SARs") were granted to certain employees of GNCI. The SARs provided for a payment in cash or stock equal to the excess of the fair market value of a common share, when the SAR was exercised, over the grant price. GNCI granted 262,500 and 306,000 SARs to key employees under the Stock Appreciation Rights Plan in 2001 and 2002, respectively. SARs expire no later than five years after the date of grant and became exercisable three years from the grant date. As the grant price of the SARs has exceeded the fair value of Numico common
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stock since the date of grant, no compensation expense was recognized for the years presented in the accompanying financial statements.
In June 2003, GNCI granted an additional 321,000 SARs to key employees under the above plan. These SARs had a three year vesting life and become fully vested upon change in control of GNCI. Due to the Acquisition , GNCI recorded $3.8 million in compensation expense related to these SARs for the period ended December 4, 2003 as the SAR's became fully vested upon the change in control as a result of the Acquisition.
WEIGHTED
AVERAGE
TOTAL EXERCISE
SARS PRICE
------- --------
Outstanding at December 31, 2000............................ --
Grants.................................................... 262,500 $23.66
Exercised................................................. --
Forfeited................................................. --
-------
Outstanding at December 31, 2001............................ 262,500 23.66
Grants.................................................... 306,000 24.04
Exercised................................................. --
Forfeited................................................. (60,500)
-------
Outstanding at December 31, 2002............................ 508,000 23.89
Grants.................................................... 321,000 11.83
Exercised................................................. --
Forfeited................................................. --
-------
Outstanding at December 4, 2003............................. 829,000 $19.22
=======
|
NUMICO MANAGEMENT STOCK PURCHASE PLAN
In accordance with the Numico Management Stock Purchase Plan ("MSPP") and to encourage key employees of the GNCI to own shares of Numico common stock, options to purchase shares of Numico common stock in an amount up to 200% of the participant's base salary were granted on January 21, 2000. These options were exercisable on January 21, 2000. Upon exercise, Numico extended a recourse loan to the participants at an annual interest rate of 6.0%, to match on a two for one basis the amount of the participant's own investment to purchase additional shares. According to the MSPP, 50% of the loan balance was to be forgiven if the participant remained employed with GNCI through August 10, 2002. The remaining 50% of the loan balance was to be forgiven by Numico if the participant remained employed by GNCI through January 21, 2003 and certain operating performance goals were met as outlined in the MSPP. If the participant was involuntarily terminated without cause, the loan forgiveness was to be prorated in accordance with the plan. Compensation expense was initially being recognized each period based on an estimate of the amount of loan forgiveness earned by the participants during the period. Total pre-tax compensation expense, net of loan repayments, of $7.1 million was recognized for the year ended December 31, 2000. The MSPP was subsequently amended in 2001 and 2002 to waive the performance obligations and extend the date of the forgiveness for the entire loan. As a result of the 2001 amendments, the loans were considered to have been converted to non-recourse loans and the remaining loan balance of $14.6 million was recognized as compensation expense for the year ended December 31, 2001. For the year ended December 31, 2002, a recovery of loan forgiveness of $2.0 million was recognized as a result of participants terminating from GNCI.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 2003 Numico granted certain participants the right to a cash bonus in an amount adequate to reimburse them for 50% of their initial cash investment and to cover their tax liability related to this reimbursement and the loan forgiveness. This bonus was payable on January 5, 2005, regardless of whether the participant remains employed by GNCI. The accrued liability was adjusted each period, based on the best available information, to the amount expected to be paid. This adjustment in the calculation of the amount payable cannot result in an amount exceeding a "break even point"; therefore, participants will only be made whole in their investment and will not receive compensation in excess of their original invested amount and associated tax liability. Based upon the current Numico stock price at December 4, 2003, GNCI recorded no net compensation expense for the period ended December 4, 2003. In conjunction with the Acquisition, the plan was assumed by Numico.
NOTE 22. RELATED PARTY TRANSACTIONS
SUCCESSOR:
During the normal course of operations, for the 27 days ended December 31, 2003 the Company entered into transactions with entities that were under common ownership and control of GNCH, the Company's immediate parent. In accordance with SFAS No. 57, "Related Party Disclosures", the nature of these material transactions is described in the following footnotes.
MANAGEMENT SERVICE FEES. As of December 5, 2003 the Company entered into a management services agreement with GNCH and Apollo. The agreement provides that Apollo furnish certain investment banking, management, consulting, financial planning, and financial advisory and investment banking services on an ongoing basis and for any significant financial transactions that may be undertaken in the future. The length of the agreement is ten years. There is an annual general services fee of $1.5 million which is payable in monthly installments. There are also major transaction services fees for services that Apollo may provide which would be based on normal and customary fees of like kind. The purchase agreement also contained a structuring and transaction services fee related to the acquisition. This fee amounted to $7.5 million and was accrued for at December 31, 2003.
PREDECESSOR:
During the normal course of operations, for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 GNCI entered into transactions with entities that were under common ownership and control of Numico. In accordance with SFAS No. 57, "Related Party Disclosures", the nature of these material transactions is described below. During 2003, Rexall and Unicity ceased to be related parties as their operations were sold by Numico. Transactions recorded with these companies prior to their sale dates are included in related party transactions.
SALES. GNCI recorded net sales of $18.7, $44.3 and $46.1 million to Numico affiliated companies for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. These amounts were included in the Manufacturing/Wholesale segment of the business.
COST OF SALES. Included in cost of sales were purchases from Numico affiliated companies of $130.9, $198.7 and $111.1 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. A significant portion of these purchases related to raw material and packaging material purchases from Nutraco S.A., a purchasing subsidiary of Numico. Included in the above totals were additional purchases from another related party in the amounts of $28.8, $35.2 and $46.3 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively.
TRANSPORTATION REVENUE. GNCI operated a fleet of distribution vehicles that service delivery of product to company-owned and franchise locations. GNCI also delivered product for a related party. GNCI recorded
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounts associated with these transportation services for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, of $1.4, $2.4 and $1.6 million, respectively as a reduction of its transportation costs.
MANAGEMENT SERVICE FEES. According to the terms of a management service agreement that began in 2002 between GNCI and Nutricia, Nutricia charged $13.2 million of costs which were included in selling, general and administrative expenses for the year ended December 31, 2002. The fees included charges for strategic planning, certain information technology, product and material management, group business process, human resources, legal, tax, regulatory and management reporting. There were no fees allocated to GNCI for the period ended December 4, 2003.
RESEARCH AND DEVELOPMENT. GNCI incurred $0.1, $1.5 and $0.4 million of research and development costs from US affiliates for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. In accordance with the previous Research Activities Agreement with Numico, also included in selling, general and administrative expenses for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001 were costs related to research and development charged by Numico. The agreement provided that Numico conduct research and development activities including but not limited to: ongoing program of scientific and medical research, support and advice on strategic research objectives, design and develop new products, organize and manage clinical trials, updates on the latest technological and scientific developments, and updates on regulatory issues. These charges totaled $5.0, $4.6 and $4.9 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively.
INSURANCE. For the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, in order to reduce costs and mitigate duplicate insurance coverage, GNCI's ultimate parent, Numico, purchased certain global insurance policies covering several types of insurance. GNCI received charges for their portion of these costs. These charges totaled $2.9, $2.6 and $1.2 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively.
SHARED SERVICE PERSONNEL COSTS. GNCI provided certain risk management, tax and internal audit services to other affiliates of Numico. The payroll and benefit costs associated with these services were reflected on GNCI's financial statements and were not allocated to any affiliates. Total costs related to shared services absorbed by GNCI was $1.2 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. GNCI also incurred costs related to management services provided for the benefit of all U.S. affiliates. These costs totaled $1.1, $2.7 and $2.6 million for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001, respectively. GNCI received certain management services related to the affiliation between GNCI and its U.S. parent, Nutricia and its ultimate parent, Numico. These services were not significant to GNCI's operations.
DUE FROM AND TO RELATED PARTIES. Included with other current assets were amounts on deposit with Numico Financial Services S.A., a subsidiary of Numico. Numico Financial Services S.A. represented the financing entity of Numico and served as a cash concentration center for Numico subsidiaries and affiliates. GNCI had $70.6 and $1.4 million on deposit as of December 4, 2003 and December 31, 2002, respectively, with Numico Financial Services S.A. There were no amounts on deposit at December 31, 2001.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed above, GNCI had amounts due from and due to several related parties. Following is a table summarizing the amount due from and due to related parties for the following periods, excluding the related party term loan described in Note 9:
DECEMBER 31, 2002
---------------------------------
DUE FROM DUE TO
RELATED PARTIES RELATED PARTIES
--------------- ---------------
(IN THOUSANDS)
Numico.................................................... $ -- $(29,459)
Numico USA................................................ -- --
Numico Financial Services................................. 1,370 --
Nutraco................................................... -- (44,363)
Rexall.................................................... 9,042 (8,133)
Unicity................................................... 999 (1,853)
Other..................................................... 647 (233)
------- --------
Total..................................................... $12,058 $(84,041)
======= ========
|
There were no related party amounts as of December 31, 2003.
NOTE DUE TO RELATED PARTY. As of December 31, 2001, GNCI had a short term note payable to a related party resulting from an intercompany loan. The note balance at December 31, 2001 was $42.3 million and was a non-interest bearing note. The entire note balance was settled by December 31, 2002.
NOTE 23. SEGMENTS
The following operating segments represent identifiable components of the Company for which separate financial information is available. This information is utilized by management to assess performance and allocate assets accordingly. The Company's management evaluates segment operating results based on several indicators. The primary key performance indicators are sales and operating income or loss for each segment. Operating income or loss, as evaluated by management, excludes certain items that are managed at the consolidated level, such as distribution and warehousing, corporate overhead, impairments and other corporate costs. The following table represents key financial information for each of the Company's business segments, identifiable by the distinct operations and management of each: Retail, Franchising, and Manufacturing/Wholesale. The Retail segment includes the Company's corporate store operations in the United States and Canada. The Franchise segment represents the Company's franchise operations, both domestically and internationally. The Manufacturing/Wholesale segment represents the Company's manufacturing operations in South Carolina and Australia and the Wholesale sales business. This segment supplies the Retail and Franchise segments, along with various third parties, with finished products for sale. The Warehousing and Distribution, Corporate Overhead, and Other Unallocated Costs represent the Company's administrative expenses. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table represents key financial information of the Company's business segments:
PREDECESSOR
-------------------------------------- SUCCESSOR
TWELVE MONTHS ENDED -------------
DECEMBER 31, PERIOD ENDED 27 DAYS ENDED
----------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
---------- ---------- ------------ -------------
Revenues:
Retail................................... $1,123,150 $1,068,637 $ 993,283 $ 66,177
Franchise................................ 273,134 256,076 241,301 14,186
Manufacturing/Wholesale:
Intersegment(A)....................... 159,039 149,439 151,137 9,907
Third Party........................... 112,860 100,263 105,625 8,925
---------- ---------- ---------- ----------
Sub total Manufacturing/Wholesale..... 271,899 249,702 256,762 18,832
Sub total segment revenues............... 1,668,183 1,574,415 1,491,346 99,195
Intersegment elimination(A)........... (159,039) (149,439) (151,137) (9,907)
---------- ---------- ---------- ----------
Total revenues........................ $1,509,144 $1,424,976 $1,340,209 $ 89,288
========== ========== ========== ==========
Operating income (loss):
Retail................................... $ 89,251 $ 86,770 $ 79,105 $ 6,546
Franchise................................ 46,360 65,372 63,660 2,427
Manufacturing/Wholesale.................. 29,892 25,786 24,270 1,426
---------- ---------- ---------- ----------
Sub total segment operating income....... 165,503 177,928 167,035 10,399
Unallocated corporate and other costs:
Warehousing & distribution costs...... 40,914 40,337 40,654 3,393
Corporate overhead costs.............. 54,617 63,895 66,768 3,651
Impairment of goodwill and intangible
assets.............................. -- 222,000 709,367 --
Legal settlement income............... -- (214,417) (11,480) --
---------- ---------- ---------- ----------
Sub total unallocated corporate and
other costs......................... 95,531 111,815 805,309 7,044
---------- ---------- ---------- ----------
Total operating income (loss)......... 69,972 66,113 (638,274) 3,355
Interest expense, net...................... (139,930) (136,353) (121,125) (2,773)
(Loss) income before income taxes.......... (69,958) (70,240) (759,399) 582
Income tax benefit (expense)............... 14,099 (996) 174,478 (228)
---------- ---------- ---------- ----------
Net (loss) income before cumulative effect
of accounting change..................... $ (55,859) $ (71,236) $ (584,921) $ 354
========== ========== ========== ==========
Depreciation & amortization:
Retail................................... $ 71,168 $ 38,699 $ 41,475 $ 1,444
Franchise................................ 31,278 4,668 3,199 163
Manufacturing/Wholesale.................. 18,309 13,330 12,718 469
Corp/Other............................... 1,322 1,300 1,659 177
---------- ---------- ---------- ----------
Total depreciation & amortization..... $ 122,077 $ 57,997 $ 59,051 $ 2,253
========== ========== ========== ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PREDECESSOR
-------------------------------------- SUCCESSOR
TWELVE MONTHS ENDED -------------
DECEMBER 31, PERIOD ENDED 27 DAYS ENDED
----------------------- DECEMBER 4, DECEMBER 31,
2001 2002 2003 2003
---------- ---------- ------------ -------------
Capital expenditures:
Retail................................... $ 21,458 $ 35,177 $ 20,780 $ 455
Franchise................................ 48 16 -- --
Manufacturing/Wholesale.................. 5,222 9,033 4,746 1,075
Corp/Other............................... 2,455 7,673 5,494 297
---------- ---------- ---------- ----------
Total capital expenditures............ $ 29,183 $ 51,899 $ 31,020 $ 1,827
========== ========== ========== ==========
Total assets:
Retail................................... $1,568,247 $ 884,541 $ 400,594 $ 424,645
Franchise................................ 1,103,286 671,616 316,497 362,748
Manufacturing/Wholesale.................. 357,043 260,413 193,199 137,105
Corp/Other............................... 43,201 61,740 127,799 94,369
---------- ---------- ---------- ----------
Total assets.......................... $3,071,777 $1,878,310 $1,038,089 $1,018,867
========== ========== ========== ==========
GEOGRAPHIC AREAS
Total revenues:
United States............................ $1,465,186 $1,379,176 $1,290,732 $ 84,605
Foreign.................................. 43,958 45,800 49,477 4,683
---------- ---------- ---------- ----------
Total revenues........................ $1,509,144 $1,424,976 $1,340,209 $ 89,288
========== ========== ========== ==========
Long-lived assets:
United States............................ $2,591,862 $1,287,474 $ 498,862 $ 555,550
Foreign.................................. 11,816 11,221 7,362 11,164
---------- ---------- ---------- ----------
Total long-lived assets............... $2,603,678 $1,298,695 $ 506,224 $ 566,714
========== ========== ========== ==========
|
(A) Intersegment revenues are eliminated from the consolidated revenue line.
NOTE 24. SUPPLEMENTAL UNAUDITED PRO FORMA INFORMATION
The following unaudited pro forma information for the combined twelve months ended December 31, 2003 and the year ended December 31, 2002 assumes that the Acquisition of the Company had occurred as of January 1, 2002. The pro forma amounts include adjustments related to depreciation, amortization, interest expense, and certain other management fees, research and development, transaction fees, directors fees and inventory adjustments. The tax effects of the pro forma adjustments have been reflected at the Company's blended federal and state income tax rate of 36.5%.
The pro forma results are not necessarily indicative of the results that would have occurred and are not intended to provide a forecast of future expected results.
COMBINED PRO FORMA
TWELVE MONTHS TWELVE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2003 2003
------------- -------------
Revenue................................................... $1,429,497 $1,429,497
Net loss before cumulative effect of accounting change.... (584,567) (504,725)
---------- ----------
Net loss.................................................. $ (584,567) $ (504,725)
========== ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PRO FORMA
TWELVE TWELVE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2002 2002
------------ ------------
Revenue................................................... $1,424,976 $1,424,976
Net loss before cumulative effect of accounting change.... (71,236) 21,197
---------- ----------
Loss from cumulative effect of accounting change.......... (889,621) (889,621)
---------- ----------
Net loss.................................................. $ (960,857) $ (868,424)
========== ==========
|
NOTE 25. SUPPLEMENTAL GUARANTOR INFORMATION
As of December 31, 2003 the Company's debt includes the senior credit facility and the 8 1/2% senior subordinated notes. The senior credit facility has been guaranteed by the Company's parent GNCH and its domestic subsidiaries. The senior subordinated notes are general unsecured obligations and are guaranteed on a senior subordinated basis by certain of the Company's domestic subsidiaries and rank secondary to the Company's senior credit facility. Guarantor subsidiaries include the Company's direct and indirect domestic subsidiaries as of the respective balance sheet dates. Non-Guarantor subsidiaries include the remaining direct and indirect foreign subsidiaries. The subsidiary guarantors are 100% owned by the Company, the guarantees are full and unconditional, and the guarantees are joint and several.
Following are condensed consolidated financial statements of the Company and the combined guarantor subsidiaries for the 27 days ended December 31, 2003. The guarantor subsidiaries are presented in a combined format as their individual operations are not material to the Company's consolidated financial statements. Investments in subsidiaries are either consolidated or accounted for under the equity method of accounting. Also following are condensed consolidated financial statements for GNCI for the period ended December 4, 2003 and the twelve months ended December 31, 2002 and 2001. Intercompany balances and transactions have been eliminated.
For the twelve months ended December 31, 2001 and 2002 and the period ended December 4, 2003, the Parent company is GNCI (Predecessor). For the 27 days ended December 31, 2003, the Parent/Issuer company is General Nutrition Centers, Inc. (Successor).
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
COMBINED COMBINED
PARENT/ GUARANTOR NON-GUARANTOR
SUCCESSOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
DECEMBER 31, 2003 -------- ------------ ------------- ------------ ------------
Current assets
Cash and equivalents........... $ -- $ 30,642 $ 2,534 $ -- $ 33,176
Accounts receivable............ 12,711 74,066 1,207 -- 87,984
Intercompany receivable........ 18,750 3,848 -- (22,598) --
Inventory, net................. -- 242,367 13,633 -- 256,000
Other current assets........... -- 40,544 2,882 -- 43,426
Total current assets........ 31,461 391,467 20,256 (22,598) 420,586
Property, plant and equipment.... -- 173,483 27,797 -- 201,280
Investment in subsidiaries....... 736,448 2,099 -- (738,547) --
Goodwill......................... -- 82,112 977 -- 83,089
Brands........................... -- 209,000 3,000 -- 212,000
Other assets..................... 19,796 90,563 333 (8,780) 101,912
-------- -------- ------- --------- ----------
Total assets................ $787,705 $948,724 $52,363 $(769,925) $1,018,867
======== ======== ======= ========= ==========
Current liabilities
Other current liabilities...... $ 12,399 $202,480 $ 5,662 $ -- $ 220,541
Intercompany payable........... -- -- 22,598 (22,598) --
Total current liabilities... 12,399 202,480 28,260 (22,598) 220,541
Long-term debt................... 497,150 -- 22,004 (8,780) 510,374
Other long-term liabilities...... -- 9,796 -- -- 9,796
Total (deficit) equity...... 278,156 736,448 2,099 (738,547) 278,156
-------- -------- ------- --------- ----------
Total liabilities and
stockholder's (deficit)
equity.................... $787,705 $948,724 $52,363 $(769,925) $1,018,867
======== ======== ======= ========= ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
DECEMBER 31, 2002 ---------- ------------ ------------- ------------ ------------
Current assets
Cash and equivalents........ $ -- $ 27,327 $11,438 $ -- $ 38,765
Accounts receivable......... 1,370 205,987 977 -- 208,334
Intercompany receivable..... 725,842 -- -- (725,842) --
Inventory, net.............. -- 273,662 11,960 -- 285,622
Other current assets........ -- 44,450 2,667 -- 47,117
Total current assets..... 727,212 551,426 27,042 (725,842) 579,838
Property, plant and
equipment................... -- 257,108 27,530 -- 284,638
Investment in subsidiaries.... 604,036 9,848 -- (613,884) --
Goodwill...................... -- 248,250 588 -- 248,838
Brands........................ -- 648,918 17,082 -- 666,000
Other assets.................. -- 107,508 268 (8,780) 98,996
---------- ---------- ------- ----------- ----------
Total assets............. $1,331,248 $1,823,058 $72,510 $(1,348,506) $1,878,310
========== ========== ======= =========== ==========
Current liabilities
Other current liabilities... $ 175,000 $ 246,905 $ 4,359 $ -- $ 426,264
Intercompany payable........ -- 689,496 36,346 (725,842) --
Total current
liabilities............ 175,000 936,401 40,705 (725,842) 426,264
Long-term debt................ 1,650,000 -- 22,952 (8,780) 1,664,172
Other long-term liabilities... -- 282,621 (995) -- 281,626
Total (deficit) equity... (493,752) 604,036 9,848 (613,884) (493,752)
---------- ---------- ------- ----------- ----------
Total liabilities and
stockholder's (deficit)
equity................. $1,331,248 $1,823,058 $72,510 $(1,348,506) $1,878,310
========== ========== ======= =========== ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
COMBINED COMBINED
PARENT/ GUARANTOR NON-GUARANTOR
SUCCESSOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
27 DAYS ENDED DECEMBER 31, 2003 ------- ------------ ------------- ------------ ------------
Revenue............................. $ -- $95,987 $5,424 $(12,123) $89,288
Cost of sales, including costs of
warehousing, distribution and
occupancy......................... -- 71,702 4,001 (12,123) 63,580
----- ------- ------ -------- -------
Gross profit................... -- 24,285 1,423 -- 25,708
Compensation and related benefits... -- 15,804 915 -- 16,719
Advertising and promotion........... -- 475 39 -- 514
Other selling, general and
administrative.................... -- 4,912 186 -- 5,098
Subsidiary loss (income)............ (496) (81) -- 577 --
Other (income) expense.............. -- (18) 40 -- 22
----- ------- ------ -------- -------
Operating income (loss)............. 496 3,112 243 (496) 3,355
Interest (expense) income, net...... (224) (2,429) (120) -- (2,773)
(Loss)/income before income
taxes.......................... 272 683 123 (496) 582
Income tax benefit/(expense) (Note
17)............................... 82 (268) (42) -- (228)
----- ------- ------ -------- -------
Net income (loss)................... $ 354 $ 415 $ 81 $ (496) $ 354
===== ======= ====== ======== =======
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
JANUARY 1, 2003 - DECEMBER 4, 2003 --------- ------------ ------------- ------------ ------------
Revenue.......................... $ -- $1,431,275 $ 60,071 $(151,137) $1,340,209
Cost of sales, including costs of
warehousing, distribution and
occupancy...................... -- 1,040,118 45,879 (151,137) 934,860
--------- ---------- -------- --------- ----------
Gross profit................ 391,157 14,192 -- 405,349
Compensation and related
benefits....................... -- 224,968 10,022 -- 234,990
Advertising and promotion........ -- 38,274 139 -- 38,413
Other selling, general and
administrative................. -- 73,122 (2,184) -- 70,938
Subsidiary loss (income)......... 584,921 10,380 -- (595,951) --
Other income..................... -- (5,810) (4,275) -- (10,085)
Impairment of goodwill and
intangible assets.............. -- 692,314 17,053 -- 709,367
--------- ---------- -------- --------- ----------
Operating income (loss).......... (584,921) (631,711) (6,563) 584,921 (638,274)
Interest (expense) income, net... -- (119,502) (1,623) -- (121,125)
(Loss)/income before income
taxes....................... (584,921) (751,213) (8,186) 584,921 (759,399)
Income tax benefit/(expense) (Note
17)............................ -- 177,122 (2,644) -- 174,478
--------- ---------- -------- --------- ----------
Net income (loss)................ $(584,921) $ (574,091) $(10,830) $ 584,921 $ (584,921)
========= ========== ======== ========= ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
TWELVE MONTHS ENDED DECEMBER 31, 2002 --------- ------------ ------------- ------------ ------------
Revenue........................... $ -- $1,516,248 $ 58,167 $(149,439) $1,424,976
Cost of sales, including costs of
warehousing, distribution and
occupancy....................... -- 1,076,364 42,983 (149,439) 969,908
--------- ---------- -------- --------- ----------
Gross profit................. -- 439,884 15,184 -- 455,068
Compensation and related benefits... -- 235,777 9,388 -- 245,165
Advertising and promotion......... -- 51,862 164 -- 52,026
Other selling, general and
administrative.................. -- 83,067 2,981 -- 86,048
Subsidiary loss (income).......... 960,857 30,610 -- (991,467) --
Other income...................... -- (216,275) (9) -- (216,284)
Impairment of goodwill and intangible
assets.......................... -- 212,694 9,306 -- 222,000
--------- ---------- -------- --------- ----------
Operating income (loss)........... (960,857) 72,759 (6,646) 960,857 66,113
Interest (expense) income, net.... -- (133,444) (2,909) -- (136,353)
(Loss)/income before income taxes.. (960,857) (60,685) (9,555) 960,857 (70,240)
Income tax benefit/(expense) (Note
17)............................. -- (535) (461) -- (996)
--------- ---------- -------- --------- ----------
Net (loss)/income before cumulative
effect of accounting change..... (960,857) (61,220) (10,016) 960,857 (71,236)
Loss from cumulative effect of
accounting change, net of tax... -- (869,027) (20,594) -- (889,621)
--------- ---------- -------- --------- ----------
Net loss.......................... $(960,857) $ (930,247) $(30,610) $ 960,857 $ (960,857)
========= ========== ======== ========= ==========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
TWELVE MONTHS ENDED DECEMBER 31, 2001 -------- ------------ ------------- ------------ ------------
Revenue............................ $ -- $1,611,469 $56,714 $(159,039) $1,509,144
Cost of sales, including costs of
warehousing, distribution and
occupancy........................ -- 1,130,134 42,297 (159,039) 1,013,392
-------- ---------- ------- --------- ----------
Gross profit.................. -- 481,335 14,417 -- 495,752
Compensation and related benefits... -- 237,711 8,928 -- 246,639
Advertising and promotion.......... -- 41,752 118 -- 41,870
Other selling, general and
administrative................... -- 136,756 3,991 -- 140,747
Subsidiary loss (income)........... 55,859 1,997 -- (57,850) --
Other (income) expense............. -- (3,859) 383 -- (3,476)
-------- ---------- ------- --------- ----------
Operating (loss) income............ (55,859) 68,975 997 55,859 69,972
Interest (expense) income, net..... -- (137,024) (2,906) -- (139,930)
(Loss)/income before income taxes.. (55,859) (68,049) (1,909) 55,859 (69,958)
Income tax benefit/(expense) (Note
17).............................. -- 14,187 (88) -- 14,099
-------- ---------- ------- --------- ----------
Net (loss) income.................. $(55,859) $ (53,862) $(1,997) $ 55,859 $ (55,859)
======== ========== ======= ========= ==========
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
COMBINED COMBINED
PARENT/ GUARANTOR NON-GUARANTOR
SUCCESSOR ISSUER SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
27 DAYS ENDED DECEMBER 31, 2003 --------- ------------ ------------- ------------
Net cash from operating activities.......... $ (19,363) $24,139 $ (88) $ 4,688
Cash flows from investing activities:
Acquisition of General Nutrition
Companies, Inc......................... (738,117) -- -- (738,117)
Capital expenditures...................... -- (1,822) (5) (1,827)
Other investing........................... -- (57) -- (57)
--------- ------- ------ ---------
Net cash from investing activities.......... (738,117) (1,879) (5) (740,001)
Cash flows from financing activities:
General Nutrition Centers Holding Company
investment in General Nutrition
Centers, Inc........................... 277,500 -- -- 277,500
Borrowing from senior credit facility..... 285,000 -- -- 285,000
Proceeds from senior subordinated notes... 215,000 -- -- 215,000
Other financing........................... (20,020) 1,735 -- (18,285)
--------- ------- ------ ---------
Net cash from financing activities.......... 757,480 1,735 -- 759,215
Effect of exchange rates on cash............ -- -- (152) (152)
Net increase (decrease) in cash and cash
equivalents............................... -- 23,995 (245) 23,750
Cash and cash equivalents at beginning of
period.................................... -- 6,647 2,779 9,426
--------- ------- ------ ---------
Cash and cash equivalents at end of
period.................................... $ -- $30,642 $2,534 $ 33,176
========= ======= ====== =========
-----------------------------------------------------------------------------------------------------
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
PERIOD ENDED DECEMBER 4, 2003 -------- ------------ ------------- ------------
Net cash from operating activities........... $ -- $ 99,755 $(6,887) $ 92,868
Cash flows from investing activities:
Capital expenditures....................... -- (30,069) (951) (31,020)
Store acquisition costs.................... -- (3,193) -- (3,193)
Investment distribution.................... 91,794 (91,794) -- --
Other investing............................ -- 2,706 54 2,760
-------- --------- ------- --------
Net cash from investing activities........... 91,794 (122,350) (897) (31,453)
Cash flows from financing activities:
Payments on long-term debt-related party... (91,794) -- -- (91,794)
Other financing............................ -- 1,915 (887) 1,028
-------- --------- ------- --------
Net cash from financing activities........... (91,794) 1,915 (887) (90,766)
Effect of exchange rates on cash............. -- -- 12 12
Net increase (decrease) in cash and cash
equivalents................................ -- (20,680) (8,659) (29,339)
Cash and cash equivalents at beginning of
period..................................... -- 27,327 11,438 38,765
-------- --------- ------- --------
Cash and cash equivalents at end of period... $ -- $ 6,647 $ 2,779 $ 9,426
======== ========= ======= ========
|
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
TWELVE MONTHS ENDED DECEMBER 31, 2002 -------- ------------ ------------- ------------
Net cash from operating activities........... $ -- $ 99,326 $11,709 $111,035
Cash flows from investing activities:
Capital expenditures....................... -- (49,936) (1,963) (51,899)
Proceeds from sale of marketable
securities.............................. -- 7,443 -- 7,443
Other investing............................ -- (1) -- (1)
-------- -------- ------- --------
Net cash from investing activities........... -- (42,494) (1,963) (44,457)
Cash flows from financing activities:
Payments on short-term debt-related
party................................... -- (42,341) -- (42,341)
Other financing............................ -- (1,112) (847) (1,959)
-------- -------- ------- --------
Net cash from financing activities........... -- (43,453) (847) (44,300)
Effect of exchange rates on cash............. -- -- 175 175
Net increase (decrease) in cash and cash
equivalents................................ -- 13,379 9,074 22,453
Cash and cash equivalents at beginning of
period..................................... -- 13,948 2,364 16,312
-------- -------- ------- --------
Cash and cash equivalents at end of period... $ -- $ 27,327 $11,438 $ 38,765
======== ======== ======= ========
|
GENERAL NUTRITION CENTERS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PREDECESSOR PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
TWELVE MONTHS ENDED DECEMBER 31, 2001 -------- ------------ ------------- ------------
Net cash from operating activities........... $ -- $ 73,860 $ 1,944 $ 75,804
Cash flows from investing activities:
Capital expenditures....................... -- (27,338) (1,845) (29,183)
Store acquisition costs.................... -- (21,863) -- (21,863)
Investment distribution.................... 50,000 (50,000) -- --
Other investing............................ -- 2,800 99 2,899
-------- -------- ------- --------
Net cash from investing activities........... 50,000 (96,401) (1,746) (48,147)
Cash flows from financing activities:
Payments on long-term debt-related party... (50,000) -- -- (50,000)
Short-term borrowings-related party........ -- 62,341 -- 62,341
Payments on short-term debt-related
party................................... -- (20,000) -- (20,000)
Decrease in cash overdrafts................ -- (12,797) -- (12,797)
Other financing............................ -- (339) (793) (1,132)
-------- -------- ------- --------
Net cash from financing activities........... (50,000) 29,205 (793) (21,588)
Effect of exchange rates on cash............. -- -- (231) (231)
Net increase (decrease) in cash and cash
equivalents................................ -- 6,664 (826) 5,838
Cash and cash equivalents at beginning of
period..................................... -- 7,284 3,190 10,474
-------- -------- ------- --------
Cash and cash equivalents at end of period... $ -- $ 13,948 $ 2,364 $ 16,312
======== ======== ======= ========
|
$215,000,000
(GNC LOGO)
UNTIL , 2004, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE DELAWARE ENTITIES -- GENERAL NUTRITION CENTERS, INC., GENERAL NUTRITION COMPANIES, INC., GENERAL NUTRITION DISTRIBUTION COMPANY, GENERAL NUTRITION GOVERNMENT SERVICES, INC., GENERAL NUTRITION INTERNATIONAL, INC., GENERAL NUTRITION SYSTEMS, INC., GNC (CANADA) HOLDING COMPANY, GNC, LIMITED, GNC US DELAWARE, INC. AND GN INVESTMENT, INC.
General Nutrition Centers, Inc., General Nutrition Companies, Inc., General Nutrition Distribution Company, General Nutrition Government Services, Inc., General Nutrition International, Inc., General Nutrition Systems, Inc., GNC (Canada) Holding Company, GNC, Limited, GNC US Delaware, Inc. and GN Investment, Inc., which we refer to as the Delaware entities, are each Delaware corporations, and as a Delaware corporation, are each subject to the Delaware General Corporation Law ("DGCL") and the exculpation from liability and indemnification provisions contained therein.
Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the corporation. The DGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or for any transaction from which the director derived an improper personal benefit.
GENERAL NUTRITION CENTERS, INC.
Article Sixth of General Nutrition Centers, Inc.'s certificate of incorporation provides that a director of General Nutrition Centers, Inc. shall not be liable to General Nutrition Centers, Inc. or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. In addition, Article VIII of the bylaws of General Nutrition Centers, Inc. provides that the corporation shall indemnify any person made party to any action or proceeding by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another entity, if such person acted in good faith in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. Any such person is also entitled to have the corporation pay by General Nutrition Centers, Inc. the expenses incurred in defending in any proceeding in advance of its final disposition.
Article VIII, Section 8 of the bylaws of General Nutrition Centers, Inc. provides that the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the corporation's request as a director, officer, employee or agent of another entity against any liability incurred by such person in any such capacity or arising out of
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such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under Article VIII of the bylaws.
GENERAL NUTRITION COMPANIES, INC.
Article Eighth of the certificate of incorporation of General Nutrition Companies, Inc. provides that the corporation shall indemnify to the full extent permitted by applicable law any person made party to any action or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity. Article Eighth also provides that the corporation may purchase and maintain insurance on behalf of any such person against any such liabilities asserted against or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability under Article Eighth.
Article Eleventh of the certificate of incorporation of General Nutrition Companies, Inc. provides that no director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction in which the director received an improper personal benefit.
The bylaws of General Nutrition Companies, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION DISTRIBUTION COMPANY
Article 10 of the certificate of incorporation of General Nutrition Distribution Company provides that, to the fullest extent permitted by the DGCL, a director of General Nutrition Distribution Company shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The bylaws of General Nutrition Distribution Company do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
Article Seventh of the certificate of incorporation of General Nutrition Government Services, Inc. provides that a director of General Nutrition Government Services, Inc. shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. The bylaws of General Nutrition Government Services, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION INTERNATIONAL, INC.
Article 10 of the certificate of incorporation of General Nutrition International, Inc. provides that, to the fullest extent permitted by the DGCL, a director of General Nutrition International, Inc. shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The bylaws of General Nutrition International, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
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GENERAL NUTRITION SYSTEMS, INC.
Article 10 of the certificate of incorporation of General Nutrition Systems, Inc. provides that a director of General Nutrition Systems, Inc. shall not be personally liable to the corporation or its stockholders for breach of fiduciary duty except for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a known violation of law, (iii) under Section 174 of the DGCL, or (iv) any transaction from which the director derived an improper personal benefit. In addition, Article 11 of the certificate of incorporation of General Nutrition Systems, Inc. provides that the corporation shall indemnify its officers, directors, employees and agents to the full extent permitted by Section 145 of the DGCL.
The bylaws of General Nutrition Systems, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GNC (CANADA) HOLDING COMPANY
Article Seventh of the certificate of incorporation of GNC (Canada) Holding Company provides that a director of GNC (Canada) Holding Company shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a known violation of law, (iii) under Section 174 of the DGCL, or (iv) any transaction from which the director derived an improper personal benefit. The bylaws of GNC (Canada) Holding Company do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GNC, LIMITED
Article Seventh of the certificate of incorporation of GNC, Limited provides that a director of GNC, Limited shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a known violation of law, (iii) under Section 174 of the DGCL, or (iv) any transaction from which the director derived an improper personal benefit. The bylaws of GNC, Limited do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GNC US DELAWARE, INC.
Article Eighth of the certificate of incorporation of GNC US Delaware, Inc. provides that the corporation shall indemnify to the full extent permitted by applicable law any person made or threatened to be made party to any action or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity. Article Eighth also provides that the corporation may purchase and maintain insurance on behalf of any such person against any such liabilities asserted against or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability under Article Eighth of the bylaws.
Article Eleventh of the certificate of incorporation of GNC US Delaware, Inc. provides that no director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction in which the director received an improper personal benefit.
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The bylaws of GNC US Delaware, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GN INVESTMENT, INC.
Article Eighth of the certificate of incorporation of GN Investment, Inc. provides that the corporation shall indemnify to the full extent permitted by applicable law any person made or threatened to be made party to any action or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity. Article Eighth also provides that the corporation may purchase and maintain insurance on behalf of any such person against any such liabilities asserted against or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability under Article Eighth of the bylaws.
Article Eleventh of the certificate of incorporation of GN Investment, Inc.
provides that no director of the corporation shall be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) for any transaction in which the
director received an improper personal benefit.
The bylaws of GN Investment, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
THE PENNSYLVANIA ENTITIES -- GENERAL NUTRITION CORPORATION, GENERAL NUTRITION,
INCORPORATED, GENERAL NUTRITION DISTRIBUTION, L.P. AND GNC FRANCHISING, LLC
(F/K/A GNC FRANCHISING, INC.)
General Nutrition Corporation, General Nutrition, Incorporated are each Pennsylvania corporations, and as a Pennsylvania corporation, are each subject to the Pennsylvania Business Corporation Law ("PBCL"). GNC Franchising, LLC (f/k/a GNC Franchising, Inc.) is a Pennsylvania limited liability company and as a Pennsylvania limited liability company is subject to the Pennsylvania Limited Liability Company Law ("PLLCL"). General Nutrition Distribution, L.P. is a limited partnership and as a Pennsylvania limited partnership is subject to the Pennsylvania Revised Limited Partnership Act ("RLPA").
Sections 1741 and 1742 of the PBCL provide that a corporation may indemnify, under specified circumstances, persons who were or are directors, officers or employees of the corporation or who served or serve other business entities at the request of the corporation. Under these provisions, a person who is wholly successful in defending a claim will be indemnified for any reasonable expenses. To the extent a person is not successful in defending a claim, reasonable expenses of the defense and any liability incurred are to be indemnified under these provisions only where independent legal counsel or another disinterested person selected by the board of directors determines that such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation, and in addition with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct of such person was unlawful. Any expense incurred with respect to any claim may be advanced by the corporation if the recipient agrees to repay such amount if it is ultimately determined that such recipient is not entitled to be indemnified.
Section 1746 of the PBCL provides that the indemnification provided for therein shall not be deemed exclusive of any other rights to which those seeking indemnification may otherwise be entitled. Section 1746 also provides for increased indemnification protections for directors, officers and others. Indemnification may be provided by Pennsylvania corporations in any case except where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness.
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Section 1747 of the PBCL provides that a corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a representative of the corporation or is or was serving at the request of the corporation as a representative of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against that liability under the provisions of the PBCL described above.
Section 1713 of the PBCL also sets forth a framework whereby Pennsylvania corporations, with the approval of the shareholders, may limit the personal liability of directors for monetary damages except where the act or omission giving rise to a claim constitutes self-dealing, willful misconduct or recklessness. The section does not apply to a director's responsibility or liability under a criminal or tax statute and may not apply to liability under Federal statutes, such as the Federal securities laws.
Section 8945 of the PLLCL provides that, subject to such standards and restrictions, if any, as are set forth in the operating agreement, a limited liability company may and shall have the power to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever, except that indemnification shall not be made where the act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Any such indemnification may be granted for any action taken and may be made whether or not the company would have the power to indemnify the person under any other provision of law except as provided in section 8945 and whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the company.
Section 8945 of the PLLCL also provides that expenses incurred by a member, manager or other person in defending any action or proceeding against which indemnification may be made under section 8945 may be paid by the company in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the company.
Section 8510 of the RLPA provides that subject to any standards and restrictions set forth in the partnership agreement, a limited partnership shall have the power to indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever, except that indemnification shall not be made where the act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Any such indemnification may be granted for any action taken and may be made whether or not the limited partnership would have the power to indemnify the person under any other provision of law except as provided in section 8510 and whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the limited partnership.
Section 8510 of the RLPA also provides that expenses incurred by a partner or other person in defending any action or proceeding against which indemnification may be made pursuant to section 8510 may be paid by the limited partnership in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the limited partnership.
GENERAL NUTRITION CORPORATION
The articles of incorporation and the bylaws of General Nutrition Corporation do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION, INCORPORATED
The articles of incorporation and the bylaws of General Nutrition, Incorporated do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
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GNC FRANCHISING, LLC (F/K/A GNC FRANCHISING, INC.)
The certificate of organization and the limited liability company operating agreement of GNC Franchising, LLC (f/k/a GNC Franchising, Inc.) do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION DISTRIBUTION, L.P.
Section 19.1 of the agreement of limited partnership of General Nutrition Distribution, L.P. provides that the partnership shall indemnify any partner (or employee of a partner) against any liabilities losses, judgments, claims and/or in connection with the defense of any action or proceeding action where the person who was, is or is threatened to be named in the proceeding was named because the person is or was a partner of the partnership (or an employee of the same). Such indemnification is conditioned upon a finding by the majority vote of the partnership that such person conducted himself in good faith, reasonably believed that his conduct was in the partnership's best interest (or in the case of conduct not in his official capacity, personally believed that his conduct was not opposed to the partnership's best interest), and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful.
THE ARIZONA ENTITIES -- GENERAL NUTRITION INVESTMENT COMPANY AND GENERAL NUTRITION SALES CORPORATION
General Nutrition Investment Company and General Nutrition Sales Corporation, which we refer to as the Arizona entities, are each Arizona corporations, and as an Arizona corporation, are each subject to the Arizona Revised Statutes ("A.R.S.").
Sections 10-850 to 10-858 of the A.R.S. grant a corporation broad powers to indemnify any person in connection with legal proceedings made a party to a proceeding by reason of his present or past status as an officer or director of the corporation, provided that the person acted in good faith and in a manner he reasonably believed to be in (when acting in an official capacity) or not opposed to (when acting in all other circumstances) the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that no indemnification may be made in connection with any action by or in the right of the corporation, if such person is adjudged to be liable to the corporation, or in connection with any proceeding charging improper personal benefit to the person whether or not involving action in the person's official capacity, in which the person was held liable on the basis that the personal benefit was improperly received by the person. Indemnification by the corporation is mandatory in the case of a director who was the prevailing party, on the merits or otherwise, in the defense of any such proceeding, and also in the case of an outside director against reasonable expenses incurred in connection with such a proceeding (in advance of final disposition of the proceeding upon a specified affidavit from the director), in either case subject to the limitations noted above and to any limitations in the articles of incorporation.
The A.R.S. also gives a corporation power to purchase and maintain insurance on behalf of an individual who is or was a director or officer of the corporation or who, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a director or officer, whether or not the corporation would have power to indemnify or advance expenses to the individual against the same liability under the indemnification provisions of the A.R.S.
GENERAL NUTRITION INVESTMENT COMPANY
Article Eighth of the articles of incorporation of General Nutrition
Investment Company provides that the corporation shall indemnify to the full
extent permitted by applicable law, any person made or threatened to be made
party to any action or proceeding by reason of the fact that he is or was a
director, officer,
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employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity. Article Eighth also provides that the corporation may purchase and maintain insurance on behalf of any such person against any such liabilities asserted against or incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability under Article Eighth of the articles of incorporation.
Article Eleventh of the articles of incorporation of General Nutrition Investment Company provides that no director of the corporation shall be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for breach of the duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under Chapter 8 of the A.R.S., or (iv) for any transaction in which the director received an improper personal benefit.
The bylaws of General Nutrition Investment Company do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
GENERAL NUTRITION SALES CORPORATION
Article Eighth of the articles of incorporation of General Nutrition Sales Corporation provides that the corporation shall indemnify to the full extent permitted by applicable law any person made or threatened to be made party to any action or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity. Article Eighth also provides that the corporation may purchase and maintain insurance on behalf of any such person against any such liabilities asserted against or incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability under Article Eighth of the articles of incorporation.
Article Eleventh of the articles of incorporation of General Nutrition Sales Corporation provides that no director of the corporation shall be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for breach of the duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under Chapter 8 of the A.R.S., or (iv) for any transaction in which the director received an improper personal benefit.
The bylaws of General Nutrition Sales Corporation do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
INFORMED NUTRITION, INC.
Informed Nutrition, Inc. is a Florida corporation. Section 607.0850(1) of the Florida Business Corporation Act (the "FBCA") empowers a corporation to indemnify any person who was or is a party to any proceeding (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another entity, against liability incurred in connection with such proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 607.0850(2) of the FBCA empowers a corporation to indemnify any person who was or is a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth in the preceding paragraph, against expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expenses of litigating the proceeding to the conclusion, actually and reasonably incurred in connection with the defense or settlement of the proceeding (including any appeal thereof), provided that the person acted
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under the standards set forth in the preceding paragraph. However, no indemnification may be made for any claim, issue or matter as to which such person is adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity.
Section 607.0850(3) of the FBCA provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any proceeding referred to in subsections (1) and
(2) of Section 607.0850 or in the defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses actually and reasonably incurred
by him or her in connection therewith.
Subsection (4) provides that any indemnification under subsections (1) and
(2) of Section 607.0850, unless determined by a court, shall be made by the
corporation only as authorized in the specific case upon a determination by the
board of directors, a committee of the board of directors or independent legal
counsel, in accordance with subsection (4), that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in subsections (1)
and (2) of Section 607.0850.
Expenses incurred by a director or officer in defending a civil or criminal proceeding may be paid by the corporation in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it is ultimately determined that such director or officer is not entitled to indemnification under Section 607.0850.
Section 607.0850(7) of the FBCA states that indemnification and advancement of expenses are not exclusive and empowers the corporation to make any other further indemnification or advancement of expenses of it directors, officers, employees or agents under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, for actions in an official capacity and in other capacities while holding an office. However, a corporation cannot indemnify or advance expenses if a judgment or other final adjudication establishes that the actions or omissions to act of the director, officer, employee or agent were material to the cause of action adjudicated and constituted (a) a violation of criminal law (unless the director, officer, employee or agent had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful), (b) a transaction from which the director, officer, agent or employee derived an improper personal benefit, (c) in the case of a director, a circumstance where the liability under Section 607.0834 of the FBCA (relating to unlawful distributions) applies, or (d) willful misconduct or conscious disregard for the best interests of the corporation in a proceeding by or in right of the corporation to procure a judgment in its favor or in a proceeding by or in right of a shareholder.
Section 607.0850(12) of the FBCA permits a corporation to purchase and maintain insurance for a director, officer, employee or agent against any liability incurred in his or her official capacity or arising out of his or her status as such regardless of the corporation's power to indemnify him or her against such liability under Section 607.0850.
The articles of incorporation and the bylaws of Informed Nutrition, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
NUTRA MANUFACTURING, INC. (F/K/A NUTRICIA MANUFACTURING USA, INC.)
Nutra Manufacturing, Inc. (f/k/a Nutricia Manufacturing USA, Inc.) is a South Carolina corporation. Section 33-8-500 et seq. of the South Carolina Business Corporation Act of 1988 (the "Act") provides a corporation with broad powers and authority to indemnify its directors and officers and to purchase and maintain insurance for such purposes and mandates the indemnification of a corporation's directors under certain circumstances.
A corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if he conducted himself in good faith, and he reasonably believed: (i) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interest; and (ii) in all other cases, that his conduct was at least not opposed to its best interest; and in the case of any
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criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. A corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation, or in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.
A corporation may also purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against liability asserted against or incurred by him in that capacity or arising from his status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify him against the same liability under Section 33-8-510 or 33-8-520.
The articles of incorporation and the bylaws of Nutra Manufacturing, Inc. do not contain provisions under which controlling persons, directors or officers of the registrant are insured or indemnified in any manner against liability which such persons may incur in such persons' capacity as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 21(A). EXHIBITS.
3.1 Certificate of Incorporation of Apollo GNC Holding, Inc.
(n/k/a General Nutrition Centers, Inc.), filed October 16,
2003.
3.2 Certificate of Amendment to the Certificate of Incorporation
of Apollo GNC Holding, Inc. (changing name to General
Nutrition Centers, Inc.), filed November 19, 2003.
3.3 By-laws of General Nutrition Centers, Inc.
3.4 Articles of Incorporation of General Nutrition,
Incorporated, filed October 28, 2003.
3.5 By-laws of General Nutrition, Incorporated.
3.6 Articles of Incorporation of General Nutrition Corporation,
filed October 28, 2003.
3.7 By-laws of General Nutrition Corporation.
3.8 Articles of Incorporation of Nutricia Manufacturing USA,
Inc. (n/k/a Nutra Manufacturing, Inc.), filed October 31,
2003.
3.9 Amendment to Articles of Incorporation of Nutricia
Manufacturing USA, Inc. (changing name to Nutra
Manufacturing, Inc.), filed March 25, 2004.
3.10 By-laws of Nutra Manufacturing, Inc.
3.11 Certificate of Organization of GNC Franchising, LLC, filed
December 31, 2003.
3.12 Limited Liability Company Operating Agreement of GNC
Franchising, LLC, dated January 1, 2004.
3.13 Certificate of Incorporation of GND Investment Company
(n/k/a General Nutrition International, Inc.), filed March
1, 1989.
3.14 Certificate Amendment to Certificate of Incorporation of GNC
Investment Company (changing name to General Nutrition
International, Inc.), filed April 12, 1990.
3.15 By-Laws of General Nutrition International, Inc.
3.16 Articles of Incorporation of General Nutrition Investment
Company, filed October 28, 2003.
3.17 By-Laws of General Nutrition Investment Company.
3.18 Certificate of Incorporation of General Nutrition Systems,
Inc., dated September 21, 1999.
3.19 By-Laws of General Nutrition Systems, Inc.
3.20 Certificate of Incorporation of General Nutrition
Distribution Company, filed September 29, 1992.
3.21 Certificate of Amendment to Certificate of Incorporation of
General Nutrition Distribution Company (changing name to
General Nutrition Services, Inc.), filed January 13, 1993.
3.22 Certificate of Amendment to Certificate of Incorporation of
General Nutrition Services, Inc. (changing name to General
Nutrition Distribution Company), filed February 1, 1998.
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3.23 By-Laws of General Nutrition Distribution Company.
3.24 Certificate of Incorporation of GNC, Limited, filed April 3,
1996.
3.25 By-Laws of GNC, Limited.
3.26 Certificate of Incorporation of GNC (Canada) Holding
Company, filed April 3, 1996.
3.27 By-Laws of GNC (Canada) Holding Company.
3.28 Articles of Incorporation of Informed Nutrition, Inc., filed
November 16, 1995.
3.29 By-Laws of Informed Nutrition, Inc.
3.30 Certificate of Incorporation of General Nutrition Government
Services, Inc., filed August 14, 1996.
3.31 Certificate Amendment to Certificate of Incorporation of
General Nutrition Government Services, Inc. (changing name
to GN Government Oldco Services, Inc.), filed October 29,
2003.
3.32 Certificate Amendment to Certificate of Incorporation of GN
Government Oldco Services, Inc. (changing name to General
Nutrition Government Services, Inc.), filed November 7,
2003.
3.33 By-Laws of General Nutrition Government Services, Inc.
3.34 Certificate of Incorporation of GN Investment, Inc., filed
October 29, 2003.
3.35 By-Laws of GN Investment, Inc.
3.36 Articles of Incorporation of General Nutrition Sales
Corporation, filed October 28, 2003.
3.37 By-Laws of General Nutrition Sales Corporation.
3.38 Certificate of Incorporation of GNC US Delaware, Inc., filed
October 29, 2003.
3.39 By-Laws of GNC US Delaware, Inc.
3.40 Certificate of Limited Partnership of General Nutrition
Distribution, L.P., filed January 28, 1998.
3.41 Agreement of Limited Partnership of General Nutrition
Distribution, L.P., dated January 27, 1998.
3.42 Certificate of Incorporation of General Nutrition Companies,
Inc., dated October 29, 2003.
3.43 By-Laws of General Nutrition Companies, Inc.
4.1 Indenture, dated as of December 5, 2003 among General
Nutrition Centers, Inc., the Guarantors (as defined therein)
and U.S. Bank National Association, as trustee relating to
General Nutrition Centers, Inc.'s 8 1/2% Senior Subordinated
Notes due 2010.
4.2 Supplemental Indenture, dated as of April 6, 2004 among GNC
Franchising, LLC, General Nutrition Centers, Inc., the other
Guarantors (as defined in the Indenture referred to therein)
and U.S. Bank National Association, as trustee relating to
General Nutrition Centers, Inc.'s 8 1/2% Senior Subordinated
Notes due 2010.
4.3 Form of 8 1/2% Senior Subordinated Note due 2010.
4.4 Registration Rights Agreement, dated December 5, 2003 among
General Nutrition Centers, Inc., the guarantors listed on
Schedule I thereto and Lehman Brothers Inc., J.P. Morgan
Securities Inc. and UBS Securities LLC, as the initial
purchasers of the notes.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel
to General Nutrition Centers, Inc., General Nutrition
Companies, Inc., General Nutrition Distribution Company,
General Nutrition Government Services, Inc., General
Nutrition International, Inc., General Nutrition Systems,
Inc., GNC (Canada) Holding Company, GNC, Limited, GNC US
Delaware, Inc. and GN Investment, Inc.
5.2 Opinion of Pepper Hamilton, LLP, counsel to General
Nutrition Corporation, General Nutrition Distribution, L.P.,
General Nutrition, Incorporated and GNC Franchising, LLC.
5.3 Opinion of Lewis and Roca LLP, counsel to General Nutrition
Investment Company and General Nutrition Sales Corporation.
5.4 Opinion of Holland & Knight LLP, counsel to Informed
Nutrition, Inc.
5.5 Opinion of Kennedy Covington Lobdell & Hickman, L.L.P.,
counsel to Nutra Manufacturing USA, Inc.
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10.1 Credit Agreement, dated as of December 5, 2003 among General
Nutrition Centers Holding Company, General Nutrition
Centers, Inc., as borrower, the several other banks and
other financial institutions or entities from time to time
party thereto, Lehman Brothers Inc. and J.P. Morgan
Securities Inc., as joint lead arrangers and joint
bookrunners, JPMorgan Chase Bank, as syndication agent and
Lehman Commercial Paper Inc., as administrative agent.
10.2 Guarantee and Collateral Agreement, dated as of December 5,
2003, made by General Nutrition Centers Holding Company,
General Nutrition Centers, Inc. and certain of its
subsidiaries in favor of Lehman Commercial Paper Inc. as
administrative agent.
10.3 Form of Intellectual Property Security Agreement, dated as
of December 5, 2003 made in favor of Lehman Commercial Paper
Inc. as administrative agent.
10.4 Management Services Agreement, dated as of December 5, 2003,
by and among General Nutrition Centers, Inc., General
Nutrition Centers Holding Company and Apollo Management V,
L.P.
10.5 Mortgage, Assignment of Leases, Rents and Contracts,
Security Agreement and Fixture Filing from Gustine Sixth
Avenue Associates, Ltd. as Mortgagor to Allstate Life
Insurance Company as Mortgagee dated March 23, 1999.
10.6 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.7 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Investment
Company.
10.8 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Investment
Company.
10.9 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.10 Know-How License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.11 Know-How License Agreement, dated December 5, 2003, by and
between Numico Research B.V. and General Nutrition
Investment Company.
10.12 Know-How License Agreement, dated December 5, 2003, by and
between General Nutrition Corporation and N.V. Nutricia.
10.13 Patent License Agreement, dated December 5, 2003, by and
between General Nutrition Investment Company and Numico
Research B.V.
10.14 GNC Live Well Later Non-Qualified Compensation Plan.
10.15 General Nutrition Centers Holding Company 2003 Omnibus Stock
Incentive Plan.
10.16 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and Louis Mancini.
10.17 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and Louis
Mancini.
10.18 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and David Heilman.
10.19 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and David
Heilman.
10.20 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and Joseph Fortunato.
10.21 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and Joseph
Fortunato.
10.22 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc. and Susan Trimbo.
10.23 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc. and Reginald Steele.
12.1 Statement Regarding the Computation of Ratio of Earnings to
Fixed Charges for General Nutrition Centers, Inc.
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21.1 Subsidiaries of General Nutrition Centers, Inc.
23.1 Consent of PricewaterhouseCoopers LLP relating to financial
statements of General Nutrition Companies, Inc.
23.2 Consent of PricewaterhouseCoopers LLP relating to financial
statements of General Nutrition Centers, Inc.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.4 Consent of Pepper Hamilton, LLP (included in Exhibit 5.2).
23.5 Consent of Lewis and Roca LLP (included in Exhibit 5.3).
23.6 Consent of Holland & Knight LLP (included in Exhibit 5.4).
23.7 Consent of Kennedy Covington Lobdell & Hickman, L.L.P.
(included in Exhibit 5.5).
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of
U.S. Bank National Association, as trustee under the
Indenture for General Nutrition Centers, Inc.'s 8 1/2%
Senior Subordinated Notes due 2010.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
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ITEM 21(B). FINANCIAL STATEMENT SCHEDULES.
VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED TO OTHER END OF
PERIOD EXPENSE CHARGES PERIOD
------------ ---------- -------- ----------
(IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Predecessor Twelve months ended December 31, 2001... $ 5,925 $ 5,702 $ (4,933) $ 6,694
Twelve months ended December 31, 2002... 6,694 15,668 (4,670) 17,692
Period ended December 4, 2003........... 17,692 3,074 (1,151) 19,615
-----------------------------------------------------------------------------------------------------------
Successor 27 days ended December 31, 2003......... $19,615 $ 888 $ (5,513) $14,990
DEFERRED TAX VALUATION ALLOWANCE
Predecessor Twelve months ended December 31, 2001... $25,314 $ 9,527 $ -- $34,841
Twelve months ended December 31, 2002... 34,841 -- -- 34,841
Period ended December 4, 2003........... 34,841 34,045 -- 68,886
-----------------------------------------------------------------------------------------------------------
Successor 27 days ended December 31, 2003......... $ -- $ -- $ -- $ --
INVENTORY RESERVES
Predecessor Twelve months ended December 31, 2001... $34,723 $21,316 $(28,293) $27,746
Twelve months ended December 31, 2002... 27,746 18,927 (31,961) 14,712
Period ended December 4, 2003........... 14,712 12,584 (10,729) 16,567
-----------------------------------------------------------------------------------------------------------
Successor 27 days ended December 31, 2003......... $16,567 $ 2,804 $ (497) $18,874
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ITEM 22. UNDERTAKINGS
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(4) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(5) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION CENTERS, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID R. HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer
(principal financial
officer)
By: /s/ CURTIS LARRIMER
------------------------------------
Name: Curt Larrimer
Title: Senior Vice President of
Finance and Corporate
Controller
(principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Director April 15, 2004
------------------------------------------------
Louis Mancini
/s/ PETER P. COPSES Director April 15, 2004
------------------------------------------------
Peter P. Copses
/s/ ANDREW S. JHAWAR Director April 15, 2004
------------------------------------------------
Andrew S. Jhawar
|
II-14
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GEORGE G. GOLLEHER Director April 15, 2004
------------------------------------------------
George G. Golleher
/s/ MARY ELIZABETH BURTON Director April 15, 2004
------------------------------------------------
Mary Elizabeth Burton
/s/ ROBERT J. DINICOLA Director April 15, 2004
------------------------------------------------
Robert J. DiNicola
/s/ EDGARDO A. MERCADANTE Director April 15, 2004
------------------------------------------------
Edgardo A. Mercadante
/s/ JOSHUA J. HARRIS Director April 15, 2004
------------------------------------------------
Joshua J. Harris
/s/ JOSEPH HARCH Director April 15, 2004
------------------------------------------------
Joseph Harch
|
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION COMPANIES, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director
(principal executive
officer)
By: /s/ DAVID HEILMAN
-----------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION CORPORATION
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION DISTRIBUTION COMPANY
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION DISTRIBUTION, L.P.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION GOVERNMENT SERVICES,
INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ >Officer, Secretary and Director
James Sander
|
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION, INCORPORATED
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION INVESTMENT COMPANY
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION INTERNATIONAL, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION SALES CORPORATION
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GENERAL NUTRITION SYSTEMS, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GNC (CANADA) HOLDING COMPANY
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GNC FRANCHISING, LLC
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GNC, LIMITED
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GNC US DELAWARE, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
GN INVESTMENT, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
INFORMED NUTRITION, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on April 15, 2004.
NUTRA MANUFACTURING, INC.
By: /s/ LOUIS MANCINI
------------------------------------
Name: Louis Mancini
Title: Chief Executive Officer
and Director (principal
executive officer)
By: /s/ DAVID HEILMAN
------------------------------------
Name: David Heilman
Title: Executive Vice President
and Chief Financial
Officer (principal
financial officer and
principal accounting
officer)
|
Each person whose signature to this registration statement appears below hereby severally constitutes and appoints Louis Mancini and David Heilman, and each of them singly, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for him or her and in his or her name, place and stead, and in any and all capacities to sign any and all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LOUIS MANCINI Chief Executive Officer and April 15, 2004
------------------------------------------------ Director
Louis Mancini
/s/ DAVID HEILMAN Executive Vice President, Chief April 15, 2004
------------------------------------------------ Financial Officer and Director
David Heilman
/s/ JAMES SANDER Senior Vice President, Chief Legal April 15, 2004
------------------------------------------------ Officer, Secretary and Director
James Sander
|
II-32
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of Apollo GNC Holding, Inc.
(n/k/a General Nutrition Centers, Inc.), filed October 16,
2003.
3.2 Certificate of Amendment to the Certificate of Incorporation
of Apollo GNC Holding, Inc. (changing name to General
Nutrition Centers, Inc.), filed November 19, 2003.
3.3 By-laws of General Nutrition Centers, Inc.
3.4 Articles of Incorporation of General Nutrition,
Incorporated, filed October 28, 2003.
3.5 By-laws of General Nutrition, Incorporated.
3.6 Articles of Incorporation of General Nutrition Corporation,
filed October 28, 2003.
3.7 By-laws of General Nutrition Corporation.
3.8 Articles of Incorporation of Nutricia Manufacturing USA,
Inc. (n/k/a Nutra Manufacturing, Inc.), filed October 31,
2003.
3.9 Amendment to Articles of Incorporation of Nutricia
Manufacturing USA, Inc. (changing name to Nutra
Manufacturing, Inc.), filed March 25, 2004.
3.10 By-laws of Nutra Manufacturing, Inc.
3.11 Certificate of Organization of GNC Franchising, LLC, filed
December 31, 2003.
3.12 Limited Liability Company Operating Agreement of GNC
Franchising, LLC, dated January 1, 2004.
3.13 Certificate of Incorporation of GND Investment Company
(n/k/a General Nutrition International, Inc.), filed March
1, 1989.
3.14 Certificate Amendment to Certificate of Incorporation of GNC
Investment Company (changing name to General Nutrition
International, Inc.), filed April 12, 1990.
3.15 By-Laws of General Nutrition International, Inc.
3.16 Articles of Incorporation of General Nutrition Investment
Company, filed October 28, 2003.
3.17 By-Laws of General Nutrition Investment Company.
3.18 Certificate of Incorporation of General Nutrition Systems,
Inc., dated September 21, 1999.
3.19 By-Laws of General Nutrition Systems, Inc.
3.20 Certificate of Incorporation of General Nutrition
Distribution Company, filed September 29, 1992.
3.21 Certificate of Amendment to Certificate of Incorporation of
General Nutrition Distribution Company (changing name to
General Nutrition Services, Inc.), filed January 13, 1993.
3.22 Certificate of Amendment to Certificate of Incorporation of
General Nutrition Services, Inc. (changing name to General
Nutrition Distribution Company), filed February 1, 1998.
3.23 By-Laws of General Nutrition Distribution Company.
3.24 Certificate of Incorporation of GNC, Limited, filed April 3,
1996.
3.25 By-Laws of GNC, Limited.
3.26 Certificate of Incorporation of GNC (Canada) Holding
Company, filed April 3, 1996.
3.27 By-Laws of GNC (Canada) Holding Company.
3.28 Articles of Incorporation of Informed Nutrition, Inc., filed
November 16, 1995.
3.29 By-Laws of Informed Nutrition, Inc.
3.30 Certificate of Incorporation of General Nutrition Government
Services, Inc., filed August 14, 1996.
3.31 Certificate Amendment to Certificate of Incorporation of
General Nutrition Government Services, Inc. (changing name
to GN Government Oldco Services, Inc.), filed October 29,
2003.
3.32 Certificate Amendment to Certificate of Incorporation of GN
Government Oldco Services, Inc. (changing name to General
Nutrition Government Services, Inc.), filed November 7,
2003.
3.33 By-Laws of General Nutrition Government Services, Inc.
|
3.34 Certificate of Incorporation of GN Investment, Inc., filed
October 29, 2003.
3.35 By-Laws of GN Investment, Inc.
3.36 Articles of Incorporation of General Nutrition Sales
Corporation, filed October 28, 2003.
3.37 By-Laws of General Nutrition Sales Corporation.
3.38 Certificate of Incorporation of GNC US Delaware, Inc., filed
October 29, 2003.
3.39 By-Laws of GNC US Delaware, Inc.
3.40 Certificate of Limited Partnership of General Nutrition
Distribution, L.P., filed January 28, 1998.
3.41 Agreement of Limited Partnership of General Nutrition
Distribution, L.P., dated January 27, 1998.
3.42 Certificate of Incorporation of General Nutrition Companies,
Inc., dated October 29, 2003.
3.43 By-Laws of General Nutrition Companies, Inc.
4.1 Indenture, dated as of December 5, 2003 among General
Nutrition Centers, Inc., the Guarantors (as defined therein)
and U.S. Bank National Association, as trustee relating to
General Nutrition Centers, Inc.'s 8 1/2% Senior Subordinated
Notes due 2010.
4.2 Supplemental Indenture, dated as of April 6, 2004 among GNC
Franchising, LLC, General Nutrition Centers, Inc., the other
Guarantors (as defined in the Indenture referred to therein)
and U.S. Bank National Association, as trustee relating to
General Nutrition Centers, Inc.'s 8 1/2% Senior Subordinated
Notes due 2010.
4.3 Form of 8 1/2% Senior Subordinated Note due 2010.
4.4 Registration Rights Agreement, dated December 5, 2003 among
General Nutrition Centers, Inc., the guarantors listed on
Schedule I thereto and Lehman Brothers Inc., J.P. Morgan
Securities Inc. and UBS Securities LLC, as the initial
purchasers of the notes.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel
to General Nutrition Centers, Inc., General Nutrition
Companies, Inc., General Nutrition Distribution Company,
General Nutrition Government Services, Inc., General
Nutrition International, Inc., General Nutrition Systems,
Inc., GNC (Canada) Holding Company, GNC, Limited, GNC US
Delaware, Inc. and GN Investment, Inc.
5.2 Opinion of Pepper Hamilton, LLP, counsel to General
Nutrition Corporation, General Nutrition Distribution, L.P.,
General Nutrition, Incorporated and GNC Franchising, LLC.
5.3 Opinion of Lewis and Roca LLP, counsel to General Nutrition
Investment Company and General Nutrition Sales Corporation.
5.4 Opinion of Holland & Knight LLP, counsel to Informed
Nutrition, Inc.
5.5 Opinion of Kennedy Covington Lobdell & Hickman, L.L.P.,
counsel to Nutra Manufacturing USA, Inc.
10.1 Credit Agreement, dated as of December 5, 2003 among General
Nutrition Centers Holding Company, General Nutrition
Centers, Inc., as borrower, the several other banks and
other financial institutions or entities from time to time
party thereto, Lehman Brothers Inc. and J.P. Morgan
Securities Inc., as joint lead arrangers and joint
bookrunners, JPMorgan Chase Bank, as syndication agent and
Lehman Commercial Paper Inc., as administrative agent.
10.2 Guarantee and Collateral Agreement, dated as of December 5,
2003, made by General Nutrition Centers Holding Company,
General Nutrition Centers, Inc. and certain of its
subsidiaries in favor of Lehman Commercial Paper Inc. as
administrative agent.
10.3 Form of Intellectual Property Security Agreement, dated as
of December 5, 2003 made in favor of Lehman Commercial Paper
Inc. as administrative agent.
10.4 Management Services Agreement, dated as of December 5, 2003,
by and among General Nutrition Centers, Inc., General
Nutrition Centers Holding Company and Apollo Management V,
L.P.
10.5 Mortgage, Assignment of Leases, Rents and Contracts,
Security Agreement and Fixture Filing from Gustine Sixth
Avenue Associates, Ltd. as Mortgagor to Allstate Life
Insurance Company as Mortgagee dated March 23, 1999.
|
10.6 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.7 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Investment
Company.
10.8 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Investment
Company.
10.9 Patent License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.10 Know-How License Agreement, dated December 5, 2003, by and
between N.V. Nutricia and General Nutrition Corporation.
10.11 Know-How License Agreement, dated December 5, 2003, by and
between Numico Research B.V. and General Nutrition
Investment Company.
10.12 Know-How License Agreement, dated December 5, 2003, by and
between General Nutrition Corporation and N.V. Nutricia.
10.13 Patent License Agreement, dated December 5, 2003, by and
between General Nutrition Investment Company and Numico
Research B.V.
10.14 GNC Live Well Later Non-Qualified Compensation Plan.
10.15 General Nutrition Centers Holding Company 2003 Omnibus Stock
Incentive Plan.
10.16 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and Louis Mancini.
10.17 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and Louis
Mancini.
10.18 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and David Heilman.
10.19 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and David
Heilman.
10.20 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc., and Joseph Fortunato.
10.21 First Amendment to Employment Agreement, dated February 12,
2004 between General Nutrition Centers, Inc. and Joseph
Fortunato.
10.22 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc. and Susan Trimbo.
10.23 Employment Agreement, dated as of December 5, 2003 between
General Nutrition Centers, Inc. and Reginald Steele.
12.1 Statement Regarding the Computation of Ratio of Earnings to
Fixed Charges for General Nutrition Centers, Inc.
21.1 Subsidiaries of General Nutrition Centers, Inc.
23.1 Consent of PricewaterhouseCoopers LLP relating to financial
statements of General Nutrition Companies, Inc.
23.2 Consent of PricewaterhouseCoopers LLP relating to financial
statements of General Nutrition Centers, Inc.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.4 Consent of Pepper Hamilton, LLP (included in Exhibit 5.2).
23.5 Consent of Lewis and Roca LLP (included in Exhibit 5.3).
23.6 Consent of Holland & Knight LLP (included in Exhibit 5.4).
23.7 Consent of Kennedy Covington Lobdell & Hickman, L.L.P.
(included in Exhibit 5.5).
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24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of
U.S. Bank National Association, as trustee under the
Indenture for General Nutrition Centers, Inc.'s 8 1/2%
Senior Subordinated Notes due 2010.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
APOLLO GNC HOLDING, INC.
FIRST: The name of the Corporation is Apollo GNC Holdings, Inc.(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, each having a par value of one penny ($0.01).
FIFTH: The name and mailing address of the Sole Incorporator is as follows:
Name Address
---- -------
Lynn T. Buckley P.O. Box 636
Wilmington, DE 19899
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SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the GCL or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or
modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occur ring prior to
such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the
Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the GCL, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 16th day of October, 2003.
/s/ Lynn T. Buckley -------------------- Lynn T. Buckley Sole Incorporator |
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
APOLLO GNC HOLDING, INC.
Pursuant to Section 228 and Section 242 of the General Corporation Law of the State of Delaware
Apollo GNC Holding, Inc., a Delaware corporation (hereinafter called the "Corporation"), does hereby certify as follows:
FIRST: Article FIRST of the Corporation's Certificate of Incorporation is hereby amended to read in its entirety as set forth below:
FIRST: The name of the corporation is General Nutrition Centers, Inc.
(hereinafter the "Corporation").
SECOND: The foregoing amendment was duly adopted in accordance with
|
the provisions of Section 228 and Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed in its corporate name this 19th day of November, 2003.
APOLLO GNC HOLDING, INC.
By: /s/ Michael D. Weiner
-----------------------------
Name: Michael D. Weiner
Title: Vice President
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Exhibit 3.3
BY-LAWS
OF
APOLLO GNC HOLDING, INC.
A Delaware Corporation
Effective October 16, 2003
TABLE OF CONTENTS
PAGE
----
ARTICLE I
OFFICES
Section 1. Registered Office............................................. 1
Section 2. Other Offices................................................. 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings............................................. 1
Section 2. Annual Meetings............................................... 2
Section 3. Special Meetings.............................................. 2
Section 4. Notice........................................................ 2
Section 5. Adjournments.................................................. 3
Section 6. Quorum........................................................ 3
Section 7. Voting........................................................ 4
Section 8. Proxies....................................................... 4
Section 9. Consent of Stockholders in Lieu of Meeting.................... 6
Section 10. List of Stockholders Entitled to Vote......................... 8
Section 11. Record Date................................................... 8
Section 12. Stock Ledger.................................................. 10
Section 13. Conduct of Meetings........................................... 10
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors.............................. 11
Section 2. Vacancies..................................................... 12
Section 3. Duties and Powers............................................. 12
Section 4. Meetings...................................................... 12
Section 5. Organization.................................................. 13
Section 6. Resignations and Removals of Directors........................ 13
Section 7. Quorum........................................................ 14
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Section 8. Actions of the Board by Written Consent....................... 14
Section 9. Meetings by Means of Conference Telephone..................... 14
Section 10. Committees.................................................... 15
Section 11. Compensation.................................................. 16
Section 12. Interested Directors.......................................... 16
ARTICLE IV
OFFICERS
Section 1. General....................................................... 17
Section 2. Election...................................................... 18
Section 3. Voting Securities Owned by the Corporation.................... 18
Section 4. Chairman of the Board of Directors............................ 19
Section 5. President..................................................... 19
Section 6. Vice Presidents............................................... 20
Section 7. Secretary..................................................... 21
Section 8. Treasurer..................................................... 22
Section 9. Assistant Secretaries......................................... 23
Section 10. Assistant Treasurers.......................................... 23
Section 11. Other Officers................................................ 24
ARTICLE V
STOCK
Section 1. Form of Certificates.......................................... 24
Section 2. Signatures.................................................... 24
Section 3. Lost Certificates............................................. 25
Section 4. Transfers..................................................... 25
Section 5. Dividend Record Date.......................................... 26
Section 6. Record Owners................................................. 27
Section 7. Transfer and Registry Agents.................................. 27
ARTICLE VI
NOTICES
Section 1. Notices....................................................... 27
Section 2. Waivers of Notice............................................. 28
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends..................................................... 28
Section 2. Disbursements................................................. 29
Section 3. Fiscal Year................................................... 29
Section 4. Corporate Seal................................................ 29
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other than Those by or in the Right of the Corporation........ 30
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation......................... 31
Section 3. Authorization of Indemnification.............................. 32
Section 4. Good Faith Defined............................................ 33
Section 5. Indemnification by a Court.................................... 34
Section 6. Expenses Payable in Advance................................... 34
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. 35
Section 8. Insurance..................................................... 36
Section 9. Certain Definitions........................................... 36
Section 10. Survival of Indemnification and Advancement of Expenses....... 37
Section 11. Limitation on Indemnification................................. 38
Section 12. Indemnification of Employees and Agents....................... 38
ARTICLE IX
AMENDMENTS
Section 1. Amendments.................................................... 38
Section 2. Entire Board of Directors..................................... 39
|
BY-LAWS
OF
APOLLO GNC HOLDING, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meeting of Stockholders for the election of directors shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. Any other proper
business may be transacted at the Annual Meeting of Stockholders.
Section 3. Special Meetings. Unless otherwise required by law
or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), Special
Meetings of Stockholders, for any purpose or purposes, may be called by either
(i) the Chairman, if there be one, or (ii) the President, (iii) any Vice
President, if there be one, (iv) the Secretary or (v) any Assistant Secretary,
if there be one, and shall be called by any such officer at the request in
writing of (i) the Board of Directors, (ii) a committee of the Board of
Directors that has been duly designated by the Board of Directors and whose
powers and authority include the power to call such meetings or (iii)
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. At a Special Meeting of Stockholders, only
such business shall be conducted as shall be specified in the notice of meeting
(or any supplement thereto).
Section 4. Notice. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a Special Meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stock holder entitled to notice of and to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been trans acted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of Section 4 hereof shall be given to each stockholder of record entitled to notice of and to vote at the meeting.
Section 6. Quorum. Unless otherwise required by applicable law or the Certificate of Incorporation, the holders of a majority of the Corporation's capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in Section 5 hereof, until a quorum shall be present or represented.
Section 7. Voting. Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of the stockholders, other than the election of directors, shall be decided by the vote of the holders of a majority of the total number of votes of the Corporation's capital stock represented and entitled to vote thereat, voting as a single class. Unless
otherwise provided in the Certificate of Incorporation, and subject to Section 11(a) of this Article II, each stockholder represented at a meeting of the stockholders shall be entitled to cast one (1) vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy as provided in Section 8 of this Article II. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of the stockholders, in such officer's discretion, may require that any votes cast at such meeting shall be cast by written ballot.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of the stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stock holder as proxy, but no such proxy shall be voted upon after three years from its date, unless such proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stock holder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder's authorized officer, director, employee or agent signing such writing or causing such person's signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to act
for such stockholder as proxy by transmitting or authorizing the transmission of a telegram or cablegram to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such telegram or cablegram, provided that any such telegram or cablegram must either set forth or be submitted with information from which it can be determined that the telegram or cablegram was authorized by the stockholder. If it is determined that such telegrams or cablegrams are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.
Any copy, facsimile telecommunication or other reliable reproduction of the writing, telegram or cablegram authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing, telegram or cablegram for any and all purposes for which the original writing, telegram or cablegram could be used; provided, however, that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing, telegram or cablegram.
Section 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this Section 9 to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were
delivered to the Corporation as provided above in this Section 9.
Section 10. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting (i) either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held or (ii) during ordinary business hours, at the principal place of business of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 11. Record Date.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of the stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
Section 12. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 10 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.
Section 13. Conduct of Meetings. The Board of Directors of the Corporation may adopt by resolution such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than one nor more than fifteen members, the
exact number of which shall initially be fixed by the Incorporator and
thereafter from time to time by the Board of Directors. Except as provided in
Section 2 of this Article III, directors shall be elected by a plurality of the
votes cast at each Annual Meeting of Stockholders and each director so elected
shall hold office until the next Annual Meeting of Stockholders and until such
director's successor is duly elected and qualified, or until such director's
earlier death, resignation or removal. Directors need not be stockholders.
Section 2. Vacancies. Unless otherwise required by law or the Certificate of Incorporation, vacancies arising through death, resignation, removal, an increase in the number of directors or otherwise may be filled only by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier death, resignation or removal.
Section 3. Duties and Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or by any director. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty- eight (48) hours before the date of the meeting, by telephone or telegram on twenty- four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.
Section 5. Organization. At each meeting of the Board of Directors, the Chairman of the Board of Directors, or, in his or her absence, a director chosen by a majority of the directors present, shall act as chairman. The Secretary of the Corporation shall act as secretary at each meeting of the Board of Directors. In case the Secretary shall be absent from any meeting of the Board of Directors, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all the Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 6. Resignations and Removals of Directors. Any director of the Corporation may resign at any time, by giving notice in writing to the
Chairman of the Board of Directors, the President or the Secretary of the Corporation. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board of Directors may be removed from office at any time by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors.
Section 7. Quorum. Except as otherwise required by law or the Certificate of Incorporation, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present.
Section 8. Actions of the Board by Written Consent. Unless otherwise provided in the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 9. Meetings by Means of Conference Telephone. Unless otherwise provided in the Certificate of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 9 shall constitute presence in person at such meeting.
Section 10. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 11. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary for service as director, payable in cash or securities. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for service as committee members.
Section 12. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because any such director's or officer's vote is counted for such purpose if: (i) the material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a commit tee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, also may choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors, at its first meeting held after each Annual Meeting of Stockholders (or action by written consent of stockholders in lieu of the Annual Meeting of Stockholders), shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the
Board of Directors; and each officer of the Corporation shall hold office until such officer's successor is elected and qualified, or until such officer's earlier death, resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President or any other officer authorized to do so by the Board of Directors and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall be the Chief Executive Officer of the Corporation, unless the Board of Directors designates the President as the Chief Executive Officer, and, except where
by law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and, provided the President is also a director, the Board of Directors. If there be no Chairman of the Board of Directors, or if the Board of Directors shall otherwise designate, the President shall be the Chief Executive Officer of the Corporation. The President shall also perform such other duties and may exercise such other powers as may from time to time be
assigned to such officer by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in the President's absence or in the event of the President's inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice President, or the Vice Presidents if there are more than one (in the order designated by the Board of Directors), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for committees of the Board of Directors when required. The Secretary shall give, or cause to be given, notice of all meetings of the stock holders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board of Directors or the President, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest to the affixing by such officer's signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the
duties of the office of the Treasurer and for the restoration to the Corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Treasurer's possession or under the Treasurer's control belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of Assistant Treasurer and for the restoration to the Corporation, in case of the Assistant Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Assistant Treasurer's control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation (i) by the Chairman of the Board of Directors, or the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be transfer able in the manner prescribed by applicable law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; provided, however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock
records of the Corporation by an entry showing from and to whom transferred.
Section 5. Dividend Record Date. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 6. Record Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.
Section 7. Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by applicable law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Annual or Special Meeting of Stockholders or any regular or special meeting of the directors or members of a committee of directors need be specified in any written waiver of notice unless so required by law, the Certificate of Incorporation or these By-Laws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the requirements of the General Corporation Law of the State of Delaware (the "DGCL") and the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting of the Board of Directors (or any action by written consent in lieu thereof in accordance with Section 8 of Article III hereof), and may be paid in cash, in property, or in shares of the Corporation's capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reason able cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person's conduct was unlawful, if such person's action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 1 or Section 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses (including attorneys' fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys' fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Section 1 and Section 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or Section 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director
or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partner ship, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term "another enterprise" as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such
a person.
Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 of this Article VIII), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors; provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such meeting of the stockholders or Board of Directors, as the case may be. All such amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies.
* * *
Adopted as of: October 16, 2003
Last Amended as of: N/A
EXHIBIT 3.4
PENNSYLVANIA DEPARTMENT OF STATE
CORPORATION BUREAU
Articles of Incorporation-For Profit
(15 Pa.C.S.)
Entity Number [x] Business-stock (Section 1306) [ ] Management (Section 2703)
3175561 [ ] Business-nonstock (Section 2102) [ ] Professional (Section 2903)
[ ] Business-statutory close (Section 2303) [ ] Insurance (Section 3101)
[ ] Cooperative (Section 7102)
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Name DOCUMENT WILL BE RETURNED TO THE
NAME AND ADDRESS YOU ENTER TO THE LEFT.
CT CORP-COUNTER -
Address
-------------------------------------
City State Zip Code
Fee: $100 Filed in the Department of State on OCT 29 2003
/s/ Pedro A. Cortes
-----------------------------
Secretary of the Commonwealth
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In compliance with the requirements of the applicable provisions (relating to corporations and unincorporated associations), the undersigned, desiring to incorporate a corporation for profit, hereby states that:
1. The name of the corporation (corporate designator required, i.e., "corporation", "incorporated", "limited" "company" or any abbreviation. "Professional corporation" or "P.C"):
General Nutrition Incorporated
2. The (a) address of this corporation's current registered office in this Commonwealth (post office box, alone, is not acceptable) or (b) name of its commercial registered office provider and the county of venue is:
(a) Number and Street City State Zip County
(b) Name of Commercial Registered Office Provider County
3. The corporation is incorporated under the provisions of the Business Corporation Law of 1988.
4. The aggregate number of shares authorized: 3000
DSCB: 15-1306, 2102/2303/2702/2903/3101/7102A-2
5. The name and address, including number and street, if any, of each incorporator (all incorporators must sign below):
Name Address
Guy E. Snyder 222 N. LaSalle Street, Chicago, IL 60601
6. The specified effective date, if any:
----------------------------.
month/day/year hour, if any
7. Additional provisions of the articles, if any, attach an 8 1/2 by 11 sheet.
8. Statutory close corporation only: Neither the corporation nor any shareholder shall make an offering of any of its shares of any class that would constitute a "public offering" within the meaning of the Securities Act of 1933 (15 U.S.C. 77a et seq.)
9. Cooperative corporations only: Complete and strike out inapplicable term:
The common bond of membership among its members/shareholders is:-----.
IN TESTIMONY WHEREOF, the incorporator(s) has/have signed these Articles of Incorporation this
28th day of October, 2003.
/s/ Guy E. Snyder
---------------------------------
Signature
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EXHIBIT 3.5
GENERAL NUTRITION, INCORPORATED
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B Y - L A W S
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ARTICLE I
OFFICES
Section 1. The registered office shall be located in the City of Philadelphia, Commonwealth of Pennsylvania.
Section 2. The commercial registered office provider county for official publication and venue purposes is CT Corporation System, located at 1635 Market Street, Philadelphia, PA 19103.
Section 3. The corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at such place within or without the Commonwealth, as may be from time to time fixed or determined by the board of directors. One or more shareholders may participate in a meeting of the shareholders by means of conference telephone or other electronic technology by means of which all persons participating in the meeting may hear each other.
Section 2. An annual meeting of the shareholders, commencing with the year 2004, shall be held on the first Monday of July, when they shall elect by a majority vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called at any time by the president, or a majority of the board of directors, or the holders of not less than twenty percent of all the shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the secretary of the corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the secretary to call a special meeting of the shareholders to be held at such time, not more than sixty days thereafter, as the secretary may fix. If the secretary shall neglect to issue such call, the person or persons making the request may issue the call.
Section 4. Written notice of every meeting of the shareholders shall be given to each shareholder entitled to vote thereat at least five days prior to the meeting, unless a greater period of notice is required by law.
Section 5. Except as otherwise provided by law, the officer having charge of the transfer books for shares of the corporation shall prepare and make a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting.
Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice.
Section 7. There shall be a presiding officer at every meeting of the shareholders, to be appointed in accordance with these bylaws or otherwise in accordance with law. The presiding officer shall determine the order of business and have authority to establish rules for the conduct of the meeting. Any action by the presiding officer in adopting rules for, and in conducting a meeting shall be fair to the shareholders. The presiding officer shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes, nor any revocations or changes thereto, may be accepted.
Section 8. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by statute or by the articles of incorporation or by these by-laws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or by proxy, shall have power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors such meeting may be adjourned only from day to day or for such longer periods not exceeding fifteen days each as the holders of a majority of the shares present in person or by proxy shall direct. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors.
Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least fifteen days because of an absence of a quorum, although less than a quorum, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
Section 9. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the articles of incorporation or of these by-laws,
a different vote is required in which case such express provision shall govern and control the decision of such question.
Section 10. Each shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share having voting power held by such shareholder. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the secretary of the corporation or its designated agent in writing or by electronic transmission. An unrevoked proxy shall not be valid after three years from the date of its execution, authentication or transmission, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation or its designated agent.
Section 11. In advance of any meeting of shareholders, the board of directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may and, on the request of any shareholder or his proxy, shall make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the chairman of the meeting or any shareholder or his proxy. If there be three judges of election the decision, act or certificate of a majority, shall be effected in all respects as the decision, act or certificate of all.
Section 12. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if prior to or subsequent to the meeting, a consent or consents thereto by all of the shareholders who would have been entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation.
Any action which may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. Such action shall not become effective until after at least ten days' notice of such action shall have been given to each shareholder of record entitled to vote thereon who has not consented thereto.
In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes up to the number of directors to be elected shall be elected.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board shall be no less than one (1) and no more than eight (8). The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this article, and each director shall hold office until his successor is elected and qualified. Directors need not be shareholders.
Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the remaining number of the board, though less than a quorum and each person so elected shall be a director for the balance of the unexpired term.
Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised and done by the shareholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The board of directors of the corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania.
One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or other electronic technology by means of which all persons participating in the meeting can hear each other.
Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for such meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
Section 3. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting, or by unanimous written consent.
Section 4. Special meetings of the board may be called by the president on twenty (20) days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors.
Section 5. At all meetings of the board a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 6. If all the directors shall severally or collectively consent in writing to any action to be taken by the corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the board of directors.
ARTICLE V
COMMITTEES
Section 1. The board of directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee to the extent provided in such resolution or in these by-laws, shall have and exercise the authority of the board of directors in the management of the business and affairs of the corporation except that a committee shall not have any power or authority as to the following: The submission to shareholders of any action requiring approval of shareholders under this subpart; the creation or filling of vacancies in the board of directors; the adoption, amendment or repeal of the bylaws; the amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board; action on matters committed by the bylaws or resolution of the board of directors exclusively to another committee of the board. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required.
ARTICLE VI
COMPENSATION OF DIRECTORS
Section 1. The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation.
ARTICLE VII
NOTICES
Section 1. Notices to directors and shareholders shall be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or courier service, charges prepaid, to his postal address appearing on the books of the corporation or, in the case of directors, supplied by him to the corporation for the purpose of notice. Notice in the manner set forth above shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a courier service for delivery to that person. Notice may also be given by facsimile transmission, e-mail or other electronic communication to the person's facsimile number or address for e-mail or other electronic communications supplied by him to the corporation for the purpose of notice. Such facsimile or electronic notice shall be deemed given to the person entitled thereto when sent. A notice of meeting shall specify the day and hour and geographic location, if any, of the meeting and any other information required by law. When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting.
Section 2. Whenever any written notice is required to be given under the provisions of law or the articles or bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by this section, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.
ARTICLE VIII
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer. The president and secretary shall be natural persons of full age; the treasurer may be a corporation but, if a natural person, shall be of full age. The board of directors may also choose vice-presidents and one or more assistant secretaries and assistant treasurers. Any number of the aforesaid offices may be held by the same person.
Section 2. The board of directors, immediately after each annual meeting of shareholders, shall elect a president, who may, but need not be a director, and the board shall also annually choose a secretary and a treasurer who need not be members of the board.
Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
Section 6. If required by the board of directors, an officer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
ARTICLE IX
THE PRESIDENT
Section 1. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 2. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
ARTICLE X
THE VICE-PRESIDENTS
Section 1. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XI
THE SECRETARY AND ASSISTANT SECRETARIES
Section 1. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of an assistant secretary.
Section 2. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XII
THE TREASURER AND ASSISTANT TREASURERS
Section 1. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 2. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
Section 3. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XIII
CERTIFICATES OF SHARES
Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated if so provided for in the by-laws. The certificates of shares of the corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder and the number and class of shares and the series, if any, represented thereby and the par value of each share or a statement that such shares are without par value as the case may be. If more than one class of shares is authorized, the certificate shall state that the corporation will furnish to any shareholder, upon request and without charge a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued, and the variations thereof between the shares of each series, and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Section 1528 or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Every share certificate shall be signed by the president or vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer and shall be sealed with the corporate seal which may be facsimile, engraved or printed.
Section 3. Where a certificate is signed by a transfer agent or an assistant transfer agent or a registrar, the signature of any such president, vice-president, treasurer, assistant
treasurer, secretary or assistant secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation.
ARTICLE XIV
LOST CERTIFICATES
Section 1. The board of directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming the share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken, certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken.
ARTICLE XV
TRANSFERS OF SHARES
Section 1. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
ARTICLE XVI
CLOSING OF TRANSFER BOOKS
Section 1. The board of directors may fix a time, not more than ninety days, prior to the date of any meeting of shareholders or the date fixed for the payment of any dividend or distribution or the date for the allotment of rights or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend or distribution or to receive any such allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The board of directors may close the books of the corporation against transfers of shares during the whole or any part of such
period and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the corporation or supplied by him to the corporation for the purpose of notice.
ARTICLE XVII
REGISTERED SHAREHOLDERS
Section 1. The corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith.
ARTICLE XVIII
GENERAL PROVISIONS DISTRIBUTIONS
Section 1. Distributions upon the shares of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Distributions may be paid in cash, in property, or in its shares, subject to the provisions of the articles of incorporation.
Section 2. Before payment of any distributions, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE XIX
FINANCIAL REPORT TO SHAREHOLDERS
Section 1. The directors shall cause to be sent to the shareholders, within 120 days after the close of the fiscal year, a financial statement as of the closing date of the preceding fiscal year. Such financial statement shall include a balance sheet as of the close of such year, together with statements of income and expenses for such year, prepared so as to present fairly the corporation's financial condition and the results of its operations.
ARTICLE XX
CHECKS
Section 1. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
ARTICLE XXI
FISCAL YEAR
Section 1. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
ARTICLE XXII
SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE XXIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the board of directors at any regular or special meeting duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action by the directors.
EXHIBIT 3.6
PENNSYLVANIA DEPARTMENT OF STATE
CORPORATION BUREAU
Articles of Incorporation-For Profit
(15 Pa.C.S.)
Entity Number [x] Business-stock (Section 1306) [ ] Management (Section 2703)
3175551 [ ] Business-nonstock (Section 2102) [ ] Professional (Section 2903)
[ ] Business-statutory close (Section 2303) [ ] Insurance (Section 3101)
[ ] Cooperative (Section 7102)
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Name DOCUMENT WILL BE RETURNED TO THE
CT CORP-COUNTER NAME AND ADDRESS YOU ENTER TO THE LEFT.
Address -
-------------------------------------
City State Zip Code
Fee: $100 Filed in the Department of State on OCT 29 2003
/s/ Pedro A. Cortes
-----------------------------
Secretary of the Commonwealth
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In compliance with the requirements of the applicable provisions (relating to corporations and unincorporated associations), the undersigned, desiring to incorporate a corporation for profit, hereby states that:
1. The name of the corporation (corporate designator required, i.e., "corporation", "incorporated", "limited" "company" or any abbreviation. "Professional corporation" or "P.C"):
General Nutrition Corporation
2. The (a) address of this corporation's current registered office in this Commonwealth (post office box, alone, is not acceptable) or (b) name of its commercial registered office provider and the county of venue is:
(a) Number and Street City State Zip County
(b) Name of Commercial Registered Office Provider County
3. The corporation is incorporated under the provisions of the Business Corporation Law of 1988.
4. The aggregate number of shares authorized: 100
THIS IS A TRUE COPY OF
THE ORIGINAL SIGNED
DOCUMENT FILED WITH
THE DEPARTMENT OF STATE.
DSCB: 15-1306, 2102/2303/2702/2903/3101/7102A-2
5. The name and address, including number and street, if any, of each incorporator (all incorporators must sign below):
Name Address
Guy E. Snyder, 222 N. LaSalle St, Chicago, IL 60601
6. The specified effective date, if any:
---------------------------.
month/day/year hour, if any
7. Additional provisions of the articles, if any, attach an 8 1/2 by 11 sheet.
8. Statutory close corporation only: Neither the corporation nor any shareholder shall make an offering of any of its shares of any class that would constitute a "public offering" within the meaning of the Securities Act of 1933 (15 U.S.C. 77a et seq.)
9. Cooperative corporations only: Complete and strike out inapplicable term:
The common bond of membership among its members/shareholders is:----.
IN TESTIMONY WHEREOF, the incorporator(s) has/have signed these Articles of Incorporation to be signed by a duly authorized officer thereof this
28th day of October, 2003.
/s/ Guy E. Snyder
---------------------------------
Signature
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EXHIBIT 3.7
GENERAL NUTRITION CORPORATION
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in the City of Philadelphia, Commonwealth of Pennsylvania.
Section 2. The commercial registered office provider county for official publication and venue purposes is CT Corporation System, located at 1635 Market Street, Philadelphia, PA 19103.
Section 3. The corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at such place within or without the Commonwealth, as may be from time to time fixed or determined by the board of directors. One or more shareholders may participate in a meeting of the shareholders by means of conference telephone or other electronic technology by means of which all persons participating in the meeting may hear each other.
Section 2. An annual meeting of the shareholders, commencing with the year 2004, shall be held on the first Monday of July, when they shall elect by a majority vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called at any time by the president, or a majority of the board of directors, or the holders of not less than twenty percent of all the shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the secretary of the corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the secretary to call a special meeting of the shareholders to be held at such time, not more than sixty days thereafter, as the secretary may fix. If the secretary shall neglect to issue such call, the person or persons making the request may issue the call.
Section 4. Written notice of every meeting of the shareholders shall be given to each shareholder entitled to vote thereat at least five days prior to the meeting, unless a greater period of notice is required by law.
Section 5. Except as otherwise provided by law, the officer having charge of the transfer books for shares of the corporation shall prepare and make a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address and the number of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting.
Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice.
Section 7. There shall be a presiding officer at every meeting of the shareholders, to be appointed in accordance with these bylaws or otherwise in accordance with law. The presiding officer shall determine the order of business and have authority to establish rules for the conduct of the meeting. Any action by the presiding officer in adopting rules for, and in conducting a meeting shall be fair to the shareholders. The presiding officer shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes, nor any revocations or changes thereto, may be accepted.
Section 8. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by statute or by the articles of incorporation or by these by-laws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or by proxy, shall have power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors such meeting may be adjourned only from day to day or for such longer periods not exceeding fifteen days each as the holders of a majority of the shares present in person or by proxy shall direct. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors.
Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least fifteen days because of an absence of a quorum, although less than a quorum, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
Section 9. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the articles of incorporation or of these by-laws,
a different vote is required in which case such express provision shall govern and control the decision of such question.
Section 10. Each shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share having voting power held by such shareholder. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the secretary of the corporation or its designated agent in writing or by electronic transmission. An unrevoked proxy shall not be valid after three years from the date of its execution, authentication or transmission, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the secretary of the corporation or its designated agent.
Section 11. In advance of any meeting of shareholders, the board of directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may and, on the request of any shareholder or his proxy, shall make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the chairman of the meeting or any shareholder or his proxy. If there be three judges of election the decision, act or certificate of a majority, shall be effected in all respects as the decision, act or certificate of all.
Section 12. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if prior to or subsequent to the meeting, a consent or consents thereto by all of the shareholders who would have been entitled to vote at a meeting for such purpose shall be filed with the secretary of the corporation.
Any action which may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting upon the consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consents shall be filed with the secretary of the corporation. Such action shall not become effective until after at least ten days' notice of such action shall have been given to each shareholder of record entitled to vote thereon who has not consented thereto.
In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he may be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes up to the number of directors to be elected shall be elected.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board shall be no less than one (1) and no more than eight (8). The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this article, and each director shall hold office until his successor is elected and qualified. Directors need not be shareholders.
Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the remaining number of the board, though less than a quorum and each person so elected shall be a director for the balance of the unexpired term.
Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised and done by the shareholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The board of directors of the corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania.
One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or other electronic technology by means of which all persons participating in the meeting can hear each other.
Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be present. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for such meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
Section 3. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting, or by unanimous written consent.
Section 4. Special meetings of the board may be called by the president on twenty
Section 5. (20) days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors.
Section 6. At all meetings of the board a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 7. If all the directors shall severally or collectively consent in writing to any action to be taken by the corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the board of directors.
ARTICLE V
COMMITTEES
Section 1. The board of directors may, by resolution adopted by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee to the extent provided in such resolution or in these by-laws, shall have and exercise the authority of the board of directors in the management of the business and affairs of the corporation except that a committee shall not have any power or authority as to the following: The submission to shareholders of any action requiring approval of shareholders under this subpart; the creation or filling of vacancies in the board of directors; the adoption, amendment or repeal of the bylaws; the amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board; action on matters committed by the bylaws or resolution of the board of directors exclusively to another committee of the board. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required.
ARTICLE VI
COMPENSATION OF DIRECTORS
Section 1. The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the corporation.
ARTICLE VII
NOTICES
Section 1. Notices to directors and shareholders shall be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or courier service, charges prepaid, to his postal address appearing on the books of the corporation or, in the case of directors, supplied by him to the corporation for the purpose of notice. Notice in the manner set forth above shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a courier service for delivery to that person. Notice may also be given by facsimile transmission, e-mail or other electronic communication to the person's facsimile number or address for e-mail or other electronic communications supplied by him to the corporation for the purpose of notice. Such facsimile or electronic notice shall be deemed given to the person entitled thereto when sent. A notice of meeting shall specify the day and hour and geographic location, if any, of the meeting and any other information required by law. When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting.
Section 2. Whenever any written notice is required to be given under the provisions of law or the articles or bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by this section, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.
ARTICLE VIII
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer. The president and secretary shall be natural persons of full age; the treasurer may be a corporation but, if a natural person, shall be of full age. The board of directors may also choose vice-presidents and one or more assistant secretaries and assistant treasurers. Any number of the aforesaid offices may be held by the same person.
Section 2. The board of directors, immediately after each annual meeting of shareholders, shall elect a president, who may, but need not be a director, and the board shall also annually choose a secretary and a treasurer who need not be members of the board.
Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
Section 6. If required by the board of directors, an officer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
ARTICLE IX
THE PRESIDENT
Section 1. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 2. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
ARTICLE X
THE VICE-PRESIDENTS
Section 1. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XI
THE SECRETARY AND ASSISTANT SECRETARIES
Section 1. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of an assistant secretary.
Section 2. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XII
THE TREASURER AND ASSISTANT TREASURERS
Section 1. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 2. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
Section 3. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE XIII
CERTIFICATES OF SHARES
Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated if so provided for in the by-laws. The certificates of shares of the corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder and the number and class of shares and the series, if any, represented thereby and the par value of each share or a statement that such shares are without par value as the case may be. If more than one class of shares is authorized, the certificate shall state that the corporation will furnish to any shareholder, upon request and without charge a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued, and the variations thereof between the shares of each series, and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Section 1528 or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Every share certificate shall be signed by the president or vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer and shall be sealed with the corporate seal which may be facsimile, engraved or printed.
Section 3. Where a certificate is signed by a transfer agent or an assistant transfer agent or a registrar, the signature of any such president, vice-president, treasurer, assistant
treasurer, secretary or assistant secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation.
ARTICLE XIV
LOST CERTIFICATES
Section 1. The board of directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming the share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken, certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken.
ARTICLE XV
TRANSFERS OF SHARES
Section 1. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
ARTICLE XVI
CLOSING OF TRANSFER BOOKS
Section 1. The board of directors may fix a time, not more than ninety days, prior to the date of any meeting of shareholders or the date fixed for the payment of any dividend or distribution or the date for the allotment of rights or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend or distribution or to receive any such allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The board of directors may close the books of the corporation against transfers of shares during the whole or any part of such
period and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the corporation or supplied by him to the corporation for the purpose of notice.
ARTICLE XVII
REGISTERED SHAREHOLDERS
Section 1. The corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith.
ARTICLE XVIII
GENERAL PROVISIONS DISTRIBUTIONS
Section 1. Distributions upon the shares of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Distributions may be paid in cash, in property, or in its shares, subject to the provisions of the articles of incorporation.
Section 2. Before payment of any distributions, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE XIX
FINANCIAL REPORT TO SHAREHOLDERS
Section 1. The directors shall cause to be sent to the shareholders, within 120 days after the close of the fiscal year, a financial statement as of the closing date of the preceding fiscal year. Such financial statement shall include a balance sheet as of the close of such year, together with statements of income and expenses for such year, prepared so as to present fairly the corporation's financial condition and the results of its operations.
ARTICLE XX
CHECKS
Section 1. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
ARTICLE XXI
FISCAL YEAR
Section 1. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
ARTICLE XXII
SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE XXIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the board of directors at any regular or special meeting duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action by the directors.
EXHIBIT 3.8
STATE OF SOUTH CAROLINA FILED
SECRETARY OF STATE OCT 31 2003
MARK HAMMOND
ARTICLES OF INCORPORATION SECRETARY OF STATE(4)
Street Address
Beattie Pl. Greenville SC 29601
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City County State Zip Code
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I hereby consent to the appointment as registered agent of the corporation:
/s/ Jeffrey R. Graves Jeffrey R. Graves -------------------------- Assistant Secretary Agent's Signature |
3. The corporation is authorized to issue shares of stock as follows. Complete "a" or "b", whichever is applicable:
a. [X] The corporation is authorized to issue a single class of shares, the
total number of shares authorized is 1000.
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b. [ ] The corporation is authorized to issue more that one class of shares:
Class of Shares Authorized No. of Each Class
------------------------- ---------------------------------
------------------------- ---------------------------------
------------------------- ---------------------------------
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The relative right, preference, and limitations of the shares of each class, and of each series within a class, are as follows:
4. The existence of the corporation shall begin as of the filing
date with the Secretary of State unless a delayed date is indicated (See
Section 33-1-230(b) of the 1976 South Carolina Code of Laws, as
amended)---------------------
5. The optional provisions, which the corporation elects to include in the articles of incorporation, are as follows (See the applicable provisions of Sections 33-2-102, 35-2-105, and 35-2-221 of the 1976 South Carolina Code of Laws, as amended).
6. The name, address, and signature of each incorporator is as follows (only one is required):
/s/ Guy E. Snyder ---------------------------------------- Signature |
7. I, Jay G. Anderson, an attorney licensed to practice in the state of South Carolina, certify that the corporation, to whose articles of incorporation this certificate is attached, has complied with the requirements of Chapter 2, Title 33 of the 1976 South Carolina Code of Laws, as amended, relating to the articles of incorporation.
Date 10/31/03 /s/ Jay G. Anderson
---------------------------------
Signature
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Columbia, SC 29205
EXHIBIT 3.9
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
CERTIFIED TO BE A TRUE AND CORRECT COPY FILED
AS TAKEN FROM AND COMPARED WITH THE
ORIGINAL ON FILE IN THIS OFFICE MAR 25 2004
MAR 25 2004 MARK HAMMOND
SECRETARY OF STATE 4
/S/ MARK HAMMOND
------------------------------------
SECRETARY OF STATE OF SOUTH CAROLINA
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Pursuant Section 33-10-106 of the 1976 South Carolina Code of Laws, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:
1. The name of the corporation is Nutricia Manufacturing USA, Inc.
2. Date of Incorporation October 31, 2003
3. Agent's Name and Address Corporation Service Company 500 Thurmond Mall Boulevard Columbia, SC 29201
4. On March 22, 2004, the corporation adopted the following Amendment(s) of its Articles of Incorporation: (Type or attach the complete text of each Amendment)
RESOLVED, that Article 1. of the Articles of Incorporation of this
Corporation shall be and it is amended to read in its entirety as follows:
"The name of the proposed corporation is Nutra Manufacturing, Inc."
5. The manner, if not set forth in the Amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (if not applicable, insert "not applicable" or "NA").
NA
6. Complete either "a" or "b", whichever is applicable.
a. [x] Amendment(s) adopted by shareholder action.
At the date of adoption of the Amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
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Amendment, and the vote of such shares was:
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented at Shares
Group Shares to be Cast the meeting For or Against
------ ----------- -------------- --------------- --------------------
General Nutrition, 100 100 100 100 0
Incorporated
(Sole Shareholder)
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*NOTE: Pursuant to Section 33-10-106(6)(l) of the 1976 South Carolina Code of Laws, as amended, the corporation can alternatively state the total number of disputed shares cast for the amendment by each voting group together with a statement that the number of cast for the amendment by each voting group was sufficient for approval by that voting group.
b. [ ] The Amendment(s) was duly adopted by the incorporators or board of
directors without shareholder approval pursuant to Section
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code
of Laws, as amended, and shareholder action was not required.
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Date March 22, 2004 Nutricia Manufacturing USA, Inc.
---------------------- ----------------------------------------
Name of Corporation
/s/ David J. Sullivan
----------------------------------------
Signature
David J. Sullivan, Assistant Secretary
----------------------------------------
Type or Print Name and Office
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FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original or a conformed copy, must be filed.
2. If the space in this form is insufficient, please attach additional sheets containing a reference to the appropriate paragraph in this form.
3. Filing fees and taxes payable to the Secretary of State at time of filing application.
Filing Fee $ 10.00
Filing tax 100.00
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TOTAL $110.00
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Return to: Secretary of State
P.O. Box 11350
Columbia, SC 29211
Form Revised by South Carolina Secretary of State, January 2000
EXHIBIT 3.10
NUTRICA MANUFACTURING USA, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Greenville, South Carolina.
Section 2. The corporation may also have offices at such other places both within and without the State of South Carolina as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors shall be held at such place as may be fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year 2004, shall be held on the trust Monday of July, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m., at which the shareholders shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of South Carolina as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president, the board of directors, or the holders of not less than ten percent of all the shares entitled to vote at the meeting. Special meetings of the shareholders may be called also by the chairman of the board of directors.
Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. A majority of the votes entitled to be cast on a matter by a voting group constitutes a quorum of the voting group for action on that matter except as otherwise provided by statute or the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
Section 2. If a quorum is present, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action unless the vote of a greater number of affirmative votes is required by law or the articles of incorporation.
Section 3. Each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders unless otherwise provided by statute or the articles of incorporation. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact.
Unless the articles of incorporation otherwise provide, every shareholder entitled to vote has the right to cumulate his votes in an election for directors.
Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be not less than one (1) nor more than eight (8). The number of directors may be fixed or changed within the minimum or maximum by the shareholders or by the board of directors. Directors need not be residents of the State of South Carolina nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first meeting of shareholders.
Section 2. Unless the charter provides otherwise, any vacancy occurring in the board of directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders, the board of directors, or if the directors remaining in office constitute fewer than a quorum of the board, the vacancy may be filled by the affirmative vote of the directors remaining in office.
Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders.
Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of South Carolina, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of South Carolina.
Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the president on twenty (20) days' notice to each director, either personally or by mail; special meetings shall be called by the president or secretary in like manner and on like notice by the written request of two directors.
Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
Section 6.2 or more of the directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the articles of incorporation. The affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if one or more written consents, setting forth the action so taken, shall be signed by each director.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors may create one or more committees that consist of one or more members. All members of committees exercising the powers of the board of directors must be members of the board of directors and serve at the board of directors' pleasure. To the extent specified by the board of directors in the articles of incorporation, each committee shall have and exercise all of the authority of the board of directors in the management of the corporation, except as otherwise required by law.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the articles of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail.
Section 2. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the articles of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He/she shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he/she shall be. He/she shall have custody of the corporate seal of the corporation and he/she, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his/her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his/her signature.
Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of
the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 12. He/she shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his/her transactions as treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he/she shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his/her office and for the restoration to the corporation, in case of his/her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his/her possession or under his/her control belonging to the corporation.
Section 14. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by certificates or shall be uncertificated. Each share certificate shall be signed by the president or a vice-president and the secretary or an assistant secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue different classes of shares or different series within a class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder, upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class and the variations in the relative rights, preferences, and limitations determined for each series and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers of the corporation upon a certificate may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he/she were such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be issued in place of any certificate issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the corporation.
FIXING RECORD DATE
Section 5. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix a record date, in advance, that may not be more than seventy days before the meeting or action requiring a determination of shareholders.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of South Carolina.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for shares shall make a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of each and the number of shares held by each, which list shall be kept on file at the principal office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the corporation, subject to any provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, South Carolina". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be altered, amended, or repealed or new bylaws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board, subject always to the right of the shareholders to adopt, amend, or repeal bylaws. The directors may amend or repeal a bylaw adopted by the shareholders unless the shareholders in adopting or amending a particular bylaw provide expressly that the directors may not adopt, amend or repeal that bylaw or any bylaw on that subject.
Exhibit 3.11 2003109-1266
PENNSYLVANIA DEPARTMENT OF STATE
CORPORATION BUREAU
Certificate of Organization
Entity Number Domestic Limited Liability Company
3190318 (15 Pa. C.S. Section 8913)
Name Pepper Hamilton LLP Document will be returned to the
Address 200 One Keystone Plaza name and address you enter to
North Front and Market Streets the left.
P.O. Box 1181 [LEFT ARROW}
Harrisburg, PA 17108-1181
City State Zip
Fee: $125
Filed in the Department of State
on DEC 31 2003
/s/ Pedro C. Curtis
--------------------------------
Secretary of the Commonwealth
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In compliance with the requirements of 15 Pa.C.S. Section 8913 (relating to certificate of organization), the undersigned desiring to organize a limited liability company, hereby certifies that:
1. The name of the limited liability company (designator is required, i.e. "company", "limited" or "limited liability company" or abbreviation):
2. The (a) address of the limited liability company's initial registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is:
3. The name and address, including street and number, if any, of each organizer is (all organizers must sign on page 2):
Name Address
Kimberly A. Petrolo 500 Grant Street, 50th Floor,
Pittsburgh, PA 15219
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4. Strike out if inapplicable term
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
5. Strike out if inapplicable:
Management of the company is vested in a manager or managers.
7. Strike out if inapplicable xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxx:
8. For additional provisions of the certificate, if any, attach an 8-1/2 x 11 sheet.
By: /s/ Kimberly A. Petrolo
-----------------------------
Kimberly A. Petrolo
Organizer
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EXHIBIT 3.12
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
GNC FRANCHISING, LLC
A Pennsylvania Limited Liability Company
This Limited Liability Company Operating Agreement is made and entered into effective as of January 1, 2004, by and between GNC Franchising, LLC, a Pennsylvania limited liability company (the "COMPANY"), and General Nutrition Corporation as the sole Member of the Company.
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. The following terms, as used herein, shall have the following respective meanings:
"Agreement" means this Limited Liability Company Operating Agreement, as it may be amended, restated or supplemented from time to time.
"Capital Contribution" means the amount of money contributed by such Member to the Company and, if property other than money is contributed, the fair market value of such property, net of liabilities assumed or taken subject to by the Company.
"Certificate of Dissolution" shall have the meaning set forth in Section 12.4.
"Certificate of Organization" means the certificate of organization of the Company, as amended or restated from time to time, filed in the Department of State of the Commonwealth of Pennsylvania in accordance with the Pennsylvania Act.
"Company" means GNC Franchising, LLC.
"Fiscal Year" shall have the meaning set forth in Section 10.1 hereof.
"Governmental Body" means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency or instrumentality thereof, or any court or arbitrator (public or private).
"Interest" means the ownership interest of the Member in the Company (which shall be considered personal property for all purposes), consisting of (i) the Member's interest in capital, profits, losses, credits, allocations and distributions, (ii) the Member's right to vote or grant or withhold consents with respect to Company matters as provided herein or in the Pennsylvania Act, and (iii) the Member's other rights and privileges as herein provided.
"Initial Member" means General Nutrition Corporation.
"Member" means initially the Initial Member, in its capacity as the sole Member of the Company, and any other Person who may from time to time be admitted to the Company as an additional or substituted member by the Initial Member as herein provided.
"Pennsylvania Act" means the Pennsylvania Limited Liability Company Law of 1994, Pa. C.S. Sections 8901 et seq., as amended.
"Person" means and includes individuals, corporations, partnerships, trusts, associations, joint ventures, limited liability companies, estates and other entities, whether or not legal entities.
"Taxes" mean all federal, state, local and foreign income, property and sales taxes and tariffs and all charges, fees, levies or other assessments whether federal, state, local or foreign based upon or measured by income, capital, net worth or gain and any other tax including but not limited to all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, withholding, payroll, employment, social security, unemployment, FICA, FUTA, excise, occupation, property or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever including all interest and penalties thereon, and additions to tax or additional amounts imposed or charged by any Governmental Body.
"Tax Authority" means any Governmental Body responsible for the imposition of any Tax.
"Tax Return" means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.
Section 1.2. Other Capitalized Terms. Unless the context otherwise requires, capitalized terms used in this Agreement but not herein defined shall have the meanings set forth in the Pennsylvania Act.
Section 1.3. Rules of Construction. Unless the context otherwise requires, references to the plural shall include the singular and the singular shall include the plural, and the words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provisions of this Agreement. Any use of the masculine, feminine or neuter herein shall be deemed to include a reference to each other gender.
ARTICLE II
FORMATION AND PURPOSE
Section 2.1. Name and Formation. The name of the Company shall be "GNC Franchising, LLC" or such other name as the Member shall from time to time select. The Company is a limited liability company formed pursuant to the provisions of the Pennsylvania Act.
Section 2.2. Purpose. The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Pennsylvania Act.
Section 2.3. Principal Place of Business. The principal place of business of the Company shall be at such location that the Member determines from time to time.
Section 2.4. Registered Agent; Registered Office. The registered agent and the registered office for the Company in the Commonwealth of Pennsylvania shall be as set forth in the Certificate of Organization.
Section 2.5. Term. The term of the Company shall commence on the filing of the Certificate of Organization and shall continue until the Company is terminated upon the filing of a Certificate of Dissolution in accordance with Section 9.3 of this Agreement.
ARTICLE III
MANAGEMENT
Section 3.1. Management Committee.
(a) The Company shall be managed by Managers acting as a committee in accordance with this Agreement (sometimes herein referred to as the "Management Committee"). Except as reserved to the Members in this Agreement, the business and affairs of the Company shall be managed under the direction of the Management Committee, and the Management Committee shall have all power and authority to manage, and direct management and the business and affairs of, the Company. Any power not specifically delineated in this Agreement, or delegated by the Management Committee pursuant to a policy of delegation adopted by the Management Committee, shall remain with the Management Committee. Approval by or action taken by the Management Committee in accordance with the Agreement shall constitute approval or action by the Company and shall be binding on the Member.
(b) The Management Committee shall consist of three (3) Managers. At any time the Member shall have the power to remove (with or without cause) any Manager by delivering written notice of such removal to the Company. Vacancies on the Management Committee shall be filled by the Member.
(c) Subject to the indemnification provisions set forth at
Section 15.2, each Manager shall have a responsibility to perform his duties as
a Manager, including his duties as a member of any committee of the Management
Committee upon which he may serve, in good faith, in a manner he reasonably
believes to be in the best interests of the Company and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. In performing his duties, a
Manager shall be entitled to rely in good faith on the records of the Company
and upon such information, opinions, reports or statements presented to the
Company by a Person as to matters the Manager reasonably believes are within
such other Person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Company, including information,
opinions, reports, or statements as to the value and amounts of the assets,
liabilities, profits, losses or cash flow or any other facts pertinent to the
existence and amount of assets from which distributions to Member might properly
be paid.
(d) No Manager shall be personally liable, as such, for monetary damages for any action taken in his capacity as a Manager unless the Manager has breached or failed to perform the duties of a Manager set forth in this Agreement and such breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.
Section 3.2. Notice of Management Committee Meetings; Location; Waiver of Notice. Regular meetings of the Management Committee shall be held at least once per quarter at the offices of the Company or at such other times and places as may be fixed by the Management Committee, and may be held without further notice. Special meetings of the Management Committee may be called by the Chief Executive Officer or by any Manager upon seven (7) days' prior written notice, which notice shall identify the purpose of the special meeting or the business to be transacted. Notice of meeting may be waived before a meeting by a written waiver of notice signed by the Manager entitled to notice. A Manager's attendance at a meeting shall constitute waiver of notice unless the Manager states at the beginning of the meeting his objection to the transaction of business because the meeting was not lawfully called or convened.
Section 3.3. Quorum; Approvals; Proxies; Written Action. The presence, in person, by proxy, or by telephone conference call (with all parties able to hear and speak to all other parties) of at least three (3) Managers shall be required for the transaction of business at a Management Committee meeting. A vote of three (3) Managers present, in person or by proxy, at a duly constituted meeting shall govern all of the Management Committee's actions and constitute the approval of the Management Committee. Each Manager may vote by delivering his proxy to another Manager. The Management Committee may act without a meeting if the action taken is approved in advance in writing by the unanimous consent of all Managers on the Management Committee. The Management Committee shall cause written minutes to be prepared of all action taken by the Management Committee and shall cause a copy thereof to be delivered to the Member within fifteen (15) days thereafter.
Section 3.4. Authority of the Management Committee. Unless otherwise agreed to in writing by the Member, the Management Committee, by its own action or by action of a committee of the Management Committee, but not by delegation to officers or other employees of the Company, shall, in addition to the other powers granted to it in this Agreement, have the right, power and authority to take the following actions:
(a) making fundamental policy decisions with respect to the business and affairs of the Company;
(b) approving the Annual Budget (a copy of the Company's initial Annual Budget, is attached hereto as Schedule 7.4), and related marketing plan for the Company and any material amendments and supplements thereto;
(c) approving any capital expense line item deviation from the Annual Budget in excess of $25,000 or expense line item in excess of $25,000;
(d) approving any contract, agreement or commitment with a value in excess of $25,000 or a term longer than three (3) years (or a group of related contracts, agreements or commitments with an aggregate value in excess of $25,000);
(e) approving the choice of any bank depositories, and approving arrangements relating to the signatories on bank accounts;
(f) approving the choice of the Company's attorneys, independent accountants and any other consultants, where it is contemplated that such consultants will provide services with a value in excess of $10,000, or for a period longer than six (6) months;
(g) approving any change of the Company's fiscal year;
(h) approving all contracts that are proposed to be entered into between the Company and the Member or an Affiliate of the Member and all amendments or modifications to such contracts;
(i) approving the conveyance, sale, transfer, assignment, pledge, encumbrance, or disposal of, or the granting of a security interest in, any assets of the Company valued in excess of $5,000;
(j) approving the entry of the Company into any other partnership or joint venture;
(k) approving the incurring of any indebtedness for borrowed money by the Company in an amount in excess of $100,000;
(l) the loaning of any sum or any other extension of credit by the Company to any Person;
(m) the guarantee by the Company of any indebtedness of any other Person;
(n) the entrance by the Company into any real estate lease
with a value in excess of $25,000 or a term in excess of three (3) years, or the
acquisition by the Company of any real estate with a value in excess of $25,000;
(o) the authorization of the Member to act for or to assume any obligation or
responsibility on behalf of the Company;
(p) the employment and appointment of any Executive Officer and any Company employee who will be involved in the day-to-day management of the business of the Company and who will receive salary and bonus in excess of $75,000 per year;
(q) any change in accounting principles used by the Company, except to the extent required by generally accepted accounting principles;
(r) approving any tax elections of the Company;
(s) the conduct of litigation to which the Company is a party;
(t) approving the acquisition of any business or a business division from any Person whether by asset purchase, stock purchase, merger or other business combination;
(u) approving the acquisition of any assets by the Company, the fair market value of which may reasonably be expected to exceed $100,000;
(v) engaging in an activity other than those expressly permitted by Section 2.4; and
(w) approving additional Capital Contribution permitted by
Section 3.5,
provided, however, that (i) matters referred to in subsections
(i), (j) and (l) through (o) shall require unanimous approval of the Management
Committee.
Section 3.5. No Individual Authority. Except as otherwise expressly provided in this Agreement, no individual Managers, acting alone, shall have any authority to act for, or undertake or assume any obligation or responsibility on behalf of the Company or the Management Committee.
Section 3.6. Executive Officers.
(a) Appointment of Chief Executive Officer. The Management Committee shall appoint a chief executive officer (the "Chief Executive Officer"), who will manage the day-to-day affairs of the Company, carry out the direction of the Management Committee and effectuate the business plan set forth in the Annual Budget.
(b) Duties of Chief Executive Officer. Subject to the control of the Management Committee and, within the scope of their authority, any committees thereof, the Chief Executive Officer shall: (i) have general and active management of all the business, property and affairs of the Company, (ii) see that all orders and resolutions of the Management Committee and the committees thereof are carried into effect, (iii) effectuate the business plan of the Company as set forth in the Annual Budget, (iv) appoint and remove subordinate officers, employees and agents, other than those appointed, approved or elected by the Management Committee, as the business of the Company may require, (v) act as the duly authorized representative of the Company in all matters, and in that capacity, execute agreements and other contracts on behalf of the Company, except where the Management Committee has formally designated some other person or group to act, and (vi) in general perform all the usual duties incident to the office of Chief Executive and such other duties as may be assigned to such person by the Management Committee. The Chief Executive Officer shall have the authority to make all decisions for the Company which are not reserved to the Management Committee or the Member pursuant to this Agreement.
(c) Preparation of Annual Budget. The Chief Executive Officer shall prepare, and submit to the Management Committee for its approval, at least sixty (60) days prior to the commencement of each subsequent fiscal year, an Annual Budget. Each Annual Budget approved by the Management Committee shall remain operative until amended by the
Management Committee or a successor Annual Budget has been approved by the Management Committee. The Chief Executive Officer shall conduct the day-to-day affairs of the Company in accordance with the approved Annual Budget.
(d) Other Officers. The Management Committee may also elect a President, a Vice President, a Chief Financial Officer, a Treasurer and a Secretary and such other officers of the Company as the Management Committee may from time to time designate or the business of the Company may require. Any number of offices may be held by the same person.
ARTICLE IV
THE MEMBER
Section 4.1. Limitation of Liability. The debts, obligations and liabilities of the Company, whether arising by contract, or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Member shall not be obligated personally for any such debt, obligation or liability by reason of the Member's managing the affairs of the Company or otherwise, and the Member shall not be obligated personally for any such debt, obligation or liability of the Company by reason of his status as a Member of the Company or otherwise. The Member shall, however, be liable to the Company for payment of his capital contribution in the amount set forth in Exhibit A hereto.
Section 4.2. Reimbursement. Except as otherwise provided for herein, the Member shall be entitled to reimbursement of expenses reasonably incurred on behalf of the Company. Such expenses shall include, without limitations, supplies and equipment, rentals, salaries to third persons, insurance, legal services, accounting services, fees or commissions paid to third parties, and similar costs and expenses.
ARTICLE V
TRANSFER OF INTERESTS
Section 5.1. Transfers by the Member. The Member may transfer all or any portion of its Interest or rights in its Interest in the Company to one or more other Persons.
Section 5.2. Admission of Members. Additional Members may be
admitted to the Company upon the approval of the Member. No prospective Member
may be admitted to the Company until such prospective Member shall execute a
joinder to this Agreement in form and substance satisfactory to the Company,
whereby the additional Member agrees to be bound by all of the terms and
conditions of this Agreement then in effect. Upon the admission of each
additional Member, the Interest in the Company of such additional Member shall
be as specified at the time such additional Member shall be admitted, the
Interests in the Company of all other Members of the Company shall be
proportionately reduced and Exhibit A hereto shall be amended to reflect the
Capital Contributions and respective Interests of the Members as so changed.
PRIOR TO THE ADMISSION OF ADDITIONAL MEMBERS, IT IS THE INTENTION OF THE MEMBER
THAT THIS AGREEMENT BE AMENDED TO PROVIDE FOR THE COMPANY'S MANAGEMENT AND
CONTROL.
ARTICLE VI
CAPITAL MATTERS
Section 6.1. Member. The Member and its Interest in the Company shall be as set forth on Exhibit A to this Agreement.
Section 6.2. Capital Contributions. In exchange for its Interest in the Company, the Member has made the initial Capital Contribution to the Company set forth on Exhibit A to this Agreement. The Member shall not be entitled to receive any interest on any Capital Contribution. The Member shall not be obligated to make any additional Capital Contribution to the Company; provided, however, that Exhibit A to this Agreement shall be amended from time to time to reflect any additional Capital Contributions made by the Member to the Company.
ARTICLE VII
PROFITS AND LOSSES; DISTRIBUTION
Section 7.1. Profits and Losses. All income, expenses, deductions, profits and losses of the Company for both book and tax purposes shall be allocated to the Member.
Section 7.2. Cash Distributions. Cash distributions shall be distributed to the Member of the Company as and when determined by the Member.
ARTICLE VIII
TERMINATION AND LIQUIDATION
Section 8.1. Termination. The existence of the Company shall terminate upon the occurrence of any of the following: (i) the written consent of the Member to dissolve the Company, (ii) the sale of all or substantially all of the assets owned by the Company and the collection of all of the net proceeds therefrom, or (iii) entry of a decree of judicial dissolution pursuant to the Pennsylvania Act.
Section 8.2. Liquidation. In the event of the termination of the Company, the Member shall within a reasonable period of time prepare, or cause to be prepared, a full and accurate statement of the Company's assets and liabilities and results of operations since the last previous statement, convert the Company's assets to cash, collect all amounts due the Company, including amounts owed by the Member, discharge the debts of the Company, and then distribute all remaining funds to the Member.
Section 8.3. Certificate of Dissolution. Following dissolution of the Company pursuant to Section 9.1 hereof, when all debts, liabilities and obligations of the Company have been paid, satisfied, comprised or otherwise discharged or adequate provisions have been made therefore, and all assets have been distributed to the Member, a Certificate of Dissolution shall be filed if required by the Pennsylvania Act.
ARTICLE IX
FINANCIAL/TAX MATTERS
Section 9.1. Fiscal Year. The fiscal year of the Company shall end on December 31.
Section 9.2. Company Funds. Pending application or distribution, the funds of the Company shall be deposited in such bank accounts, or invested in such interest-bearing or non-interest-bearing investments, including without limitation, federally insured checking and savings accounts, certificates of deposit and time or demand-deposits in U.S. government agencies or government backed securities or mutual funds investing primarily in such securities, or such other investments as the Member deems appropriate.
Section 9.3. Tax Returns. To the extent the Company is required by the applicable federal, state, local, or foreign Tax law to file Tax Returns, the Member shall cause Tax Returns of the Company to be prepared and timely filed with the appropriate Tax Authorities and shall timely pay, out of Company funds, any Tax owing by the Company.
ARTICLE X
GENERAL MATTERS
Section 10.1. Checks, Drafts, Evidence of Indebtedness. All checks, drafts, or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the Company shall be signed or endorsed in such manner and by such person or persons as shall be designated from time to time by the Member.
Section 10.2. Contracts and Instruments; How Executed. The Member, except as otherwise provided in this Agreement, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Company, and this authority may be general or confined to specific instances; and unless so authorized or ratified by the Member or within the agency power of an officer, no officer, agent, or employee other than the Member shall have any power or authority to bind the Company by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
Section 10.3. Books and Records. The Member shall be responsible for overseeing the maintenance of the Company's books and records. The Company's books and records shall at all times be maintained in the principal office or such other office as the Member shall designate for such purpose, and shall be open to the inspection and examination at reasonable times by the Member or its duly authorized representatives.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Amendments. Amendments to this Agreement shall become effective only upon the execution of a written instrument describing such amendments signed by the Member.
Section 11.2. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.
Section 11.3. Headings. The headings herein have been included for convenience of reference only and shall not be considered in interpreting this Agreement.
Section 11.4. Integration. This Agreement constitutes the entire agreement of the Member and the Company with respect to the subject matter hereof and shall supersede all oral agreements and prior writings with respect to the subject matter hereof.
Section 11.5. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and the Member and its permitted successors and assigns.
Section 11.6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, and intending to be legally bound, the Member and the Company have executed this Operating Agreement as of the day and date first above written.
GNC FRANCHISING, LLC
By: /s/ James M. Sander
-------------------------------------
MEMBER:
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GENERAL NUTRITION CORPORATION
By: /s/ James M. Sander
---------------------------------------
Name: James M. Sander
--------------------------------------
Title: SVP, Chief Legal Officer & Secretary
-------------------------------------
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EXHIBIT A
Name and Address Interest in the of Member Capital Contribution Company --------- -------------------- ------- General Nutrition Corporation $ 100.00 100% |
EXHIBIT 3.13
FILED
MAR 1 1989
[ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
GND Investment Company
1. The name of the Corporation is GND Investment Company.
2. The address of its registered office is 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware 19810. The name of its registered agent at such address is Organization Services, Inc.
3. The nature of the business to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have authority to issue is One Thousand (1,000) shares of common stock; each such share shall have One Dollar ($1.00) par value.
5. The name and mailing address of each incorporator is as follows:
NAME ADDRESS
---- -------
Cynthia L. Conner 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Harold F. Kalbach, Jr. 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
|
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by stature, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation.
8. Meetings of stockholders may be held within or without the State of Delaware as the By-Laws may provide. The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Elections of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.
9. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereinafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
10. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or nay hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
WE THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate hereby declaring and certifying that this is our act and deed and the facts herein stated are true, accordingly have hereunto set our hands this 28th day of February, 1989.
/s/ Cynthia L. Conner --------------------------- Cynthia L. Conner /s/ Harold F. Kalbach, Jr. --------------------------- Harold F. Kalbach, Jr. |
EXHIBIT 3.14
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/12/1990
901025066 - 2189055
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
GND Investment Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of GND Investment Company by unanimous consent action effective April 9, 1990, duly adopted resolutions setting forth a proposed amendment of the certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered "1" so that, as amended said Article shall be and read as follows:
"The name of the Corporation is General Nutrition International, Inc."
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the sole stockholder of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by reason of said amendment.
IN WITNESS WHEREOF, said GND Investment Company has caused this certificate to be signed by Robert V. Dunn, its Vice President, and James M. Sander, it Assistant Secretary, this 9th day of April, 1990.
By: /s/ Robert V. Dunn
--------------------------
Robert V. Dunn
Vice President
Attest: /s/ James M. Sander
--------------------------
James M. Sander
Assistant Secretary
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EXHIBIT 3.15
BY-LAWS
OF
GENERAL NUTRITION INTERNATIONAL, INC.
ARTICLE 1
Offices
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
Stockholder's Meetings
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date and time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meetings. Special meetings of the stockholders, for any purpose or other then those regulated by statute, may be called at any time by the Chairman of the Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the
purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty(60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
Directors
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successor shall be duly elected and qualified. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4 Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
Executive Committee
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
Officers
5.1 Number. The executive officers of the Corporation shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors may also chose such other officers and assistant officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution of the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice Presidents. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
Share Certificates and Transfers
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed, and the Board of Directors When authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
Corporate Records and Financial Statements
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLE 8
Emergency Powers
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
Notice
Any notice required to permitted to be given to any, director, officer or stockholder under these By-laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph, charges prepaid, telex, telefax or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with the telegraph office for transmission to such person.
ARTICLE 10
Amendments
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholders or directors of such purpose.
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: April 12, 1990
/s/ Robert V. Dunn
-----------------------
Secretary
|
EXHIBIT 3.16
ARTICLES OF INCORPORATION
OF
GENERAL NUTRITION INVESTMENT COMPANY
FIRST. The name of the corporation is General Nutrition Investment Company
SECOND. The address of the corporation's registered office in the State of Arizona. The name of its registered agent at such address is CT Corporation System, 3225 N. Central Avenue, Phoenix, AZ 85012.
THIRD. The nature of business to be conducted or promoted and the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the Arizona Revised Statutes.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is one thousand (1000) shares, all of which shall be Common Stock, $1.00 par value per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Guy E. Snyder, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2400
Chicago, Illinois 60601
SIXTH. The number of directors of the corporation shall be fixed from time to time by the By-Laws of the corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
SEVENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation.
EIGHTH. The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liabilities and expenses reasonably incurred or paid by such person in connection with such
action, suit or proceeding. The words "liabilities" and "expenses" shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys' fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, By-Law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefits of the heirs, executors and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article EIGHTH or otherwise.
For purposes of this Article EIGHTH, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
The provisions of this Article EIGHTH shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the Arizona Revised Statute or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Articles of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon shareholders herein are granted subject to this reservation.
TENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its shareholders or any class of them, any court of equitable jurisdiction within the State of Arizona may, on the application in a summary way of the Corporation or of any creditor or shareholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Chapter 14 of Title 10 of the Arizona Revised Statutes or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Chapter 14 of Title 10 of the Arizona Revised Statutes order a meeting of the creditors or class of creditors, and/or of the shareholders or class of shareholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the shareholders or class of shareholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH. No director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Chapter 8 of the Arizona Revised Statutes, or (iv) for any transaction from which the director derived an improper personal benefit.
The undersigned incorporator, for the purpose of forming a corporation pursuant to the Arizona Revised Statutes, has signed this Articles this 28th day of October, 2003.
/s/ Guy E. Snyder ----------------------------- Guy E. Snyder Sole Incorporator |
EXHIBIT 3.17
GENERAL NUTRITION INVESTMENT COMPANY
* * * * *
BY - LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The known place of business shall be located in Phoenix, Arizona.
Section 2. The corporation may also have offices at such other places both within and without the State of Arizona as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors shall be held in Arizona, at such place as may be fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year 2004, shall be held on the first Monday of July if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10.00 a.m., at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be delivered not less than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Arizona as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the President, the board of directors, or the holders of not less than one-tenth of all the shares entitled to vote at the meeting.
Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, or at the direction of the board, President, the holders of not less than one-tenth of all the shares entitled to vote at the meeting to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of shareholders shall be limited to the purpose stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a plurality of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of voting by classes is required by law or the Articles of Incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact.
In all elections for directors every shareholder, entitled to vote, shall have the right to vote, in person or by proxy, the number of shares of stock owned by him, for as many persons as there are directors to be elected, or if the Articles of Incorporation so provide, to cumulate the vote of said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute the votes on the same principle among as many candidates as he may see fit.
Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be no less than one (1) and no more than eight (8). Directors need not be residents of the State of Arizona nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. The number of directors may be increased or decreased by amendment to the Articles of Incorporation or to these bylaws.
Section 2. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors, or by the shareholders, unless the Articles of Incorporation provides otherwise. A director elected to fill a vacancy shall be elected for the unexpired portion of the term of his predecessor in office. A director elected to fill a newly created directorship shall serve until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these bylaws directed or required to be exercised or done by the shareholders.
Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of Arizona, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of Arizona, and may be held by telecommunications or by any means of communication by which all persons participating in the meeting can hear each other during the meeting.
Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the Chairman of the Board or by the President. Special meetings of the board of directors shall be preceded by <<days>> days' notice sent to directors of the date, time, and place of the meeting. Notice may be sent in writing or orally, and communicated in person, by telephone, telegraph, teletype, electronic communication, or by mail. The notice shall include the purpose of the meeting.
Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.
Section 6. Fifty percent of the directors shall constitute a quorum for the transaction of business unless a different number is required by law or by the Articles of Incorporation. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute or by the Articles of Incorporation. Whether or not a quorum shall be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority of the full board of directors, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the corporation, except as otherwise provided by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the Articles of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be President, a Vice-President, a Secretary and a Treasurer. The board of directors may also choose additional Vice-Presidents, and one or more Assistant Secretaries and Assistant Treasurers.
Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a President, one or more Vice-Presidents, a Secretary and a Treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and agents as its shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENT
Section 8. The Vice-President, or if there shall be more than one, the Vice-Presidents in the order determined by the board of directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the board of directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the President and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
Section 14. The Assistant Treasurer, or, if there shall be more than one, the Assistant Treasurers in the order determined by the board of directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by certificates or shall be uncertificated. Certificates shall be signed by the President of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof.
When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the board of directors to fix and determined the relative rights and preferences of subsequent series.
Section 2. The signature of the officer of the corporation upon a certificate may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue.
UNCERTIFICATED SHARES
Section 3. The board of directors of the corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. Shares already represented by certificates shall not be affected until they are surrendered to the corporation.
Section 4. Within days after the issue or transfer of shares without certificates, the corporation shall send shareholders a written statement of the information required on the certificates by A.R.S. Section 10-625 (B) and (C), and, if applicable, A.R.S. Section 10-627.
LOST CERTIFICATES
Section 5. The board of directors may direct a new certificate or an equivalent new uncertificated security in place of any certificate theretofore issued by the corporation alleged to have been lost, destroyed, or wrongfully taken. When authorizing such issue of a new certificate or an equivalent new uncertificated security, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost, destroyed or wrongfully taken.
TRANSFER OF SHARES
Section 6. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person
entitled thereto, and the old certificate called and the transaction recorded upon the books of the corporation.
FIXING OF RECORD DATE
Section 7. For the purpose of determining shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the record date be fixed not more than seventy days before the meeting or action requiring a determination of shareholders. For the purpose of determining those shareholders entitled to demand a special meeting, such record date shall be days before the special meeting. For the purpose of determining those shareholders entitled to take action without a meeting, such record date shall be days before the action requiring a determination of shareholders. For the purpose of determining those shareholders entitled to notice of and to vote at an annual or special shareholders' meeting, such record date shall be days before the meeting. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
LIST OF SHAREHOLDERS
Section 8. After fixing a record date for a meeting, the officer or agent in charge of the records for shares shall prepare an alphabetical list of the names of all shareholders who are entitled to notice of a shareholders' meeting, arranged by voting group, with the address of, and the number and class and series, if any, of shares held by each.
The shareholders' list shall be available for inspection by any shareholder for a period of 10 days prior to the meeting and shall be kept on file at the corporation's principal office. A shareholder or his agent or attorney shall be entitled on written demand to inspect the list, subject to the requirements of A.R.S. Section 10-1602(C) during regular business hours and at his expense, during the period it shall be available for inspection. The shareholders' list shall be made available at the meeting, and any shareholder or his agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. The shareholders' list shall be prima facie evidence of the identity of shareholders entitled to examine the shareholders' list or to vote at a meeting of shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the Articles of Incorporation relating thereto, if any, and to limitation by statute, distributions may be declared by the board of directors at any regular or special meeting, pursuant to law. Distributions may be made in cash, in property or as a dividend.
Share dividends may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series, subject to the provisions of the Articles of Incorporation.
Section 2. Before any distribution may be made, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper to meet debts of the corporation as they become due in the usual course of business, or for such other purpose as the directors shall think conducive to the interest of the corporation.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Arizona." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board.
ARTICLE XIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the at any regular or special meeting of the shareholders at which a quorum shall be present or represented, by the affirmative vote of a plurality of the shares entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting.
EXHIBIT 3.18
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:55 AM 09/21/1999
991393169 - 3099285
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION SYSTEMS, INC.
1. The name of the Corporation is General Nutrition Systems, Inc.
2. The address of its registered office is 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware 19810. The name of its registered agent at such address is Organization Services, Inc.
3. The nature of the business to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have authority to issue is One Hundred (100) shares of common stock; each such share shall have no par value.
5. The name and mailing address of each incorporator is as follows:
NAME ADDRESS
Cynthia L. Conner 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Harold F. Kalbach, Jr. 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
|
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation.
8. Meetings of stockholders may be held within or without the State of Delaware as the By-Laws may provide. The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the state of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Elections of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.
9. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereinafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
10. No director of the Corporation shall be personally liable to the Corporation or its stockholders except for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (or any successor provision of Delaware law), or (iv) any transaction from which the director derived an improper personal benefit; and the directors of the Corporation shall be entitled, to the full extent permitted by Delaware law, as amended from time to time, to the benefits of provisions limiting the personal liability of directors.
11. The Corporation shall indemnify its officers, directors, employees and agents to the full extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, or any successor provision of Delaware law.
WE THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate hereby declaring and certifying that this is our act and deed and the facts herein stated are true, accordingly have hereunto set our hands this 21st day of September, 1999.
/s/ Cynthia L. Conner ------------------------------------ Cynthia L. Conner, Incorporator /s/ Harold F. Kalbach, Jr. ------------------------------------ Harold F. Kalbach, Jr., Incorporator |
EXHIBIT 3.19
BY-LAWS
OF
GENERAL NUTRITION SYSTEMS, INC.
ARTICLE 1
Offices
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
Stockholder's Meetings
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date and time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meetings. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of the Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the purpose or purposes of the proposed meeting. Upon receipt of any such request; it shall be the
duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action Without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
Directors
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successor shall be duly elected and qualified. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3. Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4. Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action Without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.
of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be the statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice Presidents. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of directors and shareholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
Share Certificates and Transfers
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed, and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
Corporate Records and Financial Statements
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-Laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLE 8
Emergency Powers
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
Notice
Any notice required or permitted to be given to any director, officer or stockholder under these By-Laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail.
ARTICLE 10
Amendments
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholders or directors of such purpose.
CERTIFICATION
The foregoing is true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: 11/21/99
/s/ James M. Sander
------------------------
Secretary
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EXHIBIT 3.20
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION DISTRIBUTION COMPANY
1. The name of the Corporation is General Nutrition Distribution Company.
2. The address of its registered office is 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware 19810. The name of its registered agent at such address is Organization Services, Inc.
3. The nature of the business to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have authority to issue is One Thousand (1,000) shares of common stock; each such share shall have One Dollar ($1.00) par value.
5. The name and mailing address of each incorporator is as follows:
NAME ADDRESS
---- -------
Cynthia L. Conner 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
Harold F. Kalbach, Jr. 103 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810
|
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation.
8. Meetings of stockholders may be held within or without the State of Delaware as the By-Laws may provide. The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Elections of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.
9. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereinafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
10. To the fullest extent permitted by the Delaware General Corporation Law as the same exits or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
WE THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate hereby declaring and certifying that this is our act and deed and the facts herein stated are true, accordingly have hereunto set our hands this 29th day of September, 1992.
/s/ Cynthia L. Conner ---------------------------------------- Cynthia L. Conner, Incorporator /s/ Harold F. Kalbach, Jr. ---------------------------------------- Harold F. Kalbach, Jr., Incorporator |
EXHIBIT 3.21
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:25 AM 01/14/1993
930145267 - 2311326
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION DISTRIBUTION COMPANY
In compliance with the requirements of Section 241 of the General Corporation Law of the State of Delaware, the undersigned corporation, desiring to amend its Certificate of Incorporation, does hereby certify that:
FIRST: The name of the corporation is General Nutrition Distribution Company.
SECOND: The registered office of the corporation is located at 103 Springer
Building, 3411 Silverside Road, Wilmington, County of New Castle,
Delaware 19810. The name of its registered agent at such address is
Organization Services, Inc.
THIRD: The statute by or under which it was incorporated is the General
Corporation Law of the State of Delaware.
FOURTH: The date of its incorporation is September 30, 1992.
FIFTH: The amendment adopted by the Incorporators pursuant to Section 107 of
the General Corporation Law of the State of Delaware, there never
having been directors or officers elected or appointed or any shares of
stock issued for the corporation, set forth in full, is as follows:
"RESOLVED that the Article First of the Certificate of Incorporation of
this corporation be amended to read in its entirety as follows:
'FIRST: The name of the corporation is General Nutrition Services,
Inc.'
SIXTH: Such amendment has been duly adopted in accordance with the provisions
of Section 241 of the General Corporation Law of the State of Delaware.
|
WE, THE UNDERSIGNED, being all of the Incorporators of General
|
Nutrition Distribution Company, for the purpose of amending the Certificate of Incorporation of said corporation, do hereby execute this Certificate of Amendment in the name of and on behalf of said corporation, hereby declaring and certifying that this is the act and deed of said corporation and that the facts herein stated are true and, accordingly we have hereunto set our hands as of this 13th day of January, 1993.
/s/ Cynthia L. Conner ----------------------------------- Cynthia L. Conner, Incorporator /s/ Harold F. Kalbach, Jr. ----------------------------------- Harold F. Kalbach, Jr., Incorporator |
EXHIBIT 3.22
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:31 AM 03/18/1998
981102760 - 2311326
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION DISTRIBUTION COMPANY
General Nutrition Services, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of General Nutrition
Services, Inc., resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Amendment of the Certificate of said
corporation, declaring said amendment to be advisable. The resolution
setting forth the proposed amendment is a follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "1" so that, as
amended, said Article shall be and read as follows:
"The name of the corporation is General Nutrition Distribution Company"
SECOND: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
THIRD: That the capital of said corporation shall not be reduced under of by
reason of said AMENDMENT.
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
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signed by Ronald M. Marmo to Assistant Secretary this 1st day of February, 1998.
GENERAL NUTRITION SERVICES, INC.
By: /s/ Ronald M. Marmo
----------------------------
Ronald M. Marmo
Assistant Secretary
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EXHIBIT 3.23
BY-LAWS
OF
GENERAL NUTRITION SERVICES, INC.
ARTICLE 1
Offices
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 103 Springer Building, 3411 Silverside Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
Stockholder's Meetings
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date and time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meetings. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of the Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the
Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person-or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by o proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
Directors
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successor shall be duly elected and qualified. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for-holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4. Quorum. At all meetings of the Board, a majority of the directors, in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
Executive Committee
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any Vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
Officers
5.1 Number. The executive officers of the Corporation shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors nay also chose such other officers and assistant
officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution of the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice Presidents. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from, office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
Share Certificates and Transfers
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed, and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
Corporate Records and Financial Statements
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLE 8
Emergency Powers
If due to death or incapacity by illness or injury there should be no Director available to call or attend who has been authorized to manage and direct business of the Corporation, then, until the earliest time upon which a meeting of the stockholders can be convened at which a quorum is represented or until a director is present and capable of action (whichever first occurs), the first of the persons described in the following list who is available and suffering no incapacity shall have authority to manage and direct the operation of the Corporation in continuing the customary business thereof, which authority shall include the power to sign checks upon the bank account of the Corporation: its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
Notice
Any notice required to permitted to be given to any director, officer or stockholder under these By-laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph charges prepaid, telex, telefax or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with the telegraph office. for transmission to such person.
ARTICLE 10
Amendments
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholders or directors of such purpose.
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
/s/ Robert V. Dunn
DATED: January 14, 1993 ------------------------------------
Secretary
|
EXHIBIT 3.24
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/03/1996
960096845 - 2609989
CERTIFICATE OF INCORPORATION
OF
GNC, LIMITED
FIRST. The name of this corporation shall be:
GNC, LIMITED
SECOND. Its registered office in the State of Delaware is to be located at 1013 Center Road, in the City of Wilmington, County of New Castle and its registered agent at such address is THE PRENTICE-HALL CORPORATION SYSTEM, INC.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is authorized to issue is:
One Thousand (1,000) shares without par value.
FIFTH. The name and address of the incorporator is as follows:
Pamela L. Simpson Corporation Service Company 1013 Centre Road Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this certificate of incorporation this third day of April, A.D., 1996.
/s/ Pamela L. Simpson --------------------------- Pamela L. Simpson Incorporator |
EXHIBIT 3.25
BY-LAWS
OF
GNC, LIMITED
ARTICLE 1
OFFICES
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 1013 Centre Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
STOCKHOLDER'S MEETINGS
2.1 Location. AH meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date or time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meeting. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of The Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they any determine but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at eh meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action Without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be sign by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
DIRECTORS
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successors shall be duly elected and qualified. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4 Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of the Board of Directors except as may be other wise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action Without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid as corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
EXECUTIVE COMMITTEE
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
OFFICERS
5.1 Number. The executive officers of the Corporation shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors may also choose such other officers and assistant officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution by the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice President. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts of disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
SHARE CERTIFICATES AND TRANSFERS
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation, or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer has not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
CORPORATE RECORDS AND FINANCIAL STATEMENTS
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLE 8
EMERGENCY POWERS
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
NOTICE
Any notice required to permitted to be given to any director, officer or stockholder under these By-Laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph, charges prepaid, telex, fax, or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the Untied States mail or with the telegraph office for transmission to such person.
ARTICLE 10
AMENDMENTS
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholder or director of such purpose
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: April 3, 1996
/s/ James M. Sander
-------------------
Secretary
|
EXHIBIT 3.26
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/03/1996
960096844 - 2609992
CERTIFICATE OF INCORPORATION
OF
GNC (CANADA) HOLDING COMPANY
FIRST. The name of this corporation shall be:
GNC (CANADA) HOLDING COMPANY
SECOND. Its registered office in the State of Delaware is to be located at 1013 Center Road, in the City of Wilmington, County of New Castle and its registered agent at such address is THE PRENTICE-HALL CORPORATION SYSTEM, INC.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is authorized to issue is:
One Thousand (1,000) shares without par value.
FIFTH. The name and address of the incorporator is as follows:
Pamela L. Simpson
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
|
repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this certificate of incorporation this third day of April, A.D., 1996.
/s/ Pamela L. Simpson -------------------------- Pamela L. Simpson Incorporator |
EXHIBIT 3.27
BY-LAWS
OF
GNC (CANADA) HOLDING COMPANY
ARTICLE 1
OFFICES
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 1013 Centre Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
STOCKHOLDER'S MEETINGS
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date or time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meeting. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of The Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they any determine but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action Without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be sign by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
DIRECTORS
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successors shall be duly elected and qualified. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4 Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of the Board of Directors except as may be other wise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action Without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid as corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
EXECUTIVE COMMITTEE
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
OFFICERS
5.1 Number. The executive officers of the Corporation shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors may also choose such other officers and assistant officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution by the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice President. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts of disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
SHARE CERTIFICATES AND TRANSFERS
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation, or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer has not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
CORPORATE RECORDS AND FINANCIAL STATEMENTS
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLE 8
EMERGENCY POWERS
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
NOTICE
Any notice required to permitted to be given to any director, officer or stockholder under these By-Laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph, charges prepaid, telex, fax, or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the Untied States mail or with the telegraph office for transmission to such person.
ARTICLE 10
AMENDMENTS
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholder or director of such purpose
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: April 3, 1996 /s/ James M. Sander
--------------------------
Secretary
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EXHIBIT 3.28
ARTICLES OF INCORPORATION
OF
INFORMED NUTRITION, INC.
The undersigned incorporator hereby forms a corporation under Chapter 607 of the laws of the State of Florida.
ARTICLE I. NAME
The name of the corporation shall be:
INFORMED NUTRITION, INC.
The address of the principal office of this corporation shall be Feather Sound Place, 2685 Ulmerton Road, Suite 2-G, Clearwater, Florida 34622, and the mailing address of the corporation shall be the same.
ARTICLE II. NATURE OF BUSINESS
This corporation may engage or transact in any or all lawful activities or business permitted under the laws of the United States, the State of Florida or any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is authorized to have outstanding at any one time is 1000 shares of common stock having $.01 par value per share.
ARTICLE IV. REGISTERED AGENT
The street address of the initial registered office of the corporation shall be 1201 Hays Street, Tallahassee, Florida 32301, and the name of the initial registered agent of the corporation at that address is Corporation Service Company.
ARTICLE V. TERM OF EXISTENCE
This corporation is to exist perpetually.
ARTICLE VI. DIRECTORS
All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of its Board of Directors, subject to any limitation set forth in these Articles of Incorporation. This corporation shall have one Director, initially. The names and addresses of the initial members of the Board of Directors are:
James M. Sander Feather Sound Place, 2685 Ulmerton Road Dir. Suite 2-G, Clearwater, Florida 34622
ARTICLE VII. INCORPORATOR
The name and street address of the incorporator to these Articles of Incorporation:
Corporation Service Company 1201 Hays Street Tallahassee, Florida 32301
IN WITNESS WHEREOF, the undersigned agent of Corporation Service Company, has hereunto set their hand and seal of Corporation Service Company on November 16, 1995.
CORPORATION SERVICE COMPANY
BY: /s/ Gail Shelby
----------------------------
Its Agent, Gail Shelby
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ACCEPTANCE OF REGISTERED AGENT DESIGNATED
IN ARTICLES OF INCORPORATION
Corporation Service Company, a Delaware corporation authorized to transact business in this State, having a business office identical with the registered office of the corporation named above, and having been designated as the Registered Agent in the above and foregoing Articles, is familiar with and accepts the obligations of the position of Registered Agent under Section 607.0505, Florida Statutes.
CORPORATION SERVICE COMPANY
By: /s/ Gail Shelby
--------------------------
Its Agent, Gail Shelby
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SMT/smt
EXHIBIT 3.29
BY-LAWS
OF
INFORMED NUTRITION, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation in the State of Florida shall be located at 1201 Hays Street, Tallahassee, Florida 32301, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
STOCKHOLDER'S MEETINGS
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Florida, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date or time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meeting. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of The Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they any determine but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at eh meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action Without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be sign by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
DIRECTORS
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successors shall be duly elected and qualified. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4 Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of the Board of Directors except as may be other wise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action Without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid as corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
EXECUTIVE COMMITTEE
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
OFFICERS
5.1 Number. The executive officers of the Corporator shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors may also choose such other officers and assistant officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution by the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any office or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice President. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts of disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. IF required by the Board of Directors, he shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
SHARE CERTIFICATES AND TRANSFERS
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation, or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer has not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
CORPORATE RECORDS AND FINANCIAL STATEMENTS
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary; and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant
ARTICLE 8
EMERGENCY POWERS
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible
ARTICLE 9
NOTICE
Any notice required to permitted to be given to any director, officer or stockholder under these By-Laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph, charges prepaid, telex, fax, or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the Untied States mail or with the telegraph office for transmission to such person.
ARTICLE 10
AMENDMENTS
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholder or director of such purpose.
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: November 16, 1995 _____________________________ Secretary
EXHIBIT 3.30
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
FIRST. The name of this corporation shall be:
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
SECOND. Its registered office in the State of Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County of New Castle and its registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is authorized to issue is:
One Thousand (1,000) shares without par value.
FIFTH. The name and address of the incorporator is as follows:
Dolores E.H. Cleaver Corporation Service Company 1013 Centre Road Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this certificate of incorporation this fourteenth day of August, A.D., 1996.
EXHIBIT 3.31
CERTIFICATE OF AMENDMENT
OF
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
CERTIFICATE OF INCORPORATION
*****
General Nutrition Government Services, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of General Nutrition Government Services, Inc., resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, That the Certificate of Incorporation of this corporation be amended by changing the First Article thereof so that, as amended said Article shall be and read as follows:
"The name of the corporation is GN Government Oldco Services, Inc."
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of Incorporation shall be effective upon filing.
IN WITNESS WHEREOF, said General Nutrition Government Services, Inc. has caused this certificate to be signed by James Sander, its Vice President*, this 28th day of October, 2003.
GN Government Oldco Services, Inc.
By: /s/ James M. Sander
------------------------------------
*Any authorized officer or the Chairman or Vice-Chairman of the Board of
Directors may execute this certificate.
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EXHIBIT 3.32
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GN GOVERNMENT OLDCO SERVICES, INC.
GN Government Oldco Services, Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by written consent filed with the minutes of the board, duly adopted a resolution setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and submitting such amendment to the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment are as follows:
RESOLVED, that ARTICLE 1 of the Corporation's Certificate of Incorporation be and it hereby is amended in its entirety to read as follows:
ARTICLE 1. Name.
The name of the corporation is General Nutrition Government Services, Inc. (the "Corporation").
SECOND: That any and all references to GN Government Oldco Services, Inc. shall hereby be changed to General Nutrition Government Services, Inc.
THIRD: That in lieu of a meeting and vote of stockholders, the stockholders have given their written consent of said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
FOURTH: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 228 and 242 of the General Corporation Law of the State of Delaware.
FIFTH: That this Certificate of Amendment shall be effective on November 10, 2003.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed this 10th day of November, 2003.
GN GOVERNMENT OLDCO SERVICES,
INC.
By: /s/ James Sander
----------------------------
Name: James Sander
Title: Vice President
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EXHIBIT 3.33
BY-LAWS
OF
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
ARTICLE 1
OFFICES
1.1 Registered Office. The registered office of the Corporation in the State of Delaware shall be located at 1013 Centre Road, Wilmington, County of New Castle, Delaware, or at such other location as shall be selected by the Board of Directors.
1.2 Other Offices. The Corporation shall have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE 2
STOCKHOLDER'S MEETINGS
2.1 Location. All meetings of the stockholders shall be held at the registered office of the Corporation in Delaware, or at such other place, either within or without this state, as the Board of Directors may designate.
2.2 Annual Meeting. The annual meeting of the stockholders shall be held on the second Thursday in June, in each year if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date or time as the Board of Directors may designate. At the annual meeting, the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the election of directors is not held on the date designated herein for the annual meeting of stockholders, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of stockholders as soon as practicable thereafter.
2.3 Special Meeting. Special meetings of the stockholders, for any purpose or purposes other than those regulated by statute, may be called at any time by the Chairman of The Board, the President, a majority of the Board of Directors or the holders of not less than one-fifth of all shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held thereafter at such time, not less than ten (10) nor more than sixty (60) days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request may issue the call. Business transacted at all special meetings shall be confined to the matters stated in the call and other matters relevant thereto.
2.4 Notice of Meetings. Written notice of any special meeting of the stockholders stating the place, the day and year and the general nature of the business to be transacted shall be mailed, postage prepaid, to each stockholder entitled to vote thereat at such address as appears on the transfer books of the Corporation at least five (5) days before such meeting, unless a greater period of notice is required by statute in a particular case.
2.5 Quorum. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, or by the Certificate of Incorporation. If a quorum is not present, the stockholders entitled to vote thereat, present person or by proxy, shall have the power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they any determine but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at eh meeting as originally noticed.
2.6 Voting Rights of Stockholders. At every stockholders' meeting, every stockholder entitled to vote shall have the right to one vote for every share standing in his name on the books of the Corporation.
2.7 Action Without a Meeting. Any action which may be taken at a meeting of the stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be sign by all the stockholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.
2.8 Telephone Meetings. One or more stockholders may participate in a meeting of stockholders by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 3
DIRECTORS
3.1 General Powers. The business and affairs of the Corporation shall be managed by a board of not less than three nor more than seven directors who need not be residents of Delaware nor stockholders in the Corporation. Except as hereinafter provided in the case of vacancies, each director, except a director who is elected to the first Board of Directors, shall be elected to serve for a term of one year and until his successors shall be duly elected and qualified. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these By-Laws directed or required to be exercised and done by the stockholders.
3.2 Vacancies. Any vacancy in the Board of Directors shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a director until his successor is elected by the stockholders who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose and held prior thereto.
3.3 Meetings. The meetings of the Board of Directors may be held at such place within the State of Delaware or elsewhere as a majority of the directors may from time to time determine or as may be designated in the notice calling the meeting. A regular meeting of the Board of Directors shall be held without other notice immediately after and at the same place as the annual meeting of stockholders. The Board may determine the time and place for holding additional regular meetings without other notice than by resolution. A special meeting of the Board may be called by the Chairman or President on at least 24 hours' notice to each director, given personally or by mail or telegram. A special meeting may also be called by the Chairman, President or Secretary in like manner and on like notice, on the written request of two directors.
3.4 Quorum. At all meetings of the Board, a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of the Board of Directors except as may be other wise specifically provided by statute or by the Certificate of Incorporation or these By-Laws.
3.5 Action Without a Meeting. If all the directors shall consent in writing to any action to be taken by the Corporation, such action shall be as valid as corporate action as though it had been authorized at a meeting of the Board of Directors.
3.6 Telephone Meetings. One or more directors may participate in a meeting of the Board of Directors by use of a conference telephone or similar communications equipment which allows all persons participating in the meeting to communicate with one another.
ARTICLE 4
EXECUTIVE COMMITTEE
The Board of Directors may, by resolution adopted by a majority of the whole Board, designate two or more of its number to constitute an Executive Committee which, to the extent provided in such resolution, shall have and exercise the authority to the Board of Directors in the management of the business of the Corporation during the interval between meetings of the Board. Any vacancy in the membership of the Executive Committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at each of its regular meetings.
ARTICLE 5
OFFICERS
5.1 Number. The executive officers of the Corporation shall be chosen by the Board and shall include a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Chairman may designate any Vice President as an Executive Vice President. Any two of the aforesaid offices may be filled by the same person. The Board of Directors may also choose such other officers and assistant officers and agents as the needs of the Corporation may require, and such persons shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be determined by resolution by the Board.
5.2 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If any office becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
5.3 Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation. The Chairman shall be charged with and have the direction and supervision of all the Corporation's business and operations. The Chairman of the Board or the President shall sign all share certificates of the Corporation or cause them to be signed in facsimile or otherwise as permitted by law.
5.4 President. The President shall be the chief operating officer of the Corporation. He shall have general and active management of the business of the Corporation, subject to the authority of the Chairman of the Board, and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Corporation. If the office of Chairman of the Board is vacant, the President shall have the authority to perform the duties of the Chairman.
5.5 Vice President. In the absence of the President or in the event of his death, inability or refusal to act, a Vice President designated by the Board shall perform the duties of the President, and when so acting, shall have all powers of and be subject to all the restrictions upon the President. Any Vice President shall perform such other duties as from time to time may be assigned to him by the President or the Board of Directors.
5.6 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts of disbursements in the books of the Corporation. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman or President and the Board of Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. IF required by the Board of Directors, he shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board of Directors for the faithful discharge of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
5.7 Secretary. The Secretary shall attend all meetings of the Board of Directors and shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a minute book to be kept for that purpose; and shall perform like duties for the Executive Committee of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature.
ARTICLE 6
SHARE CERTIFICATES AND TRANSFERS
6.1 Share Certificates. The share certificates of the Corporation shall be numbered and registered in the share register as they are issued. They shall show the registered holder's name and the number and class of shares represented thereby. Every share certificate shall be signed by the Chairman of the Board or the President and the Secretary or any Assistant Secretary and shall be sealed with the Corporation's seal, which may be a facsimile, engraved or printed thereon. In case any officer who has signed any share certificate shall have ceased to be such officer because of death, resignation, or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer has not ceased to be such at the date of its issuance.
6.2 Transfer of Shares. Upon surrender to the Corporation of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transaction recorded upon the books of the Corporation. The Corporation shall be entitled to treat the holder of record of any shares as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by statute.
6.3 Lost Certificates. The Board of Directors may direct a new certificate be issued in place of any certificate previously issued by the Corporation alleged to have been destroyed or lost, upon the making of an affidavit of that fact by the person claiming that the share certificate was lost or destroyed and the Board of Directors when authorizing such issue of a new certificate may, in its discretion and as a condition precedent to the issuance thereof require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation.
ARTICLE 7
CORPORATE RECORDS AND FINANCIAL STATEMENTS
7.1 Corporate Records. The Corporation shall keep at its registered office or principal place of business an original or a copy of the proceedings of the stockholders and the Board of Directors; its By-laws, including all amendments thereto, certified by the Secretary, and its share register.
7.2 Financial Statements. The Corporation need not provide regular financial statements to the stockholders. Any financial statements which the Board of Directors in its discretion may cause to be sent to the stockholders need not have been examined by an independent certified public accountant nor be accompanied by the report of such accountant.
ARTICLES 8
EMERGENCY POWERS
If due to death or incapacity by illness or injury there should be no
Director available to call or attend who has been authorized to manage and
direct business of the Corporation, then, until the earliest time upon which a
meeting of the stockholders can be convened at which a quorum is represented or
until a director is present and capable of action (whichever first occurs), the
first of the persons described in the following list who is available and
suffering no incapacity shall have authority to manage and direct the operation
of the Corporation in continuing the customary business thereof, which authority
shall include the power to sign checks upon the bank account of the Corporation:
its President, any Vice President, the Treasurer or Secretary.
The person managing and directing the business of the Corporation under the authority of this section is authorized and directed to call and convene a meeting of the stockholders at the earliest time possible.
ARTICLE 9
NOTICE
Any notice required to permitted to be given to any director, officer or stockholder under these By-Laws shall be in writing and shall be deemed to have been delivered if delivered in person or if sent by United States mail or by telegraph, charges prepaid, telex, fax, or TWX, addressed to such person at the address shown on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. If such notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the Untied States mail or with the telegraph office for transmission to such person.
ARTICLE 10
AMENDMENTS
The By-Laws of the Corporation may be adopted, amended or repealed by the vote of (i) the stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast hereon or (ii) a majority of the directors then in office, at any regular or special meeting duly convened after notice to the stockholder or director of such purpose:
CERTIFICATION
The foregoing is a true and correct copy of the By-Laws of the Corporation; and said By-Laws have not been rescinded, modified or amended and are in full force and effect on the date hereof.
Dated as of: August 14, 1996 /s/ James M. Sander
-----------------------------
Secretary
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EXHIBIT 3.34
CERTIFICATE OF INCORPORATION
OF
GN INVESTMENT, INC.
FIRST. The name of the corporation is GN Investment, Inc.
SECOND. The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, DE 19801, New Castle County, Delaware. The name of its registered agent at such address is Corporation Trust Company.
THIRD. The nature of business to be conducted or promoted and the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is one hundred (100) shares, all of which shall be Common Stock, no par value per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Guy E. Snyder, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2400
Chicago, Illinois 60601
SIXTH. The number of directors of the corporation shall be fixed from time to time by the By-Laws of the corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
SEVENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation.
EIGHTH. The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liabilities and expenses reasonably incurred or paid by such person in connection with such
action, suit or proceeding. The words "liabilities" and "expenses" shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys' fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefits of the heirs, executors and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article EIGHTH or otherwise.
For purposes of this Article EIGHTH, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
The provisions of this Article EIGHTH shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
TENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.
The undersigned incorporator, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this Certificate this 28th day of October, 2003.
/s/ Guy E. Snyder ------------------------------- Guy E. Snyder Sole Incorporator |
EXHIBIT 3.35
BY-LAWS
OF
GN INVESTMENT, INC.
ARTICLE I
OFFICES OF REGISTERED AGENT
Section 1.1 Registered Office and Agent. The Corporation shall have and maintain a registered office in Delaware and a registered agent having a business office identical with such registered office.
Section 1.2 Other Offices. The Corporation may also have such other office or offices in Delaware or elsewhere as the Board of Directors may determine or as the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. An annual meeting of the stockholders shall be held on the first Monday in July in each year beginning with the year 2004, at the hour of 10:00 a.m., or in the event the annual meeting is not held on such date and at such time, then on the date and at the time designated by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the directors shall not be elected at the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the stockholders may be called at any time by the President, and shall be called by the President or Secretary at the request of (a) a majority of the Board of Directors or (b) the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called. Such request shall state the purpose or purposes of the proposed meeting.
Section 2.3 Place of Meeting. Meetings of stockholders, whether annual or special, shall be held at such time and place as may be determined by the Board of Directors and designated in the call and notice or waiver of notice of such meeting; provided, that a waiver of notice signed by all stockholders may designate any time or place as the time and place for the holding of such meeting. If no designation is made, the place of meeting shall be at the Corporation's principal place of business.
Section 2.4 Notice of Meeting. Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the date of the meeting, or, in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, at least twenty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
Section 2.5 Fixing Record Date for Determination of Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date to be not more than sixty days prior to the date of a meeting of stockholders, the date of payment of a dividend or the date on which other action requiring determination of stockholders is to be taken, as the case may be. In addition, the record date for a meeting of stockholders shall not be less than ten days, or in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, not less than twenty days immediately preceding such meeting. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 2.6 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of the stockholders, the corporate books, or to vote at any meeting of the stockholders.
Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the Certificate of Incorporation or these By-laws, a majority of the outstanding shares of the Corporation, entitled to vote on a matter, present in person or represented by proxy, shall constitute a quorum for consideration of such matter at any meeting of stockholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are present in person or represented by proxy at said meeting, a majority of the shares so present in person or represented by proxy may adjourn the meeting from time to time without further notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 2.8 Voting Shares and Proxies. Each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, except as otherwise provided in the Certificate of Incorporation. Each stockholder entitled to vote shall be entitled to vote in person, or may authorize another person or persons to act for him by proxy executed in writing by such stockholder or by his duly authorized attorney-in-fact, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 2.9 Inspectors. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon the list of stockholders produced at the meeting in accordance with Section 2.6 hereof and upon their determination of the validity and effect of proxies, and they shall count all votes, report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each such report shall be in writing and signed by at least a majority of the inspectors, the report of a majority being the report of the inspectors, and such reports shall be prima facie evidence of the number of shares represented at the meeting and the result of a vote of the stockholders.
Section 2.10 Voting of Shares by Certain Holders. Shares of its own stock belonging to the Corporation, unless held by it in a fiduciary capacity, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.
Section 2.11 Action by Written Consent. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Section 2.12 Cumulative Voting. If the Certificate of Incorporation so provides, at all elections of directors of the Corporation, or at elections held under specified circumstances, each
holder of stock shall be entitled to as many votes as shall equal the number of votes which he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, except as may be otherwise provided by statute or the Certificate of Incorporation.
Section 3.2 Number, Tenure and Qualifications. The number of directors shall be not fewer than one (1) and not more than eight (8). The number may be increased or decreased from time to time by amendment of this Section, except as otherwise provided for in the Certificate of Incorporation. Each director elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders or residents of Delaware.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Section, immediately after and at the same place as the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors may be called at any time by the President or any two directors. The person or persons who call a special meeting of the Board of Directors may designate any place, either within or without Delaware, as the place for holding such special meeting. In the absence of such a designation the place of meeting shall be the Corporation's principal place of business.
Section 3.5 Notice of Special Meetings. Notice stating the place, date and hour of a special meeting shall be mailed not less than five days before the date of the meeting, or shall be sent by telegram or be delivered personally or by telephone not less than two days before the date of the meeting, to each director, by or at the direction of the person or persons calling the meeting. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
Section 3.6 Quorum and Manner of Acting. A majority of the number of directors as fixed in Section 3.2 hereof shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided in the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 3.7 Informal Action by Directors. Any action which is required by law or by these By-laws to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of all of the directors or all of the members of such committee, as the case may be, at a duly called meeting thereof, and shall be filed with the minutes of proceedings of the Board or committee.
Section 3.8 Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, members of the Board of Directors
or of any committee designated by such Board, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence at such meeting.
Section 3.9 Resignations. Any director may resign at any time by giving written notice to the Board of Directors, the President, or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 3.10 Vacancies.
(a) Vacancies and newly-created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors are elected and qualified or until their earlier resignation or removal.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and the directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified or until their earlier resignation or removal.
Section 3.11 Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, provided, however, that:
(a) if the Board is classified and unless otherwise provided in the Certificate of Incorporation, the stockholders may affect such removal only for cause; or
(b) if the Corporation has cumulative voting, and less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.
Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, the provisions of this Section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.
Section 3.12 Interested Directors.
(a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
Section 4.1 Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation which, to the extent provided in said resolution or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that any such committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, or amending the By-laws; and, unless the resolution, By-laws or Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law.
Section 4.2 Absence or Disqualification of Committee Member. In the absence or disqualification of any member of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 4.3 Record of Proceedings. The committees shall keep regular minutes of their proceedings and when required by the Board of Directors shall report the same to the Board of Directors.
ARTICLE V
OFFICERS
Section 5.1 Number and Titles. The officers of the Corporation shall be a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer and a Secretary. There shall be such other officers and assistant officers as the Board of Directors may from time to time deem necessary. Any two or more offices may be held by the same person.
Section 5.2 Election, Term of Office and Qualifications. The officers shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall be elected to hold office until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Election of an officer shall not of itself create contract rights.
Section 5.3 Removal. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 5.4 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 5.5 Duties. In addition to and to the extent not inconsistent with the provisions in these By-laws, the officers shall have such authority, be subject to such restrictions and perform such duties in the management of the business, property and affairs of the Corporation as may be determined from time to time by the Board of Directors.
Section 5.6 President. The President shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, he shall in general supervise the business and affairs of the Corporation and he shall see that resolutions and directions of the Board of Directors are carried into effect except when that responsibility is specifically assigned to some other person by the Board of Directors. Unless there is a Chairman of the Board who is present and who has the duty to preside, the President shall preside at all meetings of the stockholders and, if a director, at all meetings of the Board of Directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the President may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed or the execution of which is in the ordinary course of the Corporation's business, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. In general, he shall perform all duties incident to the office of President and such other duties as from time to time may be prescribed by the Board of Directors.
Section 5.7 Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there is more than one Vice President, the Vice President designated Executive Vice President by the Board of Directors and thereafter, or in the absence of such designation, the Vice Presidents in the order otherwise designated by the Board of Directors, or in the absence of such other designation, in the order of their election) shall perform the duties of the President, and when so acting, shall have all the authority of and be subject to all the restrictions upon the President. Except in those instances in
which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the Vice President (or each of them if there are more than one) may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. The Vice Presidents shall perform such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.8 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Corporation, and shall (a) have charge and custody
of, and be responsible for, all funds and securities of the Corporation; (b)
keep or cause to be kept correct and complete books and records of account
including a record of all receipts and disbursements; (c) deposit all funds and
securities of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with these By-laws; (d) from
time to time prepare or cause to be prepared and render financial statements of
the Corporation at the request of the President or the Board of Directors; and
(e) in general, perform all duties incident to the office of Treasurer and such
other duties as from time to time may be prescribed by the President or the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 5.9 Secretary. The Secretary shall (a) keep the minutes of the proceedings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all stock certificates prior to the issue thereof and to all documents the execution of which on behalf of the Corporation under its seal is necessary or appropriate; (d) keep or cause to be kept a register of the name and address of each stockholder, which shall be furnished to the Corporation by each such stockholder, and the number and class of shares held by each stockholder; (e) have general charge of the stock transfer books; and (f) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.10 Assistant Treasurers and Assistant Secretaries. In the absence of the Treasurer or Secretary or in the event of the inability or refusal of the Treasurer or Secretary to act, the Assistant Treasurer and the Assistant Secretary (or in the event there is more than one of either, in the order designated by the Board of Directors or in the absence of such designation, in the order of their election) shall perform the duties of the Treasurer and Secretary, respectively, and when so acting, shall have all the authority of and be subject to all the restrictions upon such office. The Assistant Treasurers and Assistant Secretaries shall also perform such duties as from time to time may be prescribed by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. If required by the Board of Directors, an Assistant Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.
Section 5.11 Salaries. The salaries and additional compensation, if any, of the officers shall be determined from time to time by the Board of Directors; provided, that if such officers are also directors such determination shall be made by a majority of the directors then in office.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 6.1 Stock Certificates. The issued shares of the Corporation shall be represented by certificates, and no class or series of shares of the Corporation shall be uncertificated shares. Stock certificates shall be in such form as determined by the Board of Directors and shall be signed by, or in the name of the Corporation by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any of or all the signatures on the certificates may be a facsimile. All certificates of stock shall bear the seal of the Corporation, which seal may be a facsimile, engraved or printed.
Section 6.2 Transfer of Shares. The shares of the Corporation shall be
transferable. The Corporation shall have a duty to register any such transfer
(a) provided there is presented to the Corporation or its transfer agents (i)
the stock certificate endorsed by the appropriate person or persons; and (ii)
reasonable assurance that such endorsement is genuine and effective; and, (b)
provided that (i) the Corporation has no duty to inquire into adverse claims or
has discharged any such duty; (ii) any applicable law relating to the collection
of taxes has been complied with; and (iii) the transfer is in fact rightful or
is to a bona fide purchaser. Upon registration of such transfer upon the stock
transfer books of the Corporation the certificates representing the shares
transferred shall be cancelled and the new record holder, upon request, shall be
entitled to a new certificate or certificates. The terms and conditions
described in the foregoing provisions of this Section shall be construed in
accordance with the provisions of the Delaware Uniform Commercial Code, except
as otherwise provided by the Delaware General Corporation Law. No new
certificate shall be issued until the former certificate or certificates for a
like number of shares shall have been surrendered and cancelled, except that in
case of a lost, destroyed, wrongfully taken or mutilated certificate a new one
may be issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors or the President may prescribe consistent with applicable
law.
ARTICLE VII
DIVIDENDS
Section 7.1 Dividends. Subject to the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock.
ARTICLE VIII
FISCAL YEAR
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.
ARTICLE IX
SEAL
Section 9.1 Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE X
WAIVER OF NOTICE
Section 10.1 Waiver of Notice. Whenever any notice is required to be given under these By-laws, the Certificate of Incorporation or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Contracts. The Board of Directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and the President may so authorize any officer or agent with respect to contracts or instruments in the usual and regular course of its business. Such authority may be general or confined to specific instances.
Section 11.2 Loans. No loan shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.
Section 11.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, or notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent as shall from time to time be authorized by the Board of Directors.
Section 11.4 Deposits. The Board of Directors may select banks, trust companies or other depositaries for the funds of the Corporation.
Section 11.5 Stock in Other Corporations. Shares of any other corporation which may from time to time be held by the Corporation may be represented and voted by the President, or by any proxy appointed in writing by the President, or by any other person or persons thereunto authorized by the Board of Directors, at any meeting of stockholders of such corporation or by executing written consents with respect to such shares where stockholder action may be taken by written consent. Shares represented by certificates standing in the name of the Corporation may be endorsed for sale or transfer in the name of the Corporation by the President or by any other officer thereunto authorized by the Board of Directors. Shares belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the name of any nominee designated for such purpose by the Board of Directors.
ARTICLE XII
AMENDMENT
Section 12.1 Procedure. These By-laws may be altered, amended or repealed and new by-laws may be adopted by the Board of Directors.
EXHIBIT 3.36
ARTICLES OF INCORPORATION
OF
GENERAL NUTRITION SALES CORPORATION
FIRST. The name of the corporation is General Nutrition Sales Corporation.
SECOND. The address of the corporation's registered office in the State of Arizona. The name of its registered agent at such address is CT Corporation System, 3225 N. Central Avenue, Phoenix, AZ 85012.
THIRD. The nature of business to be conducted or promoted and the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the Arizona Revised Statutes.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is one thousand (1000) shares, all of which shall be Common Stock, $1.00 par value per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Guy E. Snyder, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2400
Chicago, Illinois 60601
SIXTH. The number of directors of the corporation shall be fixed from time to time by the By-Laws of the corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
SEVENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation.
EIGHTH. The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liabilities and expenses reasonably incurred or paid by such person in connection with such
action, suit or proceeding. The words "liabilities" and "expenses" shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys' fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, By-Law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefits of the heirs, executors and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article EIGHTH or otherwise.
For purposes of this Article EIGHTH, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
The provisions of this Article EIGHTH shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the Arizona Revised Statutes or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Articles of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon shareholders herein are granted subject to this reservation.
TENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its shareholders or any class of them, any court of equitable jurisdiction within the State of Arizona may, on the application in a summary way of the Corporation or of any creditor or shareholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Chapter 14 of Title 10 of the Arizona Revised Statutes or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Chapter 14 of Title 10 of the Arizona Revised Statutes order a meeting of the creditors or class of creditors, and/or of the shareholders or class of shareholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the shareholders or class of shareholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH. No director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Chapter 8 of the Arizona Revised Statutes, or (iv) for any transaction from which the director derived an improper personal benefit.
The undersigned incorporator, for the purpose of forming a corporation pursuant to the Arizona Revised Statutes, has signed this Articles this 28th day of October, 2003.
/s/ Guy E. Snyder ----------------------------- Guy E. Snyder Sole Incorporator |
EXHIBIT 3.37
GENERAL NUTRITION SALES CORPORATION
* * * * *
BY - LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The known place of business shall be located in Phoenix, Arizona.
Section 2. The corporation may also have offices at such other places both within and without the State of Arizona as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors shall be held in Arizona, at such place as may be fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year 2004, shall be held on the first Monday of July, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m. at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be delivered not less than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Arizona as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the President, the board of directors, or the holders of not less than one-tenth of all the shares entitled to vote at the meeting.
Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, or at the direction of the board, President, the holders of not less than one-tenth of all the shares entitled to vote at the meeting to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of shareholders shall be limited to the purpose stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a plurality of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of voting by classes is required by law or the Articles of Incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact.
In all elections for directors every shareholder, entitled to vote, shall have the right to vote, in person or by proxy, the number of shares of stock owned by him, for as many persons as there are directors to be elected, or if the Articles of Incorporation so provide, to cumulate the vote of said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute the votes on the same principle among as many candidates as he may see fit.
Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be not fewer than one (1) and not more than eight (8). Directors need not be residents of the State of Arizona nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. The number of directors may be increased or decreased by amendment to the Articles of Incorporation or to these bylaws.
Section 2. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors, or by the shareholders, unless the Articles of Incorporation provides otherwise. A director elected to fill a vacancy shall be elected for the unexpired portion of the term of his predecessor in office. A director elected to fill a newly created directorship shall serve until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these bylaws directed or required to be exercised or done by the shareholders.
Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of Arizona, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of Arizona, and may be held by telecommunications or by any means of communication by which all persons participating in the meeting can hear each other during the meeting.
Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by the Chairman of the Board or by the President. Special meetings of the board of directors shall be preceded by <<days>> days' notice sent to directors of the date, time, and place of the meeting. Notice may be sent in writing or orally, and communicated in person, by telephone, telegraph, teletype, electronic communication, or by mail. The notice shall include the purpose of the meeting.
Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.
Section 6. Fifty percent of the directors shall constitute a quorum for the transaction of business unless a different number is required by law or by the Articles of Incorporation. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute or by the Articles of Incorporation. Whether or not a quorum shall be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority of the full board of directors, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the corporation, except as otherwise provided by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the Articles of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be President, a Vice-President, a Secretary and a Treasurer. The board of directors may also choose additional Vice-Presidents, and one or more Assistant Secretaries and Assistant Treasurers.
Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a President, one or more Vice-Presidents, a Secretary and a Treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other officers and agents as its shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENT
Section 8. The Vice-President, or if there shall be more than one, the Vice-Presidents in the order determined by the board of directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the board of directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the President and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
Section 14. The Assistant Treasurer, or, if there shall be more than one, the Assistant Treasurers in the order determined by the board of directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by certificates or shall be uncertificated. Certificates shall be signed by the President of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the board of directors to fix and determined the relative rights and preferences of subsequent series.
Section 2. The signature of the officer of the corporation upon a certificate may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue.
UNCERTIFICATED SHARES
Section 3. The board of directors of the corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. Shares already represented by certificates shall not be affected until they are surrendered to the corporation.
Section 4. Within days after the issue or transfer of shares without certificates, the corporation shall send shareholders a written statement of the information required on the certificates by A.R.S. Section 10-625 (B) and (C), and, if applicable, A.R.S. Section 10-627.
LOST CERTIFICATES
Section 5. The board of directors may direct a new certificate or an equivalent new uncertificated security in place of any certificate theretofore issued by the corporation alleged to have been lost, destroyed, or wrongfully taken. When authorizing such issue of a new certificate or an equivalent new uncertificated security, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost, destroyed or wrongfully taken.
TRANSFER OF SHARES
Section 6. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person
entitled thereto, and the old certificate called and the transaction recorded upon the books of the corporation.
FIXING OF RECORD DATE
Section 7. For the purpose of determining shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the record date be fixed not more than seventy days before the meeting or action requiring a determination of shareholders. For the purpose of determining those shareholders entitled to demand a special meeting, such record date shall be days before the special meeting. For the purpose of determining those shareholders entitled to take action without a meeting, such record date shall be days before the action requiring a determination of shareholders. For the purpose of determining those shareholders entitled to notice of and to vote at an annual or special shareholders' meeting, such record date shall be days before the meeting. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
LIST OF SHAREHOLDERS
Section 8. After fixing a record date for a meeting, the officer or agent in charge of the records for shares shall prepare an alphabetical list of the names of all shareholders who are entitled to notice of a shareholders' meeting, arranged by voting group, with the address of, and the number and class and series, if any, of shares held by each.
The shareholders' list shall be available for inspection by any shareholder for a period of 10 days prior to the meeting and shall be kept on file at the corporation's principal office. A shareholder or his agent or attorney shall be entitled on written demand to inspect the list, subject to the requirements of A.R.S. Section 10-1602(C) during regular business hours and at his expense, during the period it shall be available for inspection. The shareholders' list shall be made available at the meeting, and any shareholder or his agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. The shareholders' list shall be prima facie evidence of the identity of shareholders entitled to examine the shareholders' list or to vote at a meeting of shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the Articles of Incorporation relating thereto, if any, and to limitation by statute, distributions may be declared by the board of directors at any regular or special meeting, pursuant to law. Distributions may be made in cash, in property or as a dividend.
Share dividends may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series, subject to the provisions of the Articles of Incorporation.
Section 2. Before any distribution may be made, there may be set aside out of any funds of the corporation available for distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper to meet debts of the corporation as they become due in the usual course of business, or for such other purpose as the directors shall think conducive to the interest of the corporation.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Arizona." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board.
ARTICLE XIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the at any regular or special meeting of the shareholders at which a quorum shall be present or represented, by the affirmative vote of a plurality of the shares entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting.
EXHIBIT 3.38
CERTIFICATE OF INCORPORATION
OF
GNC US DELAWARE, INC.
FIRST. The name of the corporation is GNC US Delaware, Inc.
SECOND. The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, DE 19801, New Castle County, Delaware. The name of its registered agent at such address is Corporation Trust Company.
THIRD. The nature of business to be conducted or promoted and the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is two thousand (2000) shares, all of which shall be Common Stock, $ (.01) par value per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Guy E. Snyder, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2400
Chicago, Illinois 60601
SIXTH. The number of directors of the corporation shall be fixed from time to time by the By-Laws of the corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
SEVENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation.
EIGHTH. The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liabilities and expenses reasonably incurred or paid by such person in connection with such
action, suit or proceeding. The words "liabilities" and "expenses" shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys' fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefits of the heirs, executors and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article EIGHTH or otherwise.
For purposes of this Article EIGHTH, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
The provisions of this Article EIGHTH shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
TENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.
The undersigned incorporator, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this Certificate this 28th day of October, 2003.
/s/ Guy E. Snyder ----------------------- Guy E. Snyder Sole Incorporator |
EXHIBIT 3.39
BY-LAWS
OF
GNC US DELAWARE, INC.
ARTICLE I
OFFICES OF REGISTERED AGENT
Section 1.1 Registered Office and Agent. The Corporation shall have and maintain a registered office in Delaware and a registered agent having a business office identical with such registered office.
Section 1.2 Other Offices. The Corporation may also have such other office or offices in Delaware or elsewhere as the Board of Directors may determine or as the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. An annual meeting of the stockholders shall be held on the first Monday in July in each year beginning with the year 2004, at the hour of 10:00 a.m., or in the event the annual meeting is not held on such date and at such time, then on the date and at the time designated by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the directors shall not be elected at the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the stockholders may be called at any time by the President, and shall be called by the President or Secretary at the request of (a) a majority of the Board of Directors or (b) the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called. Such request shall state the purpose or purposes of the proposed meeting.
Section 2.3 Place of Meeting. Meetings of stockholders, whether annual or special, shall be held at such time and place as may be determined by the Board of Directors and designated in the call and notice or waiver of notice of such meeting; provided, that a waiver of notice signed by all stockholders may designate any time or place as the time and place for the holding of such meeting. If no designation is made, the place of meeting shall be at the Corporation's principal place of business.
Section 2.4 Notice of Meeting. Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the date of the meeting, or, in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, at least twenty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
Section 2.5 Fixing Record Date for Determination of Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date to be not more than sixty days prior to the date of a meeting of stockholders, the date of payment of a dividend or the date on which other action requiring determination of stockholders is to be taken, as the case may be. In addition, the record date for a meeting of stockholders shall not be less than ten days, or in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, not less than twenty days immediately preceding such meeting. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 2.6 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of the stockholders, the corporate books, or to vote at any meeting of the stockholders.
Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the Certificate of Incorporation or these By-laws, a majority of the outstanding shares of the Corporation, entitled to vote on a matter, present in person or represented by proxy, shall constitute a quorum for consideration of such matter at any meeting of stockholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are present in person or represented by proxy at said meeting, a majority of the shares so present in person or represented by proxy may adjourn the meeting from time to time without further notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 2.8 Voting Shares and Proxies. Each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, except as otherwise provided in the Certificate of Incorporation. Each stockholder entitled to vote shall be entitled to vote in person, or may authorize another person or persons to act for him by proxy executed in writing by such stockholder or by his duly authorized attorney-in-fact, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 2.9 Inspectors. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon the list of stockholders produced at the meeting in accordance with Section 2.6 hereof and upon their determination of the validity and effect of proxies, and they shall count all votes, report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each such report shall be in writing and signed by at least a majority of the inspectors, the report of a majority being the report of the inspectors, and such reports shall be prima facie evidence of the number of shares represented at the meeting and the result of a vote of the stockholders.
Section 2.10 Voting of Shares by Certain Holders. Shares of its own stock belonging to the Corporation, unless held by it in a fiduciary capacity, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.
Section 2.11 Action by Written Consent. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Section 2.12 Cumulative Voting. If the Certificate of Incorporation so provides, at all elections of directors of the Corporation, or at elections held under specified circumstances, each
holder of stock shall be entitled to as many votes as shall equal the number of votes which he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, except as may be otherwise provided by statute or the Certificate of Incorporation.
Section 3.2 Number, Tenure and Qualifications. The number of directors shall be not fewer than one (1) and not more than eight (8). The number may be increased or decreased from time to time by amendment of this Section, except as otherwise provided for in the Certificate of Incorporation. Each director elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders or residents of Delaware.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Section, immediately after and at the same place as the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors may be called at any time by the President or any two directors. The person or persons who call a special meeting of the Board of Directors may designate any place, either within or without Delaware, as the place for holding such special meeting. In the absence of such a designation the place of meeting shall be the Corporation's principal place of business.
Section 3.5 Notice of Special Meetings. Notice stating the place, date and hour of a special meeting shall be mailed not less than five days before the date of the meeting, or shall be sent by telegram or be delivered personally or by telephone not less than two days before the date of the meeting, to each director, by or at the direction of the person or persons calling the meeting. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
Section 3.6 Quorum and Manner of Acting. A majority of the number of directors as fixed in Section 3.2 hereof shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided in the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 3.7 Informal Action by Directors. Any action which is required by law or by these By-laws to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of all of the directors or all of the members of such committee, as the case may be, at a duly called meeting thereof, and shall be filed with the minutes of proceedings of the Board or committee.
Section 3.8 Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, members of the Board of Directors
or of any committee designated by such Board, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence at such meeting.
Section 3.9 Resignations. Any director may resign at any time by giving written notice to the Board of Directors, the President, or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 3.10 Vacancies.
(a) Vacancies and newly-created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors are elected and qualified or until their earlier resignation or removal.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and the directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified or until their earlier resignation or removal.
Section 3.11 Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, provided, however, that:
(a) if the Board is classified and unless otherwise provided in the Certificate of Incorporation, the stockholders may affect such removal only for cause; or
(b) if the Corporation has cumulative voting, and less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.
Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, the provisions of this Section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.
Section 3.12 Interested Directors.
(a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
Section 4.1 Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation which, to the extent provided in said resolution or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that any such committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, or amending the By-laws; and, unless the resolution, By-laws or Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law.
Section 4.2 Absence or Disqualification of Committee Member. In the absence or disqualification of any member of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 4.3 Record of Proceedings. The committees shall keep regular minutes of their proceedings and when required by the Board of Directors shall report the same to the Board of Directors.
ARTICLE V
OFFICERS
Section 5.1 Number and Titles. The officers of the Corporation shall be a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer and a Secretary. There shall be such other officers and assistant officers as the Board of Directors may from time to time deem necessary. Any two or more offices may be held by the same person.
Section 5.2 Election, Term of Office and Qualifications. The officers shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall be elected to hold office until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Election of an officer shall not of itself create contract rights.
Section 5.3 Removal. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 5.4 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 5.5 Duties. In addition to and to the extent not inconsistent with the provisions in these By-laws, the officers shall have such authority, be subject to such restrictions and perform such duties in the management of the business, property and affairs of the Corporation as may be determined from time to time by the Board of Directors.
Section 5.6 President. The President shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, he shall in general supervise the business and affairs of the Corporation and he shall see that resolutions and directions of the Board of Directors are carried into effect except when that responsibility is specifically assigned to some other person by the Board of Directors. Unless there is a Chairman of the Board who is present and who has the duty to preside, the President shall preside at all meetings of the stockholders and, if a director, at all meetings of the Board of Directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the President may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed or the execution of which is in the ordinary course of the Corporation's business, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. In general, he shall perform all duties incident to the office of President and such other duties as from time to time may be prescribed by the Board of Directors.
Section 5.7 Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there is more than one Vice President, the Vice President designated Executive Vice President by the Board of Directors and thereafter, or in the absence of such designation, the Vice Presidents in the order otherwise designated by the Board of Directors, or in the absence of such other designation, in the order of their election) shall perform the duties of the President, and when so acting, shall have all the authority of and be subject to all the restrictions upon the President. Except in those instances in
which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the Vice President (or each of them if there are more than one) may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. The Vice Presidents shall perform such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.8 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Corporation, and shall (a) have charge and custody
of, and be responsible for, all funds and securities of the Corporation; (b)
keep or cause to be kept correct and complete books and records of account
including a record of all receipts and disbursements; (c) deposit all funds and
securities of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with these By-laws; (d) from
time to time prepare or cause to be prepared and render financial statements of
the Corporation at the request of the President or the Board of Directors; and
(e) in general, perform all duties incident to the office of Treasurer and such
other duties as from time to time may be prescribed by the President or the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 5.9 Secretary. The Secretary shall (a) keep the minutes of the proceedings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all stock certificates prior to the issue thereof and to all documents the execution of which on behalf of the Corporation under its seal is necessary or appropriate; (d) keep or cause to be kept a register of the name and address of each stockholder, which shall be furnished to the Corporation by each such stockholder, and the number and class of shares held by each stockholder; (e) have general charge of the stock transfer books; and (f) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.10 Assistant Treasurers and Assistant Secretaries. In the absence of the Treasurer or Secretary or in the event of the inability or refusal of the Treasurer or Secretary to act, the Assistant Treasurer and the Assistant Secretary (or in the event there is more than one of either, in the order designated by the Board of Directors or in the absence of such designation, in the order of their election) shall perform the duties of the Treasurer and Secretary, respectively, and when so acting, shall have all the authority of and be subject to all the restrictions upon such office. The Assistant Treasurers and Assistant Secretaries shall also perform such duties as from time to time may be prescribed by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. If required by the Board of Directors, an Assistant Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.
Section 5.11 Salaries. The salaries and additional compensation, if any, of the officers shall be determined from time to time by the Board of Directors; provided, that if such officers are also directors such determination shall be made by a majority of the directors then in office.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 6.1 Stock Certificates. The issued shares of the Corporation shall be represented by certificates, and no class or series of shares of the Corporation shall be uncertificated shares. Stock certificates shall be in such form as determined by the Board of Directors and shall be signed by, or in the name of the Corporation by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any of or all the signatures on the certificates may be a facsimile. All certificates of stock shall bear the seal of the Corporation, which seal may be a facsimile, engraved or printed.
Section 6.2 Transfer of Shares. The shares of the Corporation shall be
transferable. The Corporation shall have a duty to register any such transfer
(a) provided there is presented to the Corporation or its transfer agents (i)
the stock certificate endorsed by the appropriate person or persons; and (ii)
reasonable assurance that such endorsement is genuine and effective; and, (b)
provided that (i) the Corporation has no duty to inquire into adverse claims or
has discharged any such duty; (ii) any applicable law relating to the collection
of taxes has been complied with; and (iii) the transfer is in fact rightful or
is to a bona fide purchaser. Upon registration of such transfer upon the stock
transfer books of the Corporation the certificates representing the shares
transferred shall be cancelled and the new record holder, upon request, shall be
entitled to a new certificate or certificates. The terms and conditions
described in the foregoing provisions of this Section shall be construed in
accordance with the provisions of the Delaware Uniform Commercial Code, except
as otherwise provided by the Delaware General Corporation Law. No new
certificate shall be issued until the former certificate or certificates for a
like number of shares shall have been surrendered and cancelled, except that in
case of a lost, destroyed, wrongfully taken or mutilated certificate a new one
may be issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors or the President may prescribe consistent with applicable
law.
ARTICLE VII
DIVIDENDS
Section 7.1 Dividends. Subject to the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock.
ARTICLE VIII
FISCAL YEAR
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.
ARTICLE IX
SEAL
Section 9.1 Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE X
WAIVER OF NOTICE
Section 10.1 Waiver of Notice. Whenever any notice is required to be given under these By-laws, the Certificate of Incorporation or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Contracts. The Board of Directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and the President may so authorize any officer or agent with respect to contracts or instruments in the usual and regular course of its business. Such authority may be general or confined to specific instances.
Section 11.2 Loans. No loan shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.
Section 11.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, or notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent as shall from time to time be authorized by the Board of Directors.
Section 11.4 Deposits. The Board of Directors may select banks, trust companies or other depositaries for the funds of the Corporation.
Section 11.5 Stock in Other Corporations. Shares of any other corporation which may from time to time be held by the Corporation may be represented and voted by the President, or by any proxy appointed in writing by the President, or by any other person or persons thereunto authorized by the Board of Directors, at any meeting of stockholders of such corporation or by executing written consents with respect to such shares where stockholder action may be taken by written consent. Shares represented by certificates standing in the name of the Corporation may be endorsed for sale or transfer in the name of the Corporation by the President or by any other officer thereunto authorized by the Board of Directors. Shares belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the name of any nominee designated for such purpose by the Board of Directors.
ARTICLE XII
AMENDMENT
Section 12.1 Procedure. These By-laws may be altered, amended or repealed and new by-laws may be adopted by the Board of Directors.
EXHIBIT 3.40
Microfilm Number ----------- Filed with the Department of State on JAN 29 1998
Entity Number 2797182 /s/ [ILLEGIBLE]
--------------------------------
Secretary of the Commonwealth
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CERTIFICATE OF LIMITED PARTNERSHIP
DSCB:15-8511(Rev 90)
In compliance with the requirement of 15 P[ILLEGIBLE].S. Section 8511 (relating to certificate of limited partnership), the undersigned, desiring to form a limited partnership, hereby certifies that:
1. The name of the limited partnership is: General Nutrition Distribution, L.P.
2. The (a) address of this limited partnership's initial registered office in this Commonwealth or (b) name of its commercial registered office provider and the country of venue is:
For a limited partnership represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the limited partnership is located for venue and official publication purposes.
3. The name and business address of each general partner of the partnership is:
Name Address
14th Floor, 300 Sixth Avenue
General Nutrition Incorporated Pittsburgh, Pennsylvania 15222
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4. (Check, and if appropriate complete, one of the following):
--- The formation of the limited partnership shall be effective upon filling this Certificate of Limited Partnership in the Department of State.
--- The formation of the limited partnership shall be effective
on: ------ at ------
Date Hour
5. The specified effective date, if any, is: --------------------------------- month day year hour,if any
IN TESTIMONY WHEREOF, the undersigned general partner(s) of the limited partnership has (have) executed this Certificate of Limited Partnership this 28 day of January, 1998.
GENERAL NUTRITION, INCORPORATED
General Partner
By: /s/ Ronald M. Marmo
-------------------------------
Title: Assistant Secretary
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98 JAN 29 AM 9:02
PA DEPT. OF STATE
EXHIBIT 3.41
AGREEMENT OF LIMITED PARTNERSHIP
OF
GENERAL NUTRITION DISTRIBUTION, L.P.
Dated: January 27, 1998
Federal E.I.N.: 23-2946511
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL DEFINITIONS ............................................................... 1
Section 1.1. Definitions ................................................................. 1
ARTICLE II - NAME; FORMATION; ORGANIZATIONAL CERTIFICATES; ADMISSION OF
PARTNERS ................................................................................. 5
Section 2.1. Name ........................................................................ 5
Section 2.2. Formation of Limited Partnership ............................................ 5
Section 2.3. Statutory Compliance ............................................. .......... 5
Section 2.4. Admission of Partners ............. ......................................... 5
ARTICLE III - PURPOSES ........................................................................ 6
Section 3.1. Purposes .................................................................... 6
ARTICLE IV - TERM ............................................................................. 6
Section 4.1. Term ........................................................................ 6
ARTICLE V - PRINCIPAL OFFICE; REGISTERED OFFICE ............................................... 6
Section 5.1. Principal Office ............................................................ 6
ARTICLE VI - MANAGEMENT ....................................................................... 6
Section 6.1. General Partner ............................................................. 6
Section 6.2. Powers of the General Partner ............................................... 7
Section 6.3. Tax Controversies ........................................................... 7
Section 6.4. Limitations on Authority .................................................... 7
Section 6.5. Major Management Decisions .................................................. 8
Section 6.6. Reserve...................................................................... 8
Section 6.7. General Partner Fees......................................................... 8
Section 6.8. Interest of General Partner in Certain Transactions.......................... 9
Section 6.9. Reliance Upon Experts ....................................................... 9
Section 6.10. Other Permissible Activities ............................................... 9
ARTICLE VII - CAPITAL ......................................................................... 9
Section 7.1. Initial Capital Contributions................................................ 9
Section 7.2. Withdrawals from Capital Accounts ........................................... 9
Section 7.3. Capital Accounts............................................................. 9
Section 7.4. Determination of and Adjustments to Book Value and Capital Accounts.......... 10
Section 7.5. Additional Capital Contributions............................................. 12
Section 7.6. Liability for Continuing Obligations ........................................ 12
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ARTICLE VIII - PROFITS, LOSSES AND DISTRIBUTIONS............................................... 12
Section 8.1. Positive Cash Flow........................................................... 12
Section 8.2. Distribution of Positive Cash Flow........................................... 13
Section 8.3. Determination of Net Book Profit and Net Book Losses ........................ 13
Section 8.4. Allocation of Net Book Profits and Net Book Losses .......................... 14
Section 8.5. Allocations to Comply With Applicable Treasury Regulations................... 14
Section 8.6. Federal Income Tax Allocations .............................................. 16
Section 8.7. Allocation of Taxable Income and Loss and Tax Credits on the Transfer
of a Partnership Interest ................................................. 17
Section 8.8. Special Tax Audit Allocations ............................................... 17
Section 8.9. Interest .................................................................... 17
Section 8.10. Credits .................................................................... 17
Section 8.11. Distributions in Kind ...................................................... 17
ARTICLE IX - BOOKS OF ACCOUNT, RECORDS AND REPORTS ............................................ 18
Section 9.1. Books and Records ........................................................... 18
Section 9.2. Tax Information ............................................................. 18
Section 9.3. Accounting Principles ....................................................... 18
Section 9.4. Banks ............... ....................................................... 18
ARTICLE X - FISCAL YEAR ....................................................................... 19
Section 10.1. Fiscal Year ................................................................ 19
ARTICLE XI - LIABILITY OF GENERAL PARTNER; EXCULPATION ........................................ 19
Section 11.1. Liability of General Partner ............................................... 19
Section 11.2. Exculpation ................................................................ 19
ARTICLE XII - RIGHTS AND LIMITATIONS OF
LIMITED PARTNERS; MEETINGS; AMENDMENTS ................................................... 19
Section 12.1. Limited Assessment.......................................................... 19
Section 12.2. No Right to Manage ......................................................... 19
Section 12.3. Priority ................................................................... 20
Section 12.4. Death, Disability, Etc., of a Limited Partner .............................. 20
Section 12.5. Meetings ................................................................... 20
Section 12.6. Voting Rights of Limited Partners .......................................... 21
Section 12.7. Proposal and Adoption of Amendments Generally .............................. 22
Section 12.8. Limitations on Amendments .................................................. 23
Section 12.9. Amendments on Admission or Withdrawal of Partners........................... 23
Section 12.10. Registration............................................................... 24
Section 12.11. Continuation of Limited Partner Status..................................... 24
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ARTICLE XIII - TRANSFERS BY LIMITED PARTNERS;
REPURCHASE OF INTERESTS......................................................... 24
Section 13.1. Transfers .................................................................. 24
Section 13.2. Compliance with Securities Laws............................................. 25
Section 13.3. Steps Required to Transfer ................................................. 25
Section 13.4. Admission of Substitute Limited Partner..................................... 25
Section 13.5. Status of Transferee........................................................ 26
Section 13.6. Expenses ................................................................... 26
Section 13.7. Death, Bankruptcy, Incompetence, Etc., of a Limited Partner................. 26
Section 13.8. Transferee(s)............................................................... 26
Section 13.9. Tax Elections............................................................... 26
Section 13.10. Admission of Additional Limited Partners................................... 26
Section 13.11. Amendment of Certificate................................................... 27
ARTICLE XIV - CHANGES TO THE GENERAL PARTNER .................................................. 27
Section 14.1. Removal of the General Partner.............................................. 27
Section 14.2. Withdrawal of the General Partner........................................... 28
Section 14.3. Right of the General Partner Upon Removal................................... 28
Section 14.4. Transfer of Interest........................................................ 28
Section 14.5. Continuing Liability ....................................................... 28
Section 14.6. Successor General Partner................................................... 29
Section 14.7. Involuntary Assignment by a General Partner................................. 29
ARTICLE XV - DISSOLUTION OF THE PARTNERSHIP.................................................... 29
Section 15.1. Events of Dissolution....................................................... 29
Section 15.2. Election to Continue the Partnership........................................ 30
ARTICLE XVI - ADDITIONAL PROVISIONS CONCERNING
DISSOLUTION OF THE PARTNERSHIP................................................... 30
Section 16.1. Winding Up Affairs; Liquidation............................................. 30
Section 16.2. Time for Liquidation........................................................ 30
Section 16.3. Required Reports ........................................................... 31
Section 16.4. Termination................................................................. 31
Section 16.5. Distribution of Proceeds From the Liquidation of the Partnership............ 31
Section 16.6. Capital Account Adjustments................................................. 31
Section 16.7. Compliance With Treasury Regulations........................................ 32
Section 16.8. No Recourse................................................................. 32
Section 16.9. Reserves.................................................................... 32
ARTICLE XVII - NOTICES......................................................................... 33
Section 17.1. Notices .................................................................... 33
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ARTICLE XVIII - REPRESENTATIONS AND WARRANTIES................................................. 33
Section 18.1. The General Partner......................................................... 33
Section 18.2. Limited Partners............................................................ 33
ARTICLE XIX - INDEMNIFICATION.................................................................. 34
Section 19.1. Indemnification ............................................................ 34
Section 19.2. Conditions.................................................................. 34
Section 19.3. Successful Defense ......................................................... 35
Section 19.4. Exclusions.................................................................. 35
Section 19.5. Expenses ................................................................... 35
ARTICLE XX - MISCELLANEOUS..................................................................... 35
Section 20.1. Certificates, Etc........................................................... 35
Section 20.2. Power of Attorney .......................................................... 35
Section 20.3. Partners' Relationship Inter Se ........................................... 36
Section 20.4. Partition Waived ........................................................... 36
Section 20.5. Entire Agreement ........................................................... 36
Section 20.6. Governing Law .............................................................. 36
Section 20.7. Binding Effect ............................................................. 36
Section 20.8. Gender and Number .......................................................... 36
Section 20.9. Captions ........................ .......................................... 36
Section 20.10. Severance ................................................................. 36
Section 20.11. Execution of Instruments; Reliance by Third Parties ....................... 37
Section 20.12. Counterparts .............................................................. 37
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AGREEMENT OF LIMITED PARTNERSHIP
OF
GENERAL NUTRITION DISTRIBUTION. L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (hereinafter referred to as the "Agreement") is made and entered into as of the 27th day of January, 1998, by and between General Nutrition, Incorporated, a Pennsylvania corporation with a mailing address at 14th Floor, 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222, (hereinafter referred to as the "General Partner") and the entity whose name is set forth in Exhibit A to this Agreement (together with such other persons or entities that may be added to Exhibit A and become parties hereto) as the limited partners (hereinafter such persons are referred to individually as a "Limited Partner" and collectively as the "Limited Partners").
WITNESSETH:
WHEREAS, the parties to this Agreement desire to organize a limited partnership and to set forth in writing the agreement pursuant to which the Partnership will conduct its business.
NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I - GENERAL DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Act" shall mean the Federal Securities Act of 1933, as amended.
"Affiliate" shall, with respect to the General Partner, mean any person currently or indirectly controlling or controlled by or under common control with the General Partner.
"Agreement" shall mean this Agreement of Limited Partnership of the Partnership.
"Book Value" shall mean, with respect to any Partnership
asset, the asset's book value as carried on the books and records of the
Partnership, determined in compliance with the provisions of the Code and
applicable Treasury Regulations, including Treasury Regulation Section 1.704-1
(b)(2)(iv), and more particularly described in Section 7.4 of this Agreement.
"Capital Account" shall mean the capital account established for each Partner and maintained pursuant to the terms of this Agreement in accordance with the provisions of applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv).
"Capital Contribution" shall mean, with respect to any Partner, the contribution made by or on behalf of such Partner in accordance with Article VII hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto.
"Depreciation" shall mean, for each fiscal year or other period, the depreciation, amortization or other cost recovery expense determined pursuant to Section 8.3(a) of this Agreement.
"Gross Fair Market Value" shall mean the agreed fair market value of an asset determined without taking into account any liabilities which are secured by such asset or which are otherwise associated with such asset.
"Initial Capital Contribution" shall mean the initial capital contributed or deemed contributed to the Partnership by the Partners as listed on Exhibit B to this Agreement.
"Interest" shall mean a Partner's respective ownership interest in and to the Partnership.
"Limited Partner" shall mean each person or entity listed on Exhibit A hereto, and who is a limited partner as defined by the Partnership Act.
"Minimum Gain" shall mean the aggregate amount of gain (of
whatever character) computed with respect to each property of the Partnership
that secures a Third Party Nonrecourse Liability of the Partnership, that would
be recognized by the Partnership if, in a taxable transaction, the Partnership
were to dispose of such property in full satisfaction of such Third Party
Nonrecourse Liability. The amount of Minimum Gain and the amount of any
Partner's share of Minimum Gain shall be determined in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
"Net Book Losses and Net Book Profits" shall have the meanings ascribed to such terms in Section 8.3 of this Agreement.
"Net Fair Market Value" shall mean, in connection with the contribution of an asset to the Partnership by a Partner and/or in connection with the distribution of an asset by the Partnership to a Partner, the Gross Fair Market Value of such asset reduced by any liabilities (a) assumed by such Partner or the Partnership or (b) subject to which such Partner or the Partnership takes such asset.
"Nonrecourse Deduction" shall mean an allocation of loss and/or expense (or item thereof) attributable to Third Party Nonrecourse Liabilities, determined in accordance with the provisions of applicable Treasury Regulations, including Treasury Regulation Section 1.704-2.
"Participating Percentage" shall mean, with respect to a Partner, the percentage set forth next to such Partner's name on Exhibit B to this Agreement.
"Partner Nonrecourse Deduction" shall mean an allocation of loss and/or expense (or item thereof) attributable to Partner Nonrecourse Liabilities, determined in accordance with the provisions of applicable Treasury Regulations, including Treasury Regulation Section 1.704-2.
"Partner Nonrecourse Liabilities" shall mean liabilities of the Partnership which are nonrecourse debt (as defined in applicable Treasury Regulations, including Treasury Regulation Section 1.704-2) but with respect to which one or more Partners (or the affiliate of any Partner) bears the economic risk of loss (as defined in applicable Treasury Regulations promulgated under Code Section 752).
"Partner Nonrecourse Liability Minimum Gain" shall mean the
aggregate amount of gain (of whatever character), computed with respect to each
property of the Partnership which secures a Partner Nonrecourse Liability of the
Partnership, that would be recognized by the Partnership if, in a taxable
transaction, the Partnership were to dispose of such property in full
satisfaction of such Partner Nonrecourse Liability. The amount of Partner
Recourse Liability Minimum Gain and the amount of any Partner's share of Partner
Nonrecourse Liability Minimum Gain shall be determined in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
"Partners" shall mean the General Partners and Limited Partners of the Partnership.
"Partnership" shall mean the limited partnership created under this Agreement.
"Partnership Act" shall mean the Pennsylvania Revised Uniform Limited Partnership Act (Act of December 21, 1988, P.L. 1444, No. 177; 15 Pa. C.S.A. Section 8501 et seq.
"Partnership Interest" or "Interest" means each Partner's percentage ownership in the Partnership as set forth in Exhibit B hereto.
"Partnership Interest Valuation" shall mean, with respect to the interest in the Partnership of any Partner, the value determined in good faith by the accountant to the Partnership or value determined by the appraisal of an independent, third party appraiser.
"Person" shall mean an individual, corporation, partnership, trust, joint venture, proprietorship, estate or other incorporated or unincorporated enterprise, entity or organization of any kind whatsoever.
"Positive Cash Flow" shall have the meaning ascribed to it in
Section 8.1 of this Agreement.
"Reserve" shall mean the reserve account established by the Partnership to provide for anticipated capital improvements and other deferred maintenance, as provided for in Section 6.6 of this Agreement.
"Substitute Limited Partner" shall mean any Person admitted as a Limited Partner of the Partnership in substitution of another Limited Partner in accordance with the provisions of this Agreement.
"Tax Matters Partner" shall mean the Partner designated in this Agreement as the "tax matters partner" as defined in Code Sections 6221,6231 (a)(7) and 6233.
"Third Party Nonrecourse Liabilities" shall mean liabilities of the Partnership which are nonrecourse debt (as defined in applicable Treasury Regulations, including Treasury Regulation Section 1.704-2) and which are not Partner Nonrecourse Liabilities.
"Total Minimum Gain" shall mean the aggregate of the Minimum Gain and the Partner Nonrecourse Liability Minimum Gain.
"Treasury Regulations" shall mean any applicable regulations promulgated under the Code.
"Units" shall mean the limited partnership interests in the Partnership, with each Limited Partner being treated as the holder of one (1) Unit for each One Thousand Dollars ($ 1,000.00) contributed (or deemed contributed) by such Limited Partner to the Partnership. The number of Units of each Limited Partner shall be set forth next to such-Limited Partner's name on Exhibit B to this Agreement.
"Vote" refers to the right of the Partners, subject to all limitations set forth in this Agreement, to decide any matter that may be submitted for decision by the Partners in accordance with the express written terms of this Agreement or under the provisions of the Partnership. Each Partner shall be entitled to cast one vote for every Unit interest held of record by it on the date when notice is given of the matter to be voted on or consented to by the Partners. A "Simple Majority Vote" of the Partners means a vote of over Fifty Percent (50%) of the Units which are entitled to be voted, a "Required Vote" means a vote of at least Sixty-Seven Percent (67%) of the Units which are entitled to be voted, and a "Unanimous Vote" means a vote of One Hundred Percent (100%) of the Partners eligible to vote. Except as otherwise expressly provided in this Agreement, a Simple Majority Vote shall be sufficient to pass and approve any matter submitted to a Vote of the Partners. Whenever a Vote of the Partners is required or permitted, a written consent to the action to be taken signed by the Partners holding the required percentage may be used in lieu of holding a formal meeting at which a Vote is taken.
ARTICLE II - NAME; FORMATION;
ORGANIZATIONAL CERTIFICATES; ADMISSION OF PARTNERS
Section 2.1. Name. The name of the Partnership shall be General Nutrition Distribution, L.P. The business of the Partnership shall be conducted under this name and such other registered fictitious names as the General Partner, in its sole discretion, shall determine to be appropriate.
Section 2.2. Formation of Limited Partnership. The Partnership shall commence existence by filing a Certificate of Limited Partnership with the Secretary of State of the Commonwealth of Pennsylvania. With this Agreement, the Partners hereby agree to confirm their agreement and form a limited partnership pursuant to the provisions of the Partnership Act for the limited purposes and upon the terms and conditions set forth herein.
Section 2.3. Statutory Compliance.
(a) The Partnership shall exist under and be governed by the applicable laws of the Commonwealth of Pennsylvania. The Partners shall make all filings and disclosures required by, and shall otherwise comply with, all such laws. Except as otherwise provided in this Agreement or required by law, the rights, duties, status and liabilities of the Partners and the formation, administration, dissolution and continuation or termination of the Partnership shall be as provided in the Partnership Act.
(b) Upon the request of the General Partner, the Limited Partners shall execute, acknowledge, swear to and deliver all certificates and other instruments and perform such additional acts consistent with the terms of this Agreement as may be necessary to enable the General Partner to form, qualify, register, continue, conduct the business of and terminate the Partnership as a limited partnership under the laws of the Commonwealth of Pennsylvania and in accordance with the provisions of this Agreement.
Section 2.4. Admission of Partners. A Person shall be deemed to have been admitted as a Partner:
(a) on the date this Agreement and a Certificate of Limited Partnership are fully executed by the Partners, and the Certificate of Limited Partnership is filed with the Pennsylvania Department of State; or
(b) if applicable, with respect to any additional Limited Partners or Substitute Limited Partners, on the date such Person complies with the requirements for admission to the Partnership set forth herein.
ARTICLE III - PURPOSES
Section 3.1. Purposes. The purpose to which the Partnership is organized are:
(a) To purchase, acquire, own, hold, develop, manage, improve, maintain, repair, lease, rent, mortgage, encumber, sell, resell, and dispose of securities, real property, personal property, chooses in action and/or such other assets as the General Partner shall in its sole discretion, determine from time to time to be appropriate;
(b) To invest, reinvest and hold for investment or other purposes beneficial to the Partners the assets of the Partnership, and to carry on one or more enterprises, ventures, or other activities as the General Partner may from time to time determine in its sole discretion;
(c) To carry out any and all activities not prohibited under the Act or the Partnership Act; and
(d) To perform any acts the General Partner in its sole discretion determines to be necessary, desirable or convenient to accomplish the foregoing purposes and all things incident thereto, except to the extent specifically provided herein.
ARTICLE IV-TERM
Section 4.1. Term. The term of the Partnership shall be from the date of the filing of the Certificate referenced in Section 2.2 hereof, to February 1,2029, unless sooner terminated as hereinafter provided in this Agreement.
ARTICLE V - PRINCIPAL OFFICE; REGISTERED OFFICE
Section 5.1. Principal Office. The principal office of the Partnership shall be at 14th Floor, 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222. The General Partner may change or relocate the principal office of the Partnership and establish other or additional places of business of the Partnership by giving written notice thereof to the Limited Partners.
ARTICLE VI - MANAGEMENT
Section 6.1. General Partner. The General Partner shall have the sole, exclusive and absolute right, authority and obligation to act for, on behalf of, and manage the Partnership for the purposes of the Partnership as set forth in this Agreement and, except as otherwise expressly provided in this Agreement, the decision-making and plenary authority to implement the purposes of the Partnership shall reside with the General Partner.
Section 6.2. Powers of the General Partner.
(a) The General Partner is hereby authorized and empowered to carry out and implement the purposes of the Partnership and, in accordance therewith, the General Partner shall, except as otherwise expressly provided in this Agreement, have all the rights and powers of a partner in a general partnership.
(b) The Limited Partners specifically approve and consent to the exercise by the General Partner of the powers described in Paragraph (a) of this Section 6.2.
Section 6.3. Tax Controversies. The General Partner shall be the Tax Matters Partner and shall act as the agent of the Partnership to resolve any question or controversy with the Internal Revenue Service or other taxing authority involving the Partnership and may, on behalf of the Partnership, incur any expenses such Partner shall deem necessary or advisable in the interest of the Partners in connection with any such question or controversy, including professional fees and the cost of any protest, litigation and/or appeal. Limited Partners shall be bound by the terms of any settlement entered into by General Partner on behalf of the Partnership or all Partners.
Section 6.4. Limitations on Authority. The General Partner shall not take any action which:
(a) would cause any Limited Partner to be liable for any amounts in excess of the amounts which such Limited Partner is expressly obligated to contribute to the capital of the Partnership pursuant to this Agreement;
(b) would require a Major Management Decision as described in Section 6.5 of this Agreement without the consent of the Limited Partners as provided in Section 12.6(b) hereof;
(c) would make it impossible to carry on the ordinary business of the Partnership;
(d) would directly result in a judgment being entered, including by confession, against the Partnership;
(e) retain the income in the Partnership in an amount greater than that determined by the General Partner to be necessary for the reasonable needs of the Partnership;
(f) would result in the General Partner's obtaining possession of Partnership property or receiving an assignment of the Partnership's rights in specific Partnership property, other than for a Partnership purpose; or
(g) would result in the admission or substitution of a person as a General Partner of the Partnership, except with the required vote of the Limited Partners.
Section 6.5. Major Management Decisions. A "Major Management Decision" shall be required for the Partnership to engage in any of the following actions:
(a) Directly or indirectly acquire or convey, in a single transaction, real property, including any interests therein, and tangible and intangible personal property and interests therein on behalf of the Partnership with a purchase price in excess of Two Million Dollars ($2,000,000.00) (as adjusted annually for changes in the Consumer Price Index ("CPl"));
(b) Refinance all or substantially all of the indebtedness of the Partnership (whether in the same or a greater or lesser amount or with the same or a different lender);
(c) Approve the merger or consolidation of the Partnership with or into any entity;
(d) Sell, transfer or otherwise dispose of all or substantially all of the assets of the Partnership, or dissolve, liquidate or terminate the Partnership;
(e) Issue, grant, sell or authorize the issuance, grant or sale of any equity or debt security or security convertible into any equity or debt security or any options or rights relating thereto of the Partnership;
(f) Incur, become a guarantor or surety for, or make any single expenditure in an amount exceeding Two Million Dollars ($2,000,000.00) on behalf of the Partnership (as adjusted annually for changes in the CPI);
(g) Make an assignment on behalf of the Partnership for the benefit of creditors or file a voluntary petition in bankruptcy on behalf of the Partnership.
Section 6.6. Reserve. Though it is anticipated that the majority of the Net Profits will be distributed to Partners, the General Partner may maintain a reserve fund for anticipated future capital or extraordinary expenditures of the Partnership or for the deferred maintenance costs of the property of the Partnership.
Section 6.7. General Partner Fees. The General Partner shall be entitled to receive, in consideration for services to be performed for the Partnership pursuant to the terms of this Agreement, including without limitation, the General Partner's management of the Partnership and the Partnership assets and property and the preparation of reports, a fair and reasonable management fee, as determined by the General Partner, in a manner consistent with its duties to the Partnership, which management fee shall be based upon the General Partner's administration of the Partnership, the relative financial benefit accruing to the Partnership as the result of the General Partner's management, and such other fees as shall be reasonable under all of the facts and circumstances. Such fees shall be paid as, if and when such funds shall become available to the Partnership.
Section 6.8. Interest of General Partner in Certain Transactions. The General Partner shall not be deemed to have received on behalf of the Partnership commissions, fees or other compensation paid to any Affiliate, or any entity in which the General Partner owns a beneficial interest.
Section 6.9. Reliance Upon Experts. The General Partner may act and shall be protected in acting in good faith on the opinion or advice of, or information obtained from any counsel, accountant, engineer, appraiser or other expert or advisor, whether retained or employed by the Partnership, the General Partner, or otherwise, in relation to any matter connected with the administration or operation of the business and affairs of the Partnership.
Section 6.10. Other Permissible Activities. No Partner is prevented hereby from engaging in other activities for profit, whether as an investment, an active business or otherwise. The Partners and their Affiliates are hereby authorized, during the life of the Partnership, to acquire real and personal properties in their individual capacity and not offer same to the Partnership.
ARTICLE VII - CAPITAL
Section 7.1. Initial Capital Contributions. This Agreement contemplates that the General Partner and the Limited Partners will make, or be deemed to make, cash or other property contributions to the Partnership in exchange for their respective Interests in the Partnership. The Partners shall contribute, or be deemed to contribute, to the capital of the Partnership, as their Initial Capital Contributions, the sums and property set forth on Exhibit B to this Agreement. Pursuant to applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv)(d), the Book Value of any property contributed to the Partnership by the Partners as all or a portion of their Initial Capital Contributions shall reflect the agreed fair market value of such property on the date of its contribution to the Partnership. Each Partner's contribution to the Partnership shall be reflected in such Partner's respective Capital Account in the amount set forth next to such Partner's name on Exhibit B to this Agreement and each Limited Partner subscribes and agrees to contribute to the capital of the Partnership such amounts.
Section 7.2. Withdrawals from Capital Accounts. No Partner shall be entitled to receive interest on or to withdraw any amount from such Partner's Capital Account other than as expressly provided for in this Agreement.
Section 7.3. Capital Accounts. A Capital Account shall be established and maintained for each Partner in compliance with the provisions of applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv). In general, such Capital Accounts shall be maintained as follows:
(a) Each Partner's Capital Account shall be (i) credited with the amount of cash or other property contributed by, or deemed to be contributed by, such Partner to the
Partnership, including, without limitation, as a result of a Funding Shortfall,
(ii) credited or debited, as the case may be, with such Partner's allocation of
income, gain, loss and expense made to such Partner pursuant to the terms of
this Agreement and (iii) debited with the amount of cash and the Net Fair Market
Value of property distributed to such Partner pursuant to the terms of this
Agreement.
(b) If any Partner's Interest in the Partnership is sold, exchanged or liquidated, the following special rules shall apply when determining the Capital Account balances of any new or remaining Partners:
(i) If such sale or exchange (together with such other sales or exchanges of interests in the Partnership as shall occur during any relevant time period) causes a termination of the Partnership within the meaning of Code Section 708(b)(1)(B), the Capital Accounts of the Partnership shall be redetermined in accordance with applicable Treasury Regulations, including Treasury Regulation Section 1.708-1(b)(1)(iv);
(ii) If such sale or exchange does not cause a termination of the Partnership within the meaning of Code Section 708(b)(l)(B) and if the Partnership has in effect at the time of such sale or exchange an election in accordance with the provisions of Code Section 754, and the Treasury Regulations promulgated thereunder, the Capital Account of the selling or exchanging Partner shall be carried over to the transferee Partner and there shall not be made to the Capital Account of the Partner who receives the special tax basis adjustment under Code Section 743 a corresponding adjustment, except to the extent such a special tax basis adjustment would be reflected in a Partner's Capital Account pursuant to applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv)(m);
(iii) If such a sale or exchange is not described in Subparagraph (i) or (ii) of this Paragraph (b), the Capital Account of the selling or exchanging Partner shall be carried over to the transferee Partner; and
(iv) If a Partner's Interest in the Partnership is
redeemed by the Partnership through a distribution in complete liquidation of
the Interest, except as provided in Paragraph (a) of this Section 7.3, the
Capital Accounts of the remaining Partners shall be adjusted only to the extent
required by applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(iv)(m).
Section 7.4. Determination of and Adjustments to Book Value
and Capital Accounts. When determining the Book Value of the assets of the
Partnership and the appropriate balances in each Partner's Capital Account
resulting from any adjustments to such Book Value, in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(iv), the following accounting rules shall apply.
(a) The initial Book Value of any asset contributed by a Partner to the Partnership shall be its Gross Fair Market Value on the date of contribution.
(b) The Book Value of all Partnership assets shall be adjusted to equal their respective Gross Fair Market values, as of the following times:
(i) the acquisition of an Interest (including an additional interest) in the Partnership by any new or existing Partner in exchange for more than a de minimis capital contribution to the Partnership, if the General Partner determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners with respect to the Partnership;
(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of money or other Partnership property, if the General Partner determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners with respect to the Partnership;
(iii) the liquidation of the Partnership within the
meaning of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(ii)(g); and
(iv) the occurrence of any other event (including, without limitation, a refinancing of any property of the Partnership) if the General Partner determines that such adjustment is necessary or appropriate, if not prevented by applicable Treasury Regulations, to reflect the economic interests of the Partners with respect to the Partnership.
(c) The Book Value of any Partnership asset distributed to any Partner shall be adjusted to equal its Gross Fair Market Value on the date of such distribution.
(d) The Book Value of Partnership assets shall not be increased or decreased to reflect any adjustments to the adjusted tax basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), except to the extent that such adjustments are taken into account in determining and maintaining capital accounts pursuant to applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv)(m); provided, however, that the Book Value shall not be adjusted pursuant to this provision to the extent that such adjustment was previously reflected in the Book Value of the Partnership's assets.
(e) If the Book Value of an asset has been determined or adjusted pursuant to the foregoing provisions of this Section 7.4, such Book Value shall thereafter be reduced by the Depreciation taken into account with respect to such asset for purposes of computing the Net Book Profits and the Net Book Losses of the Partnership pursuant to the provisions of this Agreement.
Section 7.5. Additional Capital Contributions.
(a) With the prior written consent of the General Partner, a Limited Partner may, though is not required to do so, make, or be deemed to make, additional capital contributions to the Partnership from time to time.
(b) Subject to the limitations of Section 6.4 and Section 6.5 of this Agreement, to the extent that the General Partner determines that additional funds are needed by the Partnership for its operations, the General Partner may, at its election, cause the Partnership to borrow such funds at commercially reasonable rates from unrelated third persons.
(c) If the Partnership is not able to obtain loans from third party lenders, the General Partner shall give notice to the Limited Partners of the amount needed by the Partnership (the "Funding Shortfall") and the purpose for which the Partnership requires such additional funds.
(d) In order to reduce or eliminate the Funding Shortfall, the General Partner and/or any Limited Partner may loan funds to the Partnership at a mutually agreed upon rate of interest not to exceed the highest non-usurious lawful rate of interest permitted by applicable law and upon other terms and conditions as may be agreed upon at that time, including with respect to collateral for such loan. As to any funds so loaned, the General Partners or Limited Partner(s) shall be deemed general creditors of the Partnership and shall be entitled to be paid principal and interest thereon without regard to the income or profits of the Partnership.
(e) Additional Capital Contributions. If the Partnership is unable to obtain loans from third party creditors or loans from Partners sufficient to satisfy the Funding Shortfall, the General Partner shall request the Partners to make additional contributions to the Partnership in the amount necessary to satisfy the Funding Shortfall. All Partners shall have the right (but not the obligation) to contribute a portion of the Funding Shortfall by contributing additional assets. Such contributing Partner's Capital Account shall be increased by the amount of the contributing Partner's contribution, as provided herein.
Section.7.6. Liability for Continuing Obligations. Upon the bankruptcy, insolvency, death, disability or other change in the circumstances of a Partner prior to the completion of such Partner's obligations to the Partnership, including without limitation, its obligation to make certain payments to the Partnership, in the form of an Initial Capital Contribution or otherwise, such Partner's estate, legal representative or successor shall succeed to such Partner's rights and responsibilities as provided herein.
ARTICLE VIII - PROFITS, LOSSES AND DISTRIBUTIONS
Section 8.l. Positive Cash Flow. The term "Positive Cash Flow" as used in this Agreement shall mean the gross cash receipts generated from the operation of the business of the Partnership from all sources (including, without limitation, all revenue and income obtained from
the operation of the Partnership, the sale of the assets or property of the Partnership, as well as the proceeds from all refinancing of mortgages or replacements of existing mortgages encumbering the property of the Partnership) after (i) the payment or accrual for payment of all current operating expenditures in connection therewith, including, without limitation, interest and principal payments due on loans and other charges due pursuant to any mortgages encumbering the property of the Partnership and after (ii) making provisions for the reasonable working capital requirements of the Partnership, the Reserve and investments and reinvestments appropriate to enable the Partnership to carry out its purposes but disregarding, in determining Positive Cash Flow, depreciation, amortization, other noncash items and amounts to be distributed to the Partners pursuant to the terms of this Agreement.
Section 8.2. Distribution of Positive Cash Flow.
(a) Positive Cash Flow of the Partnership, to the extent available, shall be distributed in the complete discretion of the General Partner among the Partners in proportion to each Partner's respective Participating Percentage.
(b) Notwithstanding anything set forth in this Section 8.2 to the contrary, the General Partner shall have the right to apply any Positive Cash Flow to be distributed to a Partner against any amounts due from, or required to be contributed by, such Partner to the Partnership. Such application of any Positive Cash Flow shall be deemed to be a distribution to such Partner, followed by a payment or contribution to the Partnership, as the case may be.
(c) Notwithstanding anything set forth in this Section 8.2 to the contrary, any Positive Cash Flow which arises during the liquidation of the Partnership shall be distributed in accordance with the provisions of this Agreement dealing with the distribution of proceeds from the liquidation of the Partnership.
Section 8.3. Determination of Net Book Profit and Net Book Losses. For purposes of computing the amount of any items of income, gain, loss or expense to be reflected in the Partner's Capital Accounts (hereinafter the net of such items being referred to as the "Net Book Profits" or the "Net Book Losses" of the Partnership), the determination, recognition and classification of such items shall be the same as their determination, recognition and classification for federal income tax purposes, with the following modifications.
(a) Any item of expense attributable to depreciation, amortization or other cost recovery with respect to any asset of the Partnership (hereinafter referred to as "Depreciation") shall be in an amount which bears the same ratio to the Book Value of such asset at the beginning of the applicable period as the federal income tax deduction for depreciation, amortization or other cost recovery with respect to such asset for such applicable period bears to the adjusted tax basis of such asset at the beginning of such period; provided, however, that if the federal income tax deduction attributable to depreciation, amortization or other cost recovery for such applicable period with respect to any asset is zero, the Depreciation with respect to such asset for such applicable period shall be determined with reference to the Book Value of such
asset as of the beginning of such applicable period using any reasonable method selected by the General Partner.
(b) Any item of income, gain, loss or expense attributable to the taxable disposition of any property with an adjusted tax basis which is different from the Book Value of such property shall be determined as if the adjusted tax basis of such property as of the date of such dispositive were equal in amount to the Book Value of such property.
(c) All expenditures of the Partnership not deductible in computing its taxable income and not properly chargeable to a Capital Account and any otherwise nondeductible organization and syndication expenses of the Partnership (as described in Code Section 709) shall be treated as Partnership expenses.
(d) Revenue of the Partnership which is exempt from federal income tax shall be included in the Net Book Profits or the Net Book Losses of the Partnership without regard to the fact that such revenue is not includable in gross income for federal income tax purposes.
(e) Payments made to any Partner which are treated for federal income tax purposes as guaranteed payments pursuant to Code Section 707(c) shall be treated as Partnership expenses; provided, however, that such payments shall be treated as capital expenditures of the Partnership to the extent that such payments are required to be capitalized under the Code and any applicable Treasury Regulations thereunder.
(f) In the event the Book Value of any Partnership asset is adjusted pursuant to the terms of this Agreement, the amount of such adjustment shall be treated as a gain or loss (as appropriate) from a sale of such asset.
Section 8.4. Allocation of Net Book Profits and Net Book Losses. For purposes of maintaining the Capital Accounts of the Partners and determining the rights of the Partners among themselves with respect to the assets of the Partnership, the Net Book Profits or Net Book Losses of the Partnership for each applicable period shall be allocated among the Partners in Proportion to each Partner's respective Participating Percentage. Each item of such income, gain, loss or expense giving rise to such Net Book Profits or Net Book Losses of the Partnership for such period shall be allocated among the Partners in the same proportion that such Net Book Profits or Net Book Losses of the Partnership for such period are allocated among the Partners.
Section 8.5. Allocations to Comply With Applicable Treasury Regulations. In order to comply with the provisions of applicable Treasury Regulations, including Treasury Regulation Sections 1.704-1(b) and 1.704-2, the following special allocations of income, gain, loss and expense shall be made notwithstanding any other provision of this Agreement.
(a) Deficit Capital Account Allocations. Subject to the remaining provisions of this Section 8.5, in accordance with applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(ii), no allocation of expenses or losses shall be made pursuant to the terms of this Agreement to the extent such allocation would cause or increase a net deficit
balance in a Partner's Capital Account as of the end of the period to which such allocation relates in excess of any dollar amount of such net deficit balance that such Partner is obligated to restore under this Agreement. Such expenses and losses shall instead be allocated among the other Partners not subject to this limitation in accordance with their relative Participating Percentages. For purposes of this Paragraph (a), the following rules shall apply:
(i) each Partner's net deficit balance in such Partner's respective Capital Account shall be determined by adding to such Capital Account balance the amount of such Partner's share (as determined pursuant to Treasury Regulation Section 1.704-2) of the Total Minimum Gain of the partnership as of the end of the period with respect to which such determination is being made; and
(ii) in determining whether an allocation of a loss or expense would cause or increase a net deficit balance in a Partner's respective Capital Account as of the end of the period to which such allocation relates, the initial balance in such Partner's respective Capital Account shall be treated as if it reflected an amount equal to the excess of any distributions that, as of the end of such period, reasonably are expected to be made to such Partner in any future period over the Net Book Profits reasonably expected to be allocated to such Partner during (or prior to) the period in which such distributions are expected to be made.
(b) Qualified Income Offset Provision. If a Partner
unexpectedly receives an adjustment, allocation or distribution as described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), pursuant to
this Agreement which causes or increases a net deficit balance in such Partner's
Capital Account as of the end of the period to which such adjustment, allocation
or distribution relates in excess of any dollar amount of such net deficit
balance that such Partner is obligated to restore pursuant to this Agreement,
such Partner will be allocated items of gross income and gain in an amount and
manner sufficient to eliminate such net deficit balance as quickly as possible.
The rules set forth in Subparagraph (i) and (ii) of Paragraph (a) of this
Section 8.5 shall apply for purposes of determining whether any adjustment,
allocation or distribution would cause or increase a net deficit balance in any
Partner's Capital Account.
(c) Special Allocations of Nonrecourse Deductions. Notwithstanding any other provision in this Agreement, in compliance with applicable Treasury Regulations, including Treasury Regulation Section 1.704-2, allocations of Nonrecourse Deductions shall be made among the Partners in accordance with the Participating Percentages of the Partners.
(d) Minimum Gain Chargeback Provision. If there is a net decrease in the Minimum Gain of the Partnership (as determined pursuant to applicable Treasury Regulations, including Treasury Regulation Section 1.704-2) during any period, then each Partner shall be allocated items of gross income and gain in accordance with the provisions of applicable Treasury Regulations, including Treasury Regulation Section 1.704-2.
(e) Special Allocations of Partner Nonrecourse Deductions. Notwithstanding any other provision in this Agreement, in compliance with applicable Treasury Regulations, including Treasury Regulation Section 1.704-2, allocations of Partner Nonrecourse Deductions
shall be made among the Partners in accordance with the ratios in which the Partners (or the affiliates of any Partners) share the economic risk of loss with respect to the Partner Nonrecourse Liabilities to which such Partner Nonrecourse Deductions are attributable.
(f) Partner Nonrecourse Liability Minimum Gain Chargeback
Provision. If there is a net decrease in the Partner Nonrecourse Liability
Minimum Gain (as determined pursuant to applicable Treasury Regulations,
including Treasury Regulation Section 1.704-2) during any period, then each
Partner shall be allocated items of income and gain in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
(g) Subsequent Allocations. Any special allocations of items of income, gain, loss or expense made pursuant to this Section shall be taken into account in computing subsequent allocations of income, gain, loss and expense pursuant to this Agreement, so that the net amount of any item of income, gain, loss and expense allocated to each Partner pursuant to this Agreement shall, to the extent possible, be equal to the amount of such items of income, gain, loss and expense that would have been allocated to such Partner pursuant to this Agreement if the special allocations of income, gain, loss or expense required by this Section 8.5 had not been made.
(h) Interpretation of these Provisions. The provisions of this Section are intended to comply with the provisions of applicable Treasury Regulations, including Treasury Regulation Sections 1.704-1(b)(2) and 1.704-2, and shall be interpreted consistently therewith.
Section 8.6. Federal Income Tax Allocations. The allocations of income, gain, loss and expense made pursuant to the previous Sections are allocations of book income which are made for accounting purposes to determine the respective balances in the Capital Accounts of the Partners and to establish the rights of the Partners among themselves with respect to the assets of the Partnership. These allocations may be different from the allocations among the Partners of the income, gain, loss, deduction, tax preference and tax credits of the Partnership for federal income tax purposes. Allocations of income, gain, loss, deduction, tax preference and tax credits of the Partnership for federal income tax purposes for each taxable year shall be made among the Partners in accordance with the following provisions.
(a) General Rules Regarding Allocations of Income, Loss, Etc. In general, for federal income tax purposes, all items of income, gain, loss, deduction and tax preference of the Partnership for each taxable year shall be allocated among the Partners in the same manner as the items of income, gain, loss and expense which gave rise to such items of income, gain, loss, deduction and tax preference for federal income tax purposes are allocated among the Partners pursuant to the terms of this Agreement.
(b) Special Rules Where Tax Basis Differs From Book Value. If the Partnership's adjusted tax basis for federal income tax purposes of any of its property differs from the Book Value of such property at the beginning of any taxable year, in determining each Partner's distributive share of the taxable income or loss (or items thereof) of the Partnership,
each item of income, gain, loss or deduction with respect to such property shall be allocated among the Partners in such a manner as will take into account (as required by Code Section 704(c) and any applicable Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(4)(i)) the difference between the adjusted tax basis for federal income tax purposes of such property and its Book Value, all as of the beginning of such taxable year.
Section 8.7. Allocation of Taxable Income and Loss and Tax
Credits on the Transfer of a Partnership Interest. The items of income, gain,
loss, expense, deduction, tax preference and/or tax credit allocable under the
terms of this Agreement to any interest in the Partnership which may have been
transferred during any period shall be allocated among the Persons who were the
holders of such interest during such period in a manner which takes into account
the varying interests of the Partners in the Partnership during such period, all
in accordance with any Treasury Regulations promulgated under Code Section
706(d); provided, however, that the allocation of gain or loss on the
disposition of any property in which the Partnership has a direct or indirect
interest shall, to the extent not prohibited under such Regulations, be
allocated among the Partners who are Partners in the Partnership on the date the
event giving rise to such gain or loss occurs in accordance with the provisions
of this Agreement otherwise dealing with federal income tax allocations.
Section 8.8. Special Tax Audit Allocations. Notwithstanding anything contained in this Agreement to the contrary, in the event that the taxable income (or any item thereof) of the Partnership for federal income tax Purposes is adjusted as the result of an audit by the Internal Revenue Service, the Partners' Capital Accounts shall be adjusted in a manner which reflects such adjustments as though corresponding book adjustments had been originally reflected in the Net Book Profits or Net Book Losses of the Partnership determined pursuant to the terms of this Agreement.
Section 8.9. Interest. If, pursuant to applicable law, a portion of the amounts paid on any Partner notes issued with respect to capital contributions to the Partnership shall be deemed to constitute interest rather than principal for federal income tax purposes, the interest income attributable thereto shall be allocated to the Partners who shall have made such deemed interest payments on such Partner notes and the amount of such interest income shall be taken into account in determining the amount of capital contributions made by such Partner to the Partnership.
Section 8.10. Credits. All investment tax credits, targeted job credits and other tax credits available to the Partnership shall, subject to applicable Treasury Regulations and provisions of the Code be allocated among the Partners in proportion to each Partner's respective Participating Percentage.
Section 8.11. Distributions in Kind. Assets of the Partnership
may be distributed in kind in the sole and absolute discretion of the General
Partner. If any assets of the Partnership are distributed in kind, the
Partnership shall make such distributions in kind pursuant to Section 1.704-1
(b)(2)(iv)(e)(1) of the Treasury Regulations in accordance with the following:
(a) The Gross Fair Market Value of such assets shall be determined, taking into account the nature of the assets;
(b) Immediately prior to any distribution of any assets by the Partnership, the Capital Accounts of all Partners shall be adjusted to reflect the manner in which the unrealized income, gain, loss and deduction inherent in such assets (that have not been reflected in the Capital Accounts previously) would be allocated among the Partners if there were a taxable disposition of such assets for their Gross Fair Market Value on the date of distribution; and
(c) In a distribution in kind other than in liquidation of the Partnership pursuant hereto, such assets shall be distributed to the Partners either (i) as tenants-in-common in the same proportions as such Partner's Participating Percentages; or (ii) on an asset-by-asset determination, as determined by the General Partner in its sole and absolute discretion.
ARTICLE IX - BOOKS OF ACCOUNT, RECORDS AND REPORTS
Section 9.1. Books and Records. Proper and complete records and books of account shall be kept by the Partnership. The Partnership books and records shall be kept on the accrual method of accounting or on such other acceptable method as the General Partner shall determine. The books and records shall at all times be maintained at the principal office of the Partnership and shall be open to the reasonable inspection and examination of the Partners or their duly authorized representatives during normal business hours.
Section 9.2. Tax Information. As soon as available after the end of each fiscal year of the Partnership, but in no event later than seventy-five (75) days thereafter, the General Partner shall send or cause to be sent to each Partner such tax information as shall be necessary for the preparation by such Partner of his, her or its federal and state income tax returns. The Partners may review and/or request a copy of the Annual Partnership Tax Return (IRS Form 1065). The Partners acknowledge that because of the nature of the Partnership, it may be difficult or impossible to accurately set forth on Schedule K-1, and other tax forms which the Partnership may file and/or provide to the Partners, the actual interests of the Partners in the Partnership's income, losses and capital. The Partners agree among themselves that no information on any such form will be evidence of the actual interest in the Partnership of any Partner. In addition to the foregoing, the General Partner shall provide such financial information to each Partner as required by applicable law.
Section 9.3. Accounting Principles. Except as otherwise provided in this Agreement, all books and records of the Partnership shall be kept, and all financial statements furnished to the Partners hereunder shall be prepared, in accordance with generally accepted accounting Principles consistently applied.
Section 9.4. Banks. All funds of the Partnership shall be deposited in a bank account or accounts in the name of the Partnership or such other name as may be determined by the General Partner. Withdrawals from such account or accounts shall be made by checks or
other withdrawal orders signed by a duly authorized officer or representative of the General Partner.
ARTICLE X - FISCAL YEAR
Section 10.1. Fiscal Year. The fiscal year of the Partnership shall be the 52/53 week year ending on the first Saturday which is nearest to the last day of January.
ARTICLE XI - LIABILITY OF GENERAL PARTNER; EXCULPATION
Section 11.1. Liability of General Partner. To the extent that assets of the Partnership are insufficient to satisfy any and all of the Partnership's liabilities, the General Partner shall bear such liability.
Section 11.2. Exculpation. The General Partner shall not be liable to the Partnership or any other Partner for losses or liability arising from the conduct of the affairs of the Partnership or from the conduct of an employee or agent of the General Partner or the Partnership, so long as such losses or liability do not arise from the gross negligence, willful misconduct or fraud of the General Partner.
ARTICLE XII - RIGHTS AND LIMITATIONS
OF LIMITED PARTNERS; MEETINGS; AMENDMENTS
Section 12.1. Limited Assessment. Except as provided in this Agreement or under applicable law, no Limited Partner shall be subject to assessment nor shall any Limited Partner be personally liable for, or bound by, any expenses, liabilities or obligations of the Partnership beyond such Limited Partner's Capital Contribution.
Section 12.2. No Right to Manage. Except as specifically provided in this Agreement, no Limited Partner shall take part in, or interfere in any manner with, the management, control, conduct or operation of the Partnership, nor have any right, power or authority to act for or bind the Partnership. Any action of a Limited Partner that is inconsistent with the sole, exclusive and absolute right of the General Partner shall:
(a) Constitute a breach of this Agreement on the part of the Limited Partner so acting, and
(b) The General Partner shall provide such Limited Partner with notice of the breach. Such Limited Partner shall have five (5) days after he receives such notice of the breach to cure the breach (if such breach can be cured). If the breach is not cured within such five (5) day period, such Limited Partner shall be liable for any and all damages that may occur to the
Partnership, all of the other Partners and any creditor of the Partnership who relies to its detriment on the actions of such Limited Partner.
Section 12.3. Priority. No Partner shall have priority over any other Partner either as to the return of capital contributions or any other distributions from the Partnership, unless otherwise specifically provided herein.
Section 12.4. Death, Disability, Etc., of a Limited Partner. The Partnership shall not be dissolved by (i) the death, disability, insanity, adjudication of incompetency, bankruptcy, insolvency or withdrawal of any Limited Partner, (ii) the assignment by any Limited Partner of its interest in the Partnership, or (iii) the admission of a Substitute Limited Partner.
Section 12.5. Meetings.
(a) Place of Meetings. Meetings of Partners may be held in such place within or without the Commonwealth of Pennsylvania as may be specified in the notice of such meeting or by means of any telecommunications system.
(b) Call of Meetings. A meeting of the Partners for any matters on which the Limited Partners are entitled to vote or consent may be called by the written notice of the General Partner or by the written notice of the Limited Partners holding at least Forty Percent (40%) of the then outstanding Units.
(i) Written notification of such meeting shall be issued by the General Partner no later than ten (10) days before the date of such meeting. Such meetings shall be held on a date not less than fifteen (15) days nor more than sixty (60) days after the receipt by the General Partner of a written request for such a meeting signed by holders of Forty Percent (40%) or more of the then outstanding Units. In addition, the General Partner may submit any matter upon which the Limited Partners are entitled to vote to the Limited Partners for a vote by written consent without a meeting (including, without limitation, for the purpose of proposing an amendment to this Agreement).
(ii) Notification of any meeting to be held pursuant to this Section 12.5 shall be given to each Limited Partner at such Limited Partner's record address or at such other address which such Limited Partner may have furnished to the General Partner in writing. Such notification shall state the place, date and hour of the meeting and shall indicate that the notification is being issued at or by the direction of the Partner or Partners calling the meeting. The notification shall state the purpose or purposes of the meeting and the matters proposed to be acted upon. If a meeting is adjourned to another time or place, the General Partner shall give notification of the adjourned meeting. The presence in person, by proxy or via telecommunications system of the holders of a majority of the then outstanding Units shall constitute a quorum at all meetings of the Limited Partners; provided, however, that if there be no such quorum, holders of a majority of the Units present or represented by Proxy may adjourn the meeting from time to time, until a quorum shall have been obtained. No notification of the time, place or purpose of any meeting of Limited Partners need be given to any Limited Partner
who attends in person or is represented by proxy or to any Limited Partner entitled to such notification who in writing, executed and filed with the records of the meeting either before or after the time thereof, waives such notification, except for a Limited Partner attending a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business on the grounds that the meeting is not lawfully called or convened.
(iii) Every proxy must be signed by the Limited Partner or such Limited Partner's attorney-in-fact. No proxy shall be valid after the expiration of twelve (12) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it. In connection with any vote, the General Partner shall be empowered to establish reasonable rules pertaining to the validity and use of proxies by the Limited Partners.
(iv) For the purpose of determining the Limited
Partners entitled to vote at any meeting of the Limited Partners or any
adjournment thereof, or to vote by written consent without a meeting, the
General Partner or the Limited Partners requesting such meeting or vote may fix,
in advance, a date as the record date of any such determination of Limited
Partners. Such date shall not be more than fifty (50) days nor less than ten
(10) days prior to any such meeting or submission of a matter to the Limited
Partners for a vote by written consent. Only the votes of Limited Partners of
record on the notification date or such other record date as may be set pursuant
to the provisions of this Agreement, whether at a meeting or otherwise, shall be
counted.
(v) At each meeting of Limited Partners, the Limited Partners present or represented by proxy shall adopt such rules for the conduct of such meeting as they shall deem appropriate.
Section 12.6. Voting Rights of Limited Partners.
(a) A Limited Partner shall be entitled to cast one vote for each Unit which such Limited Partner owns unless otherwise set forth herein.
(b) The following actions shall require at least the Simple Majority Vote of the Limited Partners:
(i) Amendment of this Agreement, subject to the provisions of Section 12.8 hereof;
(ii) Continuation of the Partnership upon the occurrence of one of the events set forth in Section 15.1 hereof;
(iii) Indemnification of a Partner;
(iv) Admission of additional Limited Partners;
(v) Subject to the provisions herein to the contrary, any other matters on which the Partners are entitled to vote.
(c) The following actions shall require at least the Required Vote of the Limited Partners:
(i) The Major Management Decisions set forth in
Section 6.5(a), (b), (f) and(g);
(ii) Removal of the General Partner in accordance with Section 14.1 hereof; and
(iii) Transfer of a General Partner's Interest.
(d) The Unanimous Vote of the Limited Partners shall be required for the Major Management Decisions set forth in Section 6.5(c), (d) and (e).
Section 12.7. Proposal and Adoption of Amendments Generally.
(a) Amendments to this Agreement may be proposed in the following manner:
(i) by the General Partner, who shall give to the Limited Partners the text of such proposed amendment, a statement of the purpose of such amendment and an opinion of counsel obtained by the General Partner to the effect that such amendment is permitted by the Partnership Act, will not impair the purposes of the Partnership or the limited liability of any Limited Partner and will not adversely affect the classification of or cause a termination of the Partnership as a partnership for federal income tax purposes; and
(ii) by a Limited Partner or Partners holding more than Twenty-Five Percent (25%) of the then outstanding Units, who shall submit to the General Partner the text of such proposed amendment, together with a statement of the purpose of such amendment and an opinion from counsel obtained by such Limited Partner or Partners, satisfactory in form and substance to the counsel of the Partnership, to the effect that such amendment is permitted by the Partnership Act, will not impair the purposes of the Partnership or the limited liability of the Limited Partners and will not adversely affect the classification or cause the termination of the Partnership as a partnership for federal income tax purposes. The General Partner shall, within twenty (20) days after receipt of any proposal under this Subparagraph (ii), give to all Limited Partners the text of such proposed amendment, such statement of purpose and such opinion of counsel, together with the views, if any, of the General Partner with respect to such proposed amendment.
(b) Amendments proposed pursuant to this Section 12.7 (subject to Section 12.8 hereof) shall be adopted if consented to by the General Partner and the Limited Partners owning a majority of the then outstanding Units.
(c) The General Partner shall and is hereby authorized to, within a reasonable time after the adoption of any amendment to this Agreement, make any official filings, recordings and publications required or desirable to reflect such amendment, including any required filing or recordation of an Amended Certificate of Limited Partnership of the Partnership.
Section 12.8. Limitations on Amendments. Notwithstanding any other provision of this Agreement to the contrary, no amendment to this Agreement may:
(a) Without the consent of any affected Partner, enlarge the obligations of any Partner under this Agreement or convert the Interest of any Limited Partner into the Interest of a General Partner;
(b) Allow the Limited Partners to take part in the control of the Partnership's business or otherwise modify the limited liability of any Limited Partner;
(c) Create any additional class of Partnership Interest;
(d) Change the interest of any Partner in the capital, profits, losses or cash distributions of the Partnership;
(e) Amend or modify the provisions of this Agreement dealing with voting rights and requirements, allocations of profits and losses and distributions of Positive Cash Flow or the proceeds from the liquidation of the Partnership, without the consent of each Partner adversely affected by such modification;
(f) Change the term of this Agreement; or
(g) Change the voting requirements hereunder unless approved by such percentage of Partners required to approve such matter prior to the amendment.
Section 12.9. Amendments on Admission or Withdrawal of Partners.
(a) Amendments solely to admit additional Limited Partners and Substitute Limited Partners shall be adopted if the conditions specified in this Agreement regarding the admission of such Partners shall have been satisfactorily complied with and the amendment shall have been signed by the General Partner and by the person to be substituted or added and, if a Limited Partner is to be substituted, by the assigning Limited Partner or such Limited Partner's attorney-in-fact.
(b) Amendments solely to reflect the admission and/or designation of a successor General Partner shall be adopted if the conditions specified in this Agreement regarding the admission and/or designation of such a Partner shall have been satisfactorily completed and the amendments shall have been signed by such successor General Partner.
(c) Amendments solely for the removal or withdrawal of the General Partner, if the business of the Partnership is continued, shall be adopted if the conditions specified in this Agreement dealing with such removal or withdrawal of the General Partner shall have been satisfactorily completed and the amendment shall have been signed by the successor General Partner.
Section 12.10. Registration. Upon the admission of a person as a Limited Partner, such person shall be registered on the records of the Partnership as a Limited Partner, together with its address and its interest in the Partnership. Upon the transfer of a Limited Partnership interest pursuant to the provisions of this Agreement, the transferee of such interest in the Partnership shall be registered on the records of the Partnership as a Substitute Limited Partner, together with its address and interest in the Partnership.
Section 12.11. Continuation of Limited Partner Status. No event, including but not limited to, the admission of a Substitute Limited Partner, the transfer of an Interest in the Partnership by a Limited Partner, the expulsion of a Limited Partner from the Partnership, the forfeiture of an interest in the Partnership and the retirement, death, disability or bankruptcy of a Limited Partner shall entitle a Limited Partner to withdraw from the Partnership. Once admitted as a Limited Partner, a person shall continue to be a Limited Partner for all purposes of this Agreement and the Partnership Act until the General Partner consents in writing to the admission of a Substitute Limited Partner pursuant to the provisions of Article XIII of this Agreement.
ARTICLE XIII - TRANSFERS BY LIMITED PARTNERS;
REPURCHASE OF INTERESTS
Section 13.1. Transfers. A Limited Partner shall have the right to assign, transfer, encumber or pledge (hereinafter such actions collectively referred to as an "Assignment") the whole or any portion of his or her Interest in the Partnership by written Assignment, provided that (i) the terms of such Assignment are not in contravention of any of the provisions of this Agreement, (ii) such Assignment is fully executed by the transferor and transferee, (iii) such Assignment is received by the Partnership and recorded on the books thereof and (iv) the transfer is approved by the Unanimous Vote of the Partners. In the event of such Assignment, the following rules shall govern:
(a) The effective date of an Assignment of an Interest in the Partnership shall be the date set forth on the written instrument of Assignment;
(b) Notwithstanding anything herein to the contrary, the Partnership and the General Partner shall be entitled to treat the transferor of such Interest as the absolute owner thereof in all respects and shall incur no liability for distributions of cash or other property made in good faith to him until such time as the written Assignment has been received by and recorded on the books of the Partnership and is otherwise effective in accordance with the provisions of this Agreement;
(c) Except as provided in Section 13.1(b) of this Agreement, the transferee of an Assignment of Interest in the Partnership shall be entitled to receive distributions of cash or other property from the Partnership attributable to the Interest acquired by reason of such Assignment from and after the effective date of the Assignment of such Interest; and
(d) The division and allocation of profits and losses attributable to the Interest in the Partnership between transferor and transferee during any fiscal year of the Partnership shall be in accordance with the provisions of Section 8.7 of this Agreement.
Section 13.2. Compliance with Securities Laws. No Partnership Interest has been registered under the Act or under any state securities law. A Limited Partner may not transfer all or any part of its Partnership Interest except in compliance with applicable federal and state securities laws. A transfer, for purposes of this Agreement, shall be deemed to include, but not limited to, any sale, transfer, assignment, pledge, creation of a security interest or other disposition. The General Partner shall have no obligation to register any Limited Partner's interest under the Act or the securities laws of any state or to make any exemption therefrom available to any Limited Partner or Substitute Limited Partner. Any certificates or other documents representing the Units may bear a legend outlining the above restrictions on transfer. Further, the Partnership will make notations on its records of the foregoing restrictions on transfer. If a transfer agent is appointed, the Partnership will issue appropriate stop-transfer instructions to its transfer agent respecting the limitations on transfer outlined in this Article XIII.
Section 13.3. Steps Required to Transfer. No transferee of the whole or any portion of an Interest in the Partnership shall have the right to become a Substitute Limited Partner in place of his transferor unless all of the following conditions are satisfied:
(a) The transferor executes and acknowledges a written instrument of Assignment together with such other instruments as the General Partner shall deem necessary or desirable to effect the admission of the transferee as a Substitute Limited Partner including without limitation, those set forth in Section 13.4 hereof;
(b) Such instrument of assignment has been delivered to, received and approved in writing by the General Partner; and
(c) The unanimous written consent of all Partners to such substitution has been obtained, the granting or denial of which shall be within the sole and absolute discretion of each Partner.
Section 13.4. Admission of Substitute Limited Partner. Except as specifically provided for in this Agreement, a transferee of a Unit shall become a Substitute Limited Partner only after the proposed transferee receives the Unanimous Vote of the other Limited Partners and the transferee adopts and approves in writing all the terms and provisions of this Agreement then in effect (including without limitation, those set forth in Section 13.10 hereof) and assumes the obligations, if any, of the transferor to the Partnership. A Substitute Limited Partner is liable for
the obligations of such Substitute Limited Partner's transferor to make contributions as provided in and under this Agreement.
Section 13.5. Status of Transferee. A nonadmitted transferee of an Interest in the Partnership of a Limited Partner shall be entitled to receive only that share of distributions to which its transferor would otherwise be entitled to with respect to the Interest transferred and shall have no right to obtain any information on account of the Partnership's transactions, to inspect the Partnership books or to vote with the Limited Partners on any matter. However, the Partnership may, in the discretion of the General Partner, furnish the transferee with pertinent tax information at the end of each fiscal year of the Partnership.
Section 13.6. Expenses. The General Partner may charge and receive from any selling or transferring Limited Partner an amount to defray its costs and expenses, including attorneys' fees, in effecting the transfer and registration on its books of such Interest in the Partnership thus sold.
Section 13.7. Death, Bankruptcy, Incompetence, Etc., of a Limited Partner. Upon the death, dissolution, adjudication of bankruptcy, insanity or adjudication of incapacity or incompetence of a Limited Partner, such Partner's executors, administrators or legal representatives shall have all of the rights of a Limited Partner, for the purpose of settling or managing such Partner's estate, including such power as such Limited Partner possessed to constitute a successor as a transferee of its interest in the Partnership and to join with such transferee in making the application to substitute such transferee as a Partner. However, such executors, administrators or legal representatives will not have the right to become Substitute Limited Partners in the place of their predecessor in interest unless they agree to be bound by the provisions hereof.
Section 13.8. Transferee(s). Any transfer, bequest or gift of an interest in the Partnership is conditioned upon the transferee or, in the case of a trust, the trustee, being sui juris and mentally competent.
Section 13.9. Tax Elections. In the event of the transfer of any Interest in the Partnership or the distribution of property to any Partner, the Partnership may, at the determination of the General Partner, file an election in accordance with the provisions of Code Section 754, and the Treasury Regulations promulgated thereunder, to cause the basis of the Partnership's assets to be adjusted for federal income tax purposes as provided under Code Sections 734 and 743.
Section 13.10. Admission of Additional Limited Partners. Additional Limited Partners may be admitted to the Partnership from time to time with the Simple Majority Vote of the Partners of the Partnership. No Person shall be admitted as an additional Limited Partner pursuant to this Section until:
(a) Such Person shall have agreed to be bound by the terms and provisions of this Agreement and shall have assumed all of the obligations, if any, of a Limited Partner;
(b) Such Person shall have executed this Agreement (or an addendum hereto) and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Partner;
(c) Such Person shall have executed powers of attorney containing the terms and conditions set forth in the power of attorney provisions of this Agreement; and
(d) Such Person shall have delivered to the Partnership a letter containing such representations and agreements as are otherwise set forth in this Agreement and as are requested by the General Partner.
Section 13.11. Amendment of Certificate. The General Partner shall take such steps as are necessary and/or required by the Act to effect an amendment of the Certificate of Limited Partnership to reflect the substitution or addition of Limited Partners. For this purpose, the General Partner shall have the authority to sign the amendment of this Agreement and the Certificate of Limited Partnership as attorney-in-fact for the assigning Limited Partner, the Substitute Limited Partner and the remaining Limited Partners.
ARTICLE XIV - CHANGES TO THE GENERAL PARTNER
Section 14.1. Removal of the General Partner. Limited Partners by obtaining a Required Vote shall have the right to remove a General Partner only in the event such General Partner:
(a) makes a general assignment of the General Partner's assets for the benefit of creditors;
(b) files a voluntary bankruptcy petition;
(c) becomes the subject of an order for relief or is declared bankrupt or insolvent in any federal or state bankruptcy or insolvency Proceedings;
(d) files a petition or answer seeking for the General Partner a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any law;
(e) filed an answer or other pleading admitting or failing to contest the material allegations of a Petition filed against it in a proceeding of the type described in Paragraphs (a) through (d) of this Section 14.1;
(f) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of all or any substantial part of the General Partner's properties;
(g) a creditor of the General Partner attaches the General Partner's assets, such attachment not being discharged or vacated within ninety (90) days from the effective date thereof; or
(h) pleads, is found guilty of, or admits to, fraud, gross negligence or recklessness in connection with its responsibilities, duties or obligations to the Partnership arising hereunder.
Section 14.2. Withdrawal of the General Partner. The General Partner may unilaterally withdraw or resign as the General Partner of the Partnership at any time by giving thirty (30) days written notice of its intent to withdraw or resign as such General Partner to all of the then current Limited Partners. Such notice requirement may be shortened or waived by the Partners in their sole discretion.
Section 14.3. Right of the General Partner Upon Removal.
(a) Upon the removal, withdrawal or resignation of the General Partner pursuant to the provisions hereof or by applicable law, the General Partner shall not have any right to participate in the management of the affairs of the Partnership. Upon removal, withdrawal or resignation by the General Partner, the General Partner shall retain its share of the net profits or net losses, cash flow and capital interest which are allocated to such General Partner to the date of the removal, withdrawal or resignation as if it remained the General Partner of the Partnership. Neither the former General Partner nor any Affiliate shall be entitled to receive any fees under this Agreement following such removal, withdrawal or resignation. Upon the General Partner's removal, withdrawal or resignation, the General Partner may (with the approval of a Simple Majority Vote of the Limited Partners) sell all or a portion of its Partnership Interest to the new General Partner (whether Successor General Partner, second Successor General Partner or the like) upon such terms and conditions as they may mutually agree.
(b) The remaining Interest of the removed or withdrawing General Partner shall, subject to Section 14.3(a), become a Limited Partnership Interest and be assigned to the removed, resigned or withdrawing General Partner by the Partnership. The removed, resigned or withdrawing General Partner holding such a Limited Partnership Interest shall automatically become a Substitute Limited Partner.
Section 14.4. Transfer of Interest. Except as otherwise provided in this Agreement, the General Partner may not assign, transfer, mortgage or sell any portion of its Interest in the Partnership or enter into any agreement as the result of which any Person shall become interested in the Partnership, without the Required Vote of the Limited Partners.
Section 14.5. Continuing Liability. No removal, withdrawal or resignation under this Article XIV shall relieve a General Partner of any then existing obligation owing by that General Partner to the Partnership or any Partner, nor shall it constitute a waiver of any claim the Partnership or any Partner may have against the former General Partner. Upon withdrawal of the General Partner, the General Partner shall not be deemed to be liable with respect to any debts or
liabilities incurred by the Partnership subsequent to the date of withdrawal, provided that such withdrawal shall not diminish or in any way affect any debts or liabilities incurred by the Partnership prior to such date. In the event a General Partner withdraws from the Partnership or sells, transfers or assigns its entire Interest pursuant to the provisions of this Article XIV, such General Partner shall be, and shall remain, liable for all obligations and liabilities incurred by the General Partner and the Partnership prior to the effective date of such occurrence and shall be free of any obligation or liability incurred on account of the activities of the Partnership after such time.
Section 14.6. Successor General Partner. In the event of the bankruptcy, death, incapacity, dissolution, removal, withdrawal or resignation of the General Partner, the Limited Partners may elect by a Required Vote a Successor General Partner. Upon approval by the Limited Partners as set forth above, the Successor General Partner, or new General Partner shall be referred to herein as the "General Partner."
Section 14.7. Involuntary Assignment by a General Partner. In the event a General Partner's Interest is taken or distributed by levy, foreclosure, charging order, execution or other similar proceeding, a Successor General Partner may be elected by the Limited Partners pursuant to Section 14.6 hereof and in such case the Partnership shall not dissolve. The assignee of that General Partner's Interest shall receive only that General Partner's rights to distributions and allocations of the Partnership and shall, in no event, have the right to interfere in the management or the administration of the Partnership business or affairs or to act as a General Partner. Any General Partner whose Interest has been taken or distributed under any circumstances described above shall automatically become a Substitute Limited Partner and the Interest of such General Partner shall become a Limited Partnership Interest.
Any entity to which an Interest under this Agreement is transferred pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. sections 101 et seq., shall be deemed without further act to have assumed all of the obligations arising out of this Agreement on or after the date of such assignment. Upon demand any such assignee shall execute and deliver to each other party to this Agreement an instrument confirming such assumption. Failure to deliver such instrument shall entitle such assignee only to those rights specified in Section 13.5 hereof.
ARTICLE XV. - DISSOLUTION OF THE PARTNERSHIP
Section 15.1. Events of Dissolution. Subject to Section 15.2 hereof, the occurrence of any one of the following events shall cause an immediate dissolution of the Partnership:
(a) The expiration of the term of the Partnership;
(b) The consent of the General Partner and a Unanimous Vote of the Limited Partners to dissolve the Partnership;
(c) The decision of the General Partner to dissolve the Partnership at a time when the Partnership holds no substantial assets;
(d) An entry of judicial dissolution pursuant to the Act;
(e) The termination of the business of the Partnership;
(f) The general assignment for the benefit of creditors; and
(g) the bankruptcy, death, incapacity, dissolution, removal, resignation or withdrawal of the General Partner as the General Partner of the Partnership without a successor General Partner being appointed pursuant to the provisions of this Agreement.
Section 15.2. Election to Continue the Partnership. In the
event of the happening of any of the events described in Paragraph (g) of
Section 15.1 of this Agreement to any General Partner, within one hundred twenty
(120) days of the happening of the first of such events, the Limited Partners
may elect, upon the Required Vote of Limited Partners, to continue the
Partnership. In the event of such election, the Partnership shall not terminate
but shall continue upon the selection, by the Limited Partners holding a
majority of the then outstanding Units, of a successor General Partner, which
selection shall be done concurrently with the election to continue the
Partnership business.
ARTICLE XVI - ADDITIONAL PROVISIONS CONCERNING
DISSOLUTION OF THE PARTNERSHIP
Section 16.1. Winding Up Affairs; Liquidation. In the event of the dissolution of the Partnership for any reason, if no election is made pursuant to Article XV of this Agreement to continue the Partnership, the General Partner, or if the General Partner is bankrupt and without at least one qualified successor, a liquidating agent or committee selected by the affirmative vote or written concurrence of Partners owning at least a Simple Majority in value of the Interests in the Partnership owned at the time by all Partners, shall commence to wind up the business and affairs of the Partnership and to liquidate its assets. Allocations of income, gain, loss, expense, deductions, tax preference items and tax credits shall continue to be made among the Partners during the period of liquidation in accordance with the provisions of this Agreement dealing with such allocations. The General Partner or such liquidating agent or committee, as the case may be, shall have the full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership assets pursuant to such liquidation, having due regard to the activity and condition of the relevant market and general financial and economic conditions and any in-kind liquidating distributions to Partners, so long as any nonratable distributions of property interests result in the distributees receiving value in accordance with the provisions of this Article XVI.
Section 16.2. Time for Liquidation. A reasonable time shall be allowed for the orderly liquidation of the assets of the Partnership and the discharge of its liabilities so as to
enable the General Partner or the liquidating agent or committee, as the case may be, to minimize the normal losses attendant upon such a liquidation.
Section 16.3. Required Reports. If requested by Partners owning a majority of Interests then outstanding, the General Partner or the liquidating agent or committee, as the case may be, shall furnish each Partner with a statement showing the net profit or net loss of the Partnership from the date of the last annual Federal tax return submitted to the Partners Pursuant to the terms of this Agreement, to the date of the final distribution of the proceeds of the liquidation to the Partners and the manner in which the proceeds of liquidation were distributed. The General Partner or liquidating agent or committee shall comply with any and all requirements under applicable law pertaining to the winding up of a limited partnership.
Section 16.4. Termination. The Partnership shall terminate when all property owned by the Partnership shall have been disposed of or distributed and the net proceeds from sales of properties, after satisfaction of liabilities to creditors, shall have been distributed among the Partners as aforesaid. The establishment of any reserves in accordance with the provisions of this Article XVI shall not have the effect of extending the term of the Partnership.
Section 16.5. Distribution of Proceeds From the Liquidation of the Partnership. The net proceeds of liquidation and any other funds or property of the Partnership shall be distributed and applied to the extent available in the following order of priority:
(a) to the payment of debts and liabilities of the Partnership, including any debts and liabilities to a Partner arising under this Agreement;
(b) to the setting up of any reserves which the General Partner or the liquidating agent or committee, as the case may be, shall deem reasonably necessary for contingent or unforeseen liabilities or obligations of the Partnership; and
(c) to the Partners with net positive balances in their respective Capital Accounts in the proportion that the balance in the Capital Account of each Partner with a net positive balance in such Partner's respective Capital Account bears to the balances in the Capital Accounts of all Partners with net positive balances in their respective Capital Accounts.
Section 16.6. Capital Account Adjustments. For purposes of
Section 16.5, the respective balance in the Capital Account of each Partner
shall be determined after allocating all income, gain, loss and expense of the
Partnership pursuant to the terms of this Agreement and after taking into
account all prior distributions to the Partners. In addition, if property is
distributed in kind to the Partners, for purposes of Section 16.5 of this
Agreement, any unsold Partnership property shall be valued by the General
Partner or the liquidating agent or committee, as the case may be, to determine
the gain or loss which would have resulted if the property were sold for its
Gross Fair Market Value, and, to the extent not previously reflected in the
Partners Capital Accounts, the respective balance of the Capital Account of each
Partner shall be adjusted to reflect such gain or loss that would have been
allocated to such Partner if such property had been sold at its then Gross Fair
Market Value.
Section 16.7. Compliance With Treasury Regulations. In the event the Partnership or any General Partner's interest in the Partnership is liquidated within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g), the following action shall be taken by the later to occur of the last day of the Partnership's taxable year in which such liquidation occurred or the ninetieth day following the date of such liquidation:
(a) If any General Partner has a deficit balance in its Capital Account at the time of the liquidation of the Partnership or the liquidation of such General Partner's interest in the Partnership (after giving effect to all contributions, distributions and allocations for all taxable years including the year during which such liquidation occurs), such General Partner shall contribute to the capital of the Partnership funds in an amount equal to the deficit balance in its Capital Account. Nothing contained in this Agreement shall require any Limited Partner to contribute to the Partnership any amounts with respect to a deficit balance in such Partner's respective Capital Account.
(b) If the Partnership is actually liquidated, distributions shall be made to the Partners who have positive capital Account balances in compliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).
(c) In the discretion of the General Partner or the liquidating agent or committee, as the case may be, distributions pursuant to this Section 16.7 may be distributed to a trust of which the General Partner or the liquidating agent or committee is the trustee (hereinafter referred to as the "Trustee") established for the benefit of the Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership and paying any contingent or unforeseen liabilities or obligations of the Partnership so long as an opinion of counsel is obtained to the effect that such trust will not be taxed as an association taxable as a corporation. The assets of any such trust shall be distributed to the Partners from time to time, in the reasonable discretion of the Trustee, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the Partners pursuant to this Agreement and a portion or all of such assets may be withheld by the Trustee to provide a reasonable reserve for liabilities.
Section 16.8. No Recourse. On liquidation and dissolution of the Partnership, the Limited Partners shall look solely to the assets of the Partnership for the return of their investment, and if the Partnership assets remaining after payment and discharge of debts and liabilities of the Partnership, including any debts and liabilities owed to any one or more of the Partners, is insufficient to satisfy the rights of the Limited Partners, the Limited Partners shall have no recourse or further right or claim against the Partnership or the General Partner.
Section 16.9. Reserves. In winding up the affairs of the Partnership and distributing its assets, the General Partner or the liquidating agent or committee, as applicable, shall set up a reserve to meet any contingent or unforeseen liabilities or obligations and deposit funds for such purpose, together with funds held by the Partnership for distribution to Partners which remain unclaimed after a reasonable period of time, with an escrow agent for the purpose of disbursing such reserves and funds. At the expiration of such period as the General Partner or
the liquidating agent or committee, as applicable, deems advisable, the escrow agent shall be authorized and directed to distribute the balance remaining in the manner provided in Section 16.5 above.
ARTICLE XVII-NOTICES
Section 17.1. Notices. All notices and demands required or permitted under the provisions of this Agreement shall be in writing and may be personally delivered or sent by telefax, certified or registered mail, Federal Express or comparable courier service, postage or freight prepaid, to the Partners at their addresses as shown on Exhibit A hereto. Any Partner may specify a different address by notifying the General Partner in writing of such different address. Any notice personally delivered shall be effective upon the date of delivery. Any notice mailed or sent by air courier as provided for in this Section 17.1 shall be deemed given and become effective on the second business day following the date so sent.
ARTICLE XVIII - REPRESENTATIONS AND WARRANTIES
Section 18.1. The General Partner. As of the date of this Agreement, each of the representations and warranties contained in this Section 18.1 shall be a true, accurate and full disclosure of all facts relevant to the matters contained herein and such warranties and representations shall survive the execution of this Agreement. The General Partner hereby represents and warrants that:
(a) There are no disputes, claims, actions, suits or proceedings, arbitrations or investigations, either administrative or judicial, pending or, to the knowledge of the General Partner, threatened or contemplated, against or affecting the General Partner or its business, operations, financial condition or assets or its ability to consummate the transactions contemplated in this Agreement, at law or in equity or otherwise, before or by any court or governmental agency or body, domestic or foreign, or before an arbitrator of any kind. The General Partner is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency or body, domestic or foreign, or of an arbitrator of any kind, and the execution and delivery of this Agreement by the General Partner and the performance by the General Partner of its obligations hereunder, will not constitute an event of default under any agreement by which the General Partner or its properties are bound or result in any encumbrance upon the properties or assets of the General Partner, and
(b) The General Partner is acquiring its Interest in the Partnership for investment and without a view to the distribution thereof.
Section 18.2. Limited Partners. As of the date each Limited Partner executes this Agreement, each of the representations and warranties made with respect to such Limited Partner in this Section 18.2 shall be a true, accurate and full disclosure of all facts relevant to the matters
contained herein and such warranties and representations shall survive the execution of this Agreement. Each Limited Partner hereby represents and warrants that:
(a) Such Limited Partner is acquiring such Limited Partner's Interest in the Partnership for investment and without a view to the distribution thereof;
(b) If such Limited Partner is not an individual, it is duly organized and validly existing under appropriate state law and has the requisite power and authority to enter into and carry out the terms and conditions of this Agreement;
(c) All actions required to be taken by such Limited Partner to consummate the transactions contemplated by this Agreement have been taken by such Limited Partner and no further approval of any board, court or other body is necessary in order to permit such Limited Partner to consummate the transactions contemplated by the Agreement; and
(d) There are no disputes, claims, actions, suits or proceedings, arbitrations or investigations, either administrative or judicial, pending or, to the knowledge of the Limited Partner, threatened or contemplated, against or affecting the Limited Partner or its business, operations, financial condition or assets or its ability to consummate the transactions contemplated in this Agreement, at law or in equity or otherwise, before or by any court or governmental agency or body, domestic or foreign, or before an arbitrator of any kind. The Limited Partner is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency or body, domestic or foreign, or of an arbitrator of any kind, and the execution and delivery of this Agreement by the Limited Partner and the performance by the Limited Partner of its obligations hereunder, will not constitute an event of default under any agreement by which the Limited Partner or its properties are bound or result in any encumbrance upon the properties or assets of the Limited Partner.
ARTICLE XIX - INDEMNIFICATION
Section 19.1. Indemnification. The Partnership (but not any Limited Partner individually) shall indemnify any Partner (or employee of a Partner) against any losses, judgments, claims and/or liabilities (including reasonable expenses incurred) in connection with the defense of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit or proceeding (other than an action, suit or proceeding by or in the right of a Limited Partner or the Partnership), where the Person who was, is or is threatened to be made a named defendant or respondent in a proceeding was named because the Person is or was a Partner of the Partnership (or employee of the same).
Section 19.2. Conditions. The indemnification contained in
Section 19.1 is conditioned upon the Majority Vote that such Person:
(a) conducted himself in good faith;
(b) reasonably believed, in the case of conduct in his official capacity as a General Partner of the Partnership, that his conduct was in the Partnership's best interest, and in all other cases, that his conduct was at least not opposed to the Partnership's best interest; and
(c) in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 19.3. Successful Defense. Notwithstanding Section 19.2, the Partnership shall indemnify each Partner (or employee of a Partner) against reasonable expenses incurred in connection with a proceeding in which he is a party because he is or was a Partner (or employee of a Partner) if he has been wholly successful, on the merits or otherwise, in the defense of the proceeding.
Section 19.4. Exclusions. A Partner (or employee of a Partner) may not be indemnified under this Article XIX for obligations resulting from a proceeding:
(a) in which the Person is found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Person's official capacity; or
(b) in which the Person is found liable to the Partnership.
In the event that the Partnership advanced funds for a proceeding in which the
Partner (or Employee) was found liable in accordance with subsections (a) and
(b) above, the Partner (or Employee) shall repay all such amounts to the
Partnership, with interest.
Section 19.5. Expenses. Expenses as used herein means court costs, attorneys' fees, judgments, penalties (including excise and similar taxes), fines, settlements and other reasonable expenditures actually incurred by the Person in connection with the proceeding.
ARTICLE XX - MISCELLANEOUS
Section 20.1. Certificates, Etc. At the expense of the Partnership, the General Partner shall promptly have prepared and executed all legally required applications, registrations, publications, certificates and affidavits, and any amendments thereof, for filing with the proper governmental authorities and arrange for the proper advertisement, publication and filing thereof for the record.
Section 20.2. Power of Attorney. Each Partner who is a party hereto or executes and delivers an addendum joining in his Agreement, hereby makes, constitutes and appoints the General Partner, with full power of substitution, the Partner's true and lawful attorney-in-fact for
the Partner and in the Partner's name, place and stead and for the Partner's use and benefit, to sign, execute, certify, acknowledge, file and record any documents, financing statements or other instruments referred to herein or required by law in Pennsylvania or any other jurisdiction, of the Partnership or the Partners, or appropriate to fully effectuate the provisions of this Agreement. The foregoing grant of authority shall be irrevocable and shall constitute a power coupled with an interest; provided, however, that each Partner may revoke this power by an instrument in writing executed and delivered to the General Partner after the dissolution and winding-up of the Partnership in accordance with the terms of this Agreement or after the permitted assignment or transfer of the Partner's entire interest in the Partnership.
Section 20.3. Partners' Relationship Inter Se. Nothing in this Agreement shall be construed to constitute any Partner the agent of any other Partner, except as expressly provided herein. Each Partner may, without accountability to the Partnership or to any other Partner, and without any consent whatsoever, engage jointly and/or severally in any other business whether or not such other business is similar to the business of the Partnership or any of its assets.
Section 20.4. Partition Waived. The Partners agree that the Partnership property is not and will not be suitable for Partition. Accordingly, each of the Partners hereby irrevocably waives any and all rights that such Partner may have to maintain any action for partition of any of the Partnership Property.
Section 20.5. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof. It supersedes any prior or contemporaneous agreement or understanding among the parties and it may not be modified or amended in any manner other than as set forth in this Agreement.
Section 20.6. Governing Law. This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions.
Section 20.7. Binding Effect. Except as otherwise specifically provided in this Agreement, this Agreement shall be binding upon and inure to the benefit of the Parties and their legal representatives, heirs, administrators, executors, successors and assigns.
Section 20.8. Gender and Number. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter.
Section 20.9. Captions. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope of any provision of this Agreement.
Section 20.10. Severance. If any provision of this Agreement or the application of such provision to any Person or circumstance shall be held invalid, the remainder of this
Agreement, or the application of such provisions to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby and this Agreement shall be construed so as to be enforceable to the maximum extent allowed at law or in equity.
Section 20.11. Execution of Instruments; Reliance by Third Parties. Any form of execution on behalf of the Partnership, including, without limitation, execution of any note, mortgage, evidence of indebtedness, contract or other instrument or writing, or any assignment or endorsement thereof executed or entered into between the Partnership and any Person shall be executed on behalf of the Partnership by the General Partner. Third parties dealing with the Partnership shall be entitled to rely conclusively upon the power and authority of the General Partner. Any Person having occasion to transact business with the Partnership or being called upon to transfer any property, funds or value to or from the name or account of the Partnership shall be entitled to rely on instructions, assignments or any document or instrument signed or purporting to be signed in accordance with this Section 20.11 by the General Partner without inquiry as to the authority of the General Partner and without inquiry as to the validity of any transfer to or from the name or account of the Partnership. At the time of transfer, the Person shall be entitled to assume that the Partnership continues in existence under the laws of the Commonwealth of Pennsylvania and this Agreement continues in full force and effect without amendment, so long as such Person has received no actual notice to the contrary.
Section 20.12. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. In addition, this Agreement may contain more than one counterpart of the signature page and any schedule, and this Agreement may be executed by the affixing of the signatures of each of the Partners to one of such counterparts. All of such counterparts shall be read as though one and they shall have the same force and effect as though all the signers had signed a single page.
IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as of the date first written above.
WITNESS: GENERAL PARTNER:
GENERAL NUTRITION, INCORPORATED
[ILLEGIBLE] By: /s/ Ronald M. Marmo
------------------------------
Name: Ronald M. Marmo
Title: Assistant Secretary
|
[SEE ATTACHED LIMITED PARTNER SIGNATURE PAGES]
LIMITED PARTNER SIGNATURE PAGE
GN INVESTMENT, INC.
By: /s/ Ronald M. Marmo
------------------------------
Ronald M. Marmo
Assistant Secretary/Treasurer
|
EXHIBIT 3.42
CERTIFICATE OF INCORPORATION
OF
GENERAL NUTRITION COMPANIES, INC.
FIRST. The name of the corporation is General Nutrition Companies, Inc.
SECOND. The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, DE 19801, New Castle County, Delaware. The name of its registered agent at such address is Corporation Trust Company.
THIRD. The nature of business to be conducted or promoted and the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall have authority to issue is two thousand (2,000) shares, all of which shall be Common Stock, $(.01) par value per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Guy E. Snyder, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street, Suite 2400
Chicago, Illinois 60601
SIXTH. The number of directors of the corporation shall be fixed from time to time by the By-Laws of the corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
SEVENTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation.
EIGHTH. The corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liabilities and expenses reasonably incurred or paid by such person in connection with such
action, suit or proceeding. The words "liabilities" and "expenses" shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys' fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article EIGHTH shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefits of the heirs, executors and administrators of such person.
The corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article EIGHTH or otherwise.
For purposes of this Article EIGHTH, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
The provisions of this Article EIGHTH shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
TENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.
The undersigned incorporator, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this Certificate this 28th day of October, 2003.
/s/ Guy E. Snyder -------------------------------- Guy E. Snyder Sole Incorporator |
EXHIBIT 3.43
BY-LAWS
OF
GENERAL NUTRITION COMPANIES, INC.
ARTICLE I
OFFICES OF REGISTERED AGENT
Section 1.1 Registered Office and Agent. The Corporation shall have and maintain a registered office in Delaware and a registered agent having a business office identical with such registered office.
Section 1.2 Other Offices. The Corporation may also have such other office or offices in Delaware or elsewhere as the Board of Directors may determine or as the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. An annual meeting of the stockholders shall be held on the first Monday in July in each year beginning with the year 2004, at the hour of 10:00 a.m., or in the event the annual meeting is not held on such date and at such time, then on the date and at the time designated by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the directors shall not be elected at the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the stockholders may be called at any time by the President, and shall be called by the President or Secretary at the request of (a) a majority of the Board of Directors or (b) the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called. Such request shall state the purpose or purposes of the proposed meeting.
Section 2.3 Place of Meeting. Meetings of stockholders, whether annual or special, shall be held at such time and place as may be determined by the Board of Directors and designated in the call and notice or waiver of notice of such meeting; provided, that a waiver of notice signed by all stockholders may designate any time or place as the time and place for the holding of such meeting. If no designation is made, the place of meeting shall be at the Corporation's principal place of business.
Section 2.4 Notice of Meeting. Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the date of the meeting, or, in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, at least twenty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
Section 2.5 Fixing Record Date for Determination of Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date to be not more than sixty days prior to the date of a meeting of stockholders, the date of payment of a dividend or the date on which other action requiring determination of stockholders is to be taken, as the case may be. In addition, the record date for a meeting of stockholders shall not be less than ten days, or in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, not less than twenty days immediately preceding such meeting. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 2.6 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of the stockholders, the corporate books, or to vote at any meeting of the stockholders.
Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the Certificate of Incorporation or these By-laws, a majority of the outstanding shares of the Corporation, entitled to vote on a matter, present in person or represented by proxy, shall constitute a quorum for consideration of such matter at any meeting of stockholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are present in person or represented by proxy at said meeting, a majority of the shares so present in person or represented by proxy may adjourn the meeting from time to time without further notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 2.8 Voting Shares and Proxies. Each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, except as otherwise provided in the Certificate of Incorporation. Each stockholder entitled to vote shall be entitled to vote in person, or may authorize another person or persons to act for him by proxy executed in writing by such stockholder or by his duly authorized attorney-in-fact, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 2.9 Inspectors. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon the list of stockholders produced at the meeting in accordance with Section 2.6 hereof and upon their determination of the validity and effect of proxies, and they shall count all votes, report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each such report shall be in writing and signed by at least a majority of the inspectors, the report of a majority being the report of the inspectors, and such reports shall be prima facie evidence of the number of shares represented at the meeting and the result of a vote of the stockholders.
Section 2.10 Voting of Shares by Certain Holders. Shares of its own stock belonging to the Corporation, unless held by it in a fiduciary capacity, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.
Section 2.11 Action by Written Consent. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Section 2.12 Cumulative Voting. If the Certificate of Incorporation so provides, at all elections of directors of the Corporation, or at elections held under specified circumstances, each
holder of stock shall be entitled to as many votes as shall equal the number of votes which he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, except as may be otherwise provided by statute or the Certificate of Incorporation.
Section 3.2 Number, Tenure and Qualifications. The number of directors shall be . The number may be increased or decreased from time to time by amendment of this Section, except as otherwise provided for in the Certificate of Incorporation. Each director elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders or residents of Delaware.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Section, immediately after and at the same place as the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors may be called at any time by the President or any two directors. The person or persons who call a special meeting of the Board of Directors may designate any place, either within or without Delaware, as the place for holding such special meeting. In the absence of such a designation the place of meeting shall be the Corporation's principal place of business.
Section 3.5 Notice of Special Meetings. Notice stating the place, date and hour of a special meeting shall be mailed not less than five days before the date of the meeting, or shall be sent by telegram or be delivered personally or by telephone not less than two days before the date of the meeting, to each director, by or at the direction of the person or persons calling the meeting. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
Section 3.6 Quorum and Manner of Acting. A majority of the number of directors as fixed in Section 3.2 hereof shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided in the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.
Section 3.7 Informal Action by Directors. Any action which is required by law or by these By-laws to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of all of the directors or all of the members of such committee, as the case may be, at a duly called meeting thereof, and shall be filed with the minutes of proceedings of the Board or committee.
Section 3.8 Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, members of the Board of Directors
or of any committee designated by such Board, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence at such meeting.
Section 3.9 Resignations. Any director may resign at any time by giving written notice to the Board of Directors, the President, or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 3.10 Vacancies.
(a) Vacancies and newly-created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until their successors are elected and qualified or until their earlier resignation or removal.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and the directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified or until their earlier resignation or removal.
Section 3.11 Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, provided, however, that:
(a) if the Board is classified and unless otherwise provided in the Certificate of Incorporation, the stockholders may affect such removal only for cause; or
(b) if the Corporation has cumulative voting, and less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.
Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, the provisions of this Section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.
Section 3.12 Interested Directors.
(a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
Section 4.1 Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation which, to the extent provided in said
resolution or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that any such committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, or amending the By-laws; and, unless the resolution, By-laws or Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law.
Section 4.2 Absence or Disqualification of Committee Member. In the absence or disqualification of any member of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 4.3 Record of Proceedings. The committees shall keep regular minutes of their proceedings and when required by the Board of Directors shall report the same to the Board of Directors.
ARTICLE V
OFFICERS
Section 5.1 Number and Titles. The officers of the Corporation shall be a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer and a Secretary. There shall be such other officers and assistant officers as the Board of Directors may from time to time deem necessary. Any two or more offices may be held by the same person.
Section 5.2 Election, Term of Office and Qualifications. The officers shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall be elected to hold office until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Election of an officer shall not of itself create contract rights.
Section 5.3 Removal. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 5.4 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.
Section 5.5 Duties. In addition to and to the extent not inconsistent with the provisions in these By-laws, the officers shall have such authority, be subject to such restrictions and perform such duties in the management of the business, property and affairs of the Corporation as may be determined from time to time by the Board of Directors.
Section 5.6 President. The President shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, he shall in general supervise the business and affairs of the Corporation and he shall see that resolutions and directions of the Board of Directors are carried into effect except when that responsibility is specifically assigned to some other person by the Board of Directors. Unless there is a Chairman of the Board who is present and who has the duty to preside, the President shall preside at all meetings of the stockholders and, if a director, at all meetings of the Board of Directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the President may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed or the execution of which is in the ordinary course of the Corporation's business, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. In general, he shall perform all duties incident to the office of President and such other duties as from time to time may be prescribed by the Board of Directors.
Section 5.7 Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there is more than one Vice President, the Vice President designated Executive Vice President by the Board of Directors and thereafter, or in the absence of such designation, the Vice Presidents in the order otherwise designated by the Board of Directors, or in the absence of such other designation, in the order of their election) shall perform the duties of the President, and when so acting, shall have all the authority of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the Vice President (or each of them if there are more than one) may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto
authorized by the Board of Directors or these By-laws. The Vice Presidents shall perform such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.8 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Corporation, and shall (a) have charge and custody
of, and be responsible for, all funds and securities of the Corporation; (b)
keep or cause to be kept correct and complete books and records of account
including a record of all receipts and disbursements; (c) deposit all funds and
securities of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with these By-laws; (d) from
time to time prepare or cause to be prepared and render financial statements of
the Corporation at the request of the President or the Board of Directors; and
(e) in general, perform all duties incident to the office of Treasurer and such
other duties as from time to time may be prescribed by the President or the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 5.9 Secretary. The Secretary shall (a) keep the minutes of the proceedings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all stock certificates prior to the issue thereof and to all documents the execution of which on behalf of the Corporation under its seal is necessary or appropriate; (d) keep or cause to be kept a register of the name and address of each stockholder, which shall be furnished to the Corporation by each such stockholder, and the number and class of shares held by each stockholder; (e) have general charge of the stock transfer books; and (f) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be prescribed by the President or the Board of Directors.
Section 5.10 Assistant Treasurers and Assistant Secretaries. In the absence of the Treasurer or Secretary or in the event of the inability or refusal of the Treasurer or Secretary to act, the Assistant Treasurer and the Assistant Secretary (or in the event there is more than one of either, in the order designated by the Board of Directors or in the absence of such designation, in the order of their election) shall perform the duties of the Treasurer and Secretary, respectively, and when so acting, shall have all the authority of and be subject to all the restrictions upon such office. The Assistant Treasurers and Assistant Secretaries shall also perform such duties as from time to time may be prescribed by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. If required by the Board of Directors, an Assistant Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.
Section 5.11 Salaries. The salaries and additional compensation, if any, of the officers shall be determined from time to time by the Board of Directors; provided, that if such officers are also directors such determination shall be made by a majority of the directors then in office.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 6.1 Stock Certificates. The issued shares of the Corporation shall be represented by certificates, and no class or series of shares of the Corporation shall be uncertificated shares. Stock certificates shall be in such form as determined by the Board of Directors and shall be signed by, or in the name of the Corporation by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any of or all the signatures on the certificates may be a facsimile. All certificates of stock shall bear the seal of the Corporation, which seal may be a facsimile, engraved or printed.
Section 6.2 Transfer of Shares. The shares of the Corporation shall be
transferable. The Corporation shall have a duty to register any such transfer
(a) provided there is presented to the Corporation or its transfer agents (i)
the stock certificate endorsed by the appropriate person or persons; and (ii)
reasonable assurance that such endorsement is genuine and effective; and, (b)
provided that (i) the Corporation has no duty to inquire into adverse claims or
has discharged any such duty; (ii) any applicable law relating to the collection
of taxes has been complied with; and (iii) the transfer is in fact rightful or
is to a bona fide purchaser. Upon registration of such transfer upon the stock
transfer books of the Corporation the certificates representing the shares
transferred shall be cancelled and the new record holder, upon request, shall be
entitled to a new certificate or certificates. The terms and conditions
described in the foregoing provisions of this Section shall be construed in
accordance with the provisions of the Delaware Uniform Commercial Code, except
as otherwise provided by the Delaware General Corporation Law. No new
certificate shall be issued until the former certificate or certificates for a
like number of shares shall have been surrendered and cancelled, except that in
case of a lost, destroyed, wrongfully taken or mutilated certificate a new one
may be issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors or the President may prescribe consistent with applicable
law.
ARTICLE VII
DIVIDENDS
Section 7.1 Dividends. Subject to the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock.
ARTICLE VIII
FISCAL YEAR
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.
ARTICLE IX
SEAL
Section 9.1 Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE X
WAIVER OF NOTICE
Section 10.1 Waiver of Notice. Whenever any notice is required to be given under these By-laws, the Certificate of Incorporation or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Contracts. The Board of Directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and the President may so authorize any officer or agent with respect to contracts or instruments in the usual and regular course of its business. Such authority may be general or confined to specific instances.
Section 11.2 Loans. No loan shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.
Section 11.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, or notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent as shall from time to time be authorized by the Board of Directors.
Section 11.4 Deposits. The Board of Directors may select banks, trust companies or other depositaries for the funds of the Corporation.
Section 11.5 Stock in Other Corporations. Shares of any other corporation which may from time to time be held by the Corporation may be represented and voted by the President, or by any proxy appointed in writing by the President, or by any other person or persons thereunto authorized by the Board of Directors, at any meeting of stockholders of such corporation or by executing written consents with respect to such shares where stockholder action may be taken by written consent. Shares represented by certificates standing in the name of the Corporation may be endorsed for sale or transfer in the name of the Corporation by the President or by any other officer thereunto authorized by the Board of Directors. Shares belonging to the Corporation
need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the name of any nominee designated for such purpose by the Board of Directors.
ARTICLE XII
AMENDMENT
Section 12.1 Procedure. These By-laws may be altered, amended or repealed and new by-laws may be adopted by the Board of Directors.
EXHIBIT 4.1
GENERAL NUTRITION CENTERS, INC.
AND EACH OF THE GUARANTORS PARTY HERETO
8-1/2% SENIOR SUBORDINATED NOTES DUE 2010
INDENTURE
Dated as of December 5, 2003
U.S. Bank National Association
Trustee
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310(a)(1)................................................................... 7.10 (a)(2)................................................................... 7.10 (a)(3)................................................................... N.A. (a)(4)................................................................... N.A. (a)(5)................................................................... 7.10 (b)...................................................................... 7.10 (c)...................................................................... N.A. 311(a)...................................................................... 7.11 (b)...................................................................... 7.11 (c)...................................................................... N.A. 312(a)...................................................................... 2.05 (b)...................................................................... 12.03 (c)...................................................................... 12.03 313(a)...................................................................... 7.06 (b)(1)................................................................... N.A. (b)(2)................................................................... 7.06; 7.07 (c)...................................................................... 7.06; 12.02 (d)...................................................................... 7.06 314(a)...................................................................... 4.03; 12.02; 12.05 (b)...................................................................... N.A (c)(1)................................................................... 12.04 (c)(2)................................................................... 12.04 (c)(3)................................................................... N.A. (d)...................................................................... N.A (e)...................................................................... 12.05 (f)...................................................................... N.A. 315(a)...................................................................... 7.01 (b)...................................................................... 7.05; 12.02 (c)...................................................................... 7.01 (d)...................................................................... 7.01 (e)...................................................................... 6.11 316(a) (last sentence)...................................................... 2.09 (a)(1)(A)................................................................ 6.05 (a)(1)(B)................................................................ 6.04 (a)(2)................................................................... N.A. (b)...................................................................... 6.07 (c)...................................................................... 2.12 317(a)(1)................................................................... 6.08 (a)(2)................................................................... 6.09 (b)...................................................................... 2.04 318(a)...................................................................... 12.01 (b)...................................................................... N.A. (c)...................................................................... 12.01 |
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions................................................................................ 1
Section 1.02 Other Definitions.......................................................................... 29
Section 1.03 Incorporation by Reference of Trust Indenture Act.......................................... 29
Section 1.04 Rules of Construction...................................................................... 30
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating............................................................................ 30
Section 2.02 Execution and Authentication............................................................... 31
Section 2.03 Registrar and Paying Agent................................................................. 32
Section 2.04 Paying Agent to Hold Money in Trust........................................................ 32
Section 2.05 Holder Lists............................................................................... 32
Section 2.06 Transfer and Exchange...................................................................... 33
Section 2.07 Replacement Notes.......................................................................... 45
Section 2.08 Outstanding Notes.......................................................................... 45
Section 2.09 Treasury Notes............................................................................. 45
Section 2.10 Temporary Notes............................................................................ 45
Section 2.11 Cancellation............................................................................... 46
Section 2.12 Defaulted Interest......................................................................... 46
Section 2.13 Issuance of Additional Notes............................................................... 46
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee......................................................................... 47
Section 3.02 Selection of Notes to Be Redeemed or Purchased............................................. 47
Section 3.03 Notice of Redemption....................................................................... 47
Section 3.04 Effect of Notice of Redemption............................................................. 48
Section 3.05 Deposit of Redemption or Purchase Price.................................................... 48
Section 3.06 Notes Redeemed or Purchased in Part........................................................ 49
Section 3.07 Optional Redemption........................................................................ 49
Section 3.08 Mandatory Redemption....................................................................... 50
Section 3.09 Offer to Purchase by Application of Excess Proceeds........................................ 50
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes........................................................................... 51
Section 4.02 Maintenance of Office or Agency............................................................ 52
Section 4.03 Reports.................................................................................... 52
Section 4.04 Compliance Certificate..................................................................... 53
Section 4.05 Taxes...................................................................................... 53
Section 4.06 Stay, Extension and Usury Laws............................................................. 53
Section 4.07 Limitation on Restricted Payments.......................................................... 53
Section 4.08 Limitation on Restrictions on Distributions from Restricted Subsidiaries................... 56
Section 4.09 Limitation on Indebtedness................................................................. 58
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Section 4.10 Limitation on Asset Dispositions........................................................... 60
Section 4.11 Limitation on Transactions with Affiliates................................................. 62
Section 4.12 Limitation on Liens........................................................................ 64
Section 4.13 Limitation on the Sale or Issuance of Preferred Stock of Restricted Subsidiaries........... 64
Section 4.14 Corporate Existence........................................................................ 64
Section 4.15 Offer to Repurchase Upon Change of Control................................................. 65
Section 4.16 Limitation on Layering..................................................................... 66
Section 4.17 Additional Note Guarantees................................................................. 66
Section 4.18 Designation of Unrestricted Subsidiaries................................................... 67
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets................................................... 67
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.......................................................................... 68
Section 6.02 Acceleration............................................................................... 70
Section 6.03 Other Remedies............................................................................. 70
Section 6.04 Waiver of Past Defaults.................................................................... 70
Section 6.05 Control by Majority........................................................................ 71
Section 6.06 Limitation on Suits........................................................................ 71
Section 6.07 Rights of Holders of Notes to Receive Payment.............................................. 71
Section 6.08 Collection Suit by Trustee................................................................. 72
Section 6.09 Trustee May File Proofs of Claim........................................................... 72
Section 6.10 Priorities................................................................................. 72
Section 6.11 Undertaking for Costs...................................................................... 73
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.......................................................................... 73
Section 7.02 Rights of Trustee.......................................................................... 74
Section 7.03 Individual Rights of Trustee............................................................... 74
Section 7.04 Trustee's Disclaimer....................................................................... 75
Section 7.05 Notice of Defaults......................................................................... 75
Section 7.06 Reports by Trustee to Holders of the Notes................................................. 75
Section 7.07 Compensation and Indemnity................................................................. 75
Section 7.08 Replacement of Trustee..................................................................... 76
Section 7.09 Successor Trustee by Merger, etc........................................................... 77
Section 7.10 Eligibility; Disqualification.............................................................. 77
Section 7.11 Preferential Collection of Claims Against Company.......................................... 77
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance................................... 77
Section 8.02 Legal Defeasance and Discharge............................................................. 77
Section 8.03 Covenant Defeasance........................................................................ 78
Section 8.04 Conditions to Legal or Covenant Defeasance................................................. 78
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions................................................................................. 80
Section 8.06 Repayment to Company....................................................................... 80
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Section 8.07 Reinstatement.............................................................................. 80
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes........................................................ 81
Section 9.02 With Consent of Holders of Notes........................................................... 82
Section 9.03 Compliance with Trust Indenture Act........................................................ 83
Section 9.04 Revocation and Effect of Consents.......................................................... 83
Section 9.05 Notation on or Exchange of Notes........................................................... 83
Section 9.06 Trustee to Sign Amendments, etc............................................................ 83
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate................................................................... 84
Section 10.02 Liquidation; Dissolution; Bankruptcy....................................................... 84
Section 10.03 Default on Designated Senior Indebtedness.................................................. 84
Section 10.04 Acceleration of Notes...................................................................... 85
Section 10.05 When Distribution Must Be Paid Over........................................................ 85
Section 10.06 Notice by Company.......................................................................... 86
Section 10.07 Subrogation................................................................................ 86
Section 10.08 Relative Rights............................................................................ 86
Section 10.09 Subordination May Not Be Impaired by Company............................................... 86
Section 10.10 Distribution or Notice to Representative................................................... 86
Section 10.11 Rights of Trustee and Paying Agent......................................................... 87
Section 10.12 Authorization to Effect Subordination...................................................... 87
Section 10.13 Amendments................................................................................. 87
ARTICLE 11
NOTE GUARANTEES
Section 11.01 Guarantee.................................................................................. 87
Section 11.02 Subordination of Note Guarantee............................................................ 88
Section 11.03 Limitation on Guarantor Liability.......................................................... 89
Section 11.04 Execution and Delivery of Note Guarantee................................................... 89
Section 11.05 Guarantors May Consolidate, etc., on Certain Terms......................................... 89
Section 11.06 Releases................................................................................... 90
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls............................................................... 90
Section 12.02 Notices.................................................................................... 90
Section 12.03 Communication by Holders of Notes with Other Holders of Notes.............................. 91
Section 12.04 Certificate and Opinion as to Conditions Precedent......................................... 92
Section 12.05 Statements Required in Certificate or Opinion.............................................. 92
Section 12.06 Rules by Trustee and Agents................................................................ 92
Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders................... 92
Section 12.08 Governing Law.............................................................................. 92
Section 12.09 No Adverse Interpretation of Other Agreements.............................................. 93
Section 12.10 Successors................................................................................. 93
Section 12.11 Severability............................................................................... 93
Section 12.12 Counterpart Originals...................................................................... 93
Section 12.13 Table of Contents, Headings, etc........................................................... 93
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EXHIBITS
Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE |
INDENTURE dated as of December 5, 2003 among General Nutrition Centers, Inc., a Delaware corporation (the "Company"), the Guarantors (as defined) and U.S. Bank National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 8-1/2% Senior Subordinated Notes due 2010 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions.
"144A Global Note" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquisition" means the acquisition of General Nutrition Companies, Inc. pursuant to the Acquisition Agreement.
"Acquisition Agreement" means the Purchase Agreement, dated October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as in effect on the date of this Indenture.
"Additional Assets" means
(l) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; provided that such Restricted Subsidiary is primarily engaged in a Related Business;
(3) Capital Stock of any Person that at such time is a Restricted Subsidiary, acquired from a third party; provided that such Restricted Subsidiary is primarily engaged in a Related Business; and
(4) Capital Stock or Indebtedness of any Person which is primarily engaged in a Related Business; provided, however, for purposes of Section 4.10 hereof, the aggregate amount of Net Available Cash permitted to be invested pursuant to this clause (4) shall not exceed at any one time outstanding 2.5% of Consolidated Tangible Assets.
"Additional Notes" means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 2.13 hereof, and as permitted by Section 4.09 hereof, as part of the same series as the Initial Notes.
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. No Person (other than the Company or any Subsidiary of the Company) in whom a Receivables Subsidiary makes an Investment in connection with a Qualified Receivables Transaction will be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment.
"Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent.
"Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of shares of Capital Stock of a Restricted Subsidiary, other than directors' qualifying shares, property or other assets, each referred to for the purposes of this definition as a "disposition," by the Company or any of its Restricted Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction, other than:
(1) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;
(2) a disposition of inventory, equipment, obsolete assets or surplus personal property in the ordinary course of business;
(3) the sale of Cash Equivalents in the ordinary course of business;
(4) a transaction or a series of related transactions in which the fair market value of the assets disposed of, in the aggregate, does not exceed $2 million;
(5) the sale or discount, with or without recourse, and on commercially reasonable terms, of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable for notes receivable;
(6) the licensing of intellectual property in the ordinary course of business;
(7) for purposes of Section 4.10 hereof only, a disposition subject to the provisions of Section 4.07 hereof;
(8) a disposition of property or assets that is governed by the provisions of Section 5.01 hereof;
(9) the sale of franchisee accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Subsidiary for the fair market value thereof, including cash in an amount at least equal to 75% of the book value thereof as determined in accordance with GAAP, it being understood that, for the purposes of this clause (9), Notes received in exchange for the transfer of franchisee accounts receivable and related assets will be deemed cash if the Receivables Subsidiary or other payor is required to repay said
Notes as soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that are not Affiliates of the Company entered into as part of a Qualified Receivables Transaction;
(10) the transfer of franchise accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction;
(11) any surrender or waiver of contract rights or the settlement release or surrender of contract, tort or other litigation claims in the ordinary course of business;
(12) the granting of Liens (and foreclosure thereon) not prohibited by this Indenture;
(13) the closure and disposition of retail stores or distribution centers and any sales of a store owned by the Company to a franchisee, in each case in the ordinary course of business; and
(14) any sublease of real property by the Company or any Restricted Subsidiary to a franchisee in the ordinary course of business.
"Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the date of this Indenture or thereafter Incurred, payable under or in respect of the Senior Credit Facility and all obligations under Specified Hedging Obligations (as defined in the Senior Credit Agreement), including, without limitation, principal, premium, if any, interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceedings, penalties, fees, charges, expenses, indemnifications, damages, reimbursement obligations, Guarantees, other monetary obligations of any nature and all other amounts payable thereunder or in respect thereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company or any committee thereof duly authorized to act on behalf of such board.
"Borrowing Base" means, as of any date, an amount equal to:
(1) 75% of the face amount of all accounts receivable owned by the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 60 days past due; provided, however, that any franchise accounts receivable owned by a Receivables Subsidiary, or that the Company or any of its Subsidiaries has agreed to
transfer to a Receivables Subsidiary, shall be excluded for purposes of determining such amount; plus
(2) 50% of the book value of all inventory, net of reserves, owned by the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date.
"Broker-Dealer" has the meaning set forth in the Registration Rights Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law to close in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease.
"Cash Equivalents" means any of the following:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Senior Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Permitted Holder or its Related Parties, becomes the beneficial owner, as defined in Rules 13d-3 and 13d-5 under the Exchange
Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of the Company or a Successor Company, as defined below, including, without limitation, through a merger or consolidation or purchase of Voting Stock of the Company; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a Wholly Owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of this Indenture;
(2) after an Equity Offering that is an initial public offering of Capital Stock of the Company, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of the Company.
"Clearstream" means Clearstream Banking, S.A.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means General Nutrition Centers, Inc., and any and all successors thereto.
"Consolidated Coverage Ratio" as of any date of determination means the ratio of
(1) the aggregate amount of EBITDA of the Company and its Restricted Subsidiaries for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of the Company are available, to
(2) Consolidated Interest Expense of the Company for such four fiscal quarters; provided, however, that:
(a) if the Company or any Restricted Subsidiary:
(i) has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period, except that in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation shall be computed based on:
(A) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or
(B) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation, and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, or
(ii) has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination, or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness, in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such discharge had occurred on the first day of such period;
(b) if since the beginning of such period the Company or any Restricted Subsidiary has made any Asset Disposition of any company or any business or any business segment, the EBITDA for such period shall be reduced by an amount equal to the EBITDA, if positive, directly attributable to the company, business or business segment that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA, if negative, directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period, and, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale;
(c) if since the beginning of such period the Company or any Restricted Subsidiary, by merger or otherwise, has made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquired any company or any business or any group of assets, including any such acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Investment or acquisition occurred on the first day of such period; and
(d) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period, has made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (b) or (c) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an Asset Disposition, Investment or acquisition of assets, or any transaction governed by the provisions of Section 5.01 hereof or the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred or repaid, repurchased, defeased or otherwise discharged in connection therewith, the pro forma calculations in respect thereof shall be as determined in good faith by a responsible financial or accounting officer of the Company, based on reasonable assumptions. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated at a fixed rate as if the rate in effect on the date of determination had been the applicable rate for the entire period, taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months. If any Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness which is being given pro forma effect was Incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, as to any Person, for any period, the total consolidated interest expense of such Person and its Restricted Subsidiaries determined in accordance with GAAP, minus, to the extent included in such interest expense, amortization or write-off of financing costs plus, to the extent Incurred by such Person and its Restricted Subsidiaries in such period but not included in such interest expense, without duplication:
(1) interest expense attributable to Capitalized Lease Obligations determined as if such lease were a capitalized lease, in accordance with GAAP;
(2) amortization of debt discount;
(3) interest in respect of Indebtedness of any other Person that has been Guaranteed by such Person or any Restricted Subsidiary, but only to the extent that such interest is actually paid by such Person or any Restricted Subsidiary;
(4) non-cash interest expense;
(5) net costs associated with Hedging Obligations;
(6) the product of:
(a) mandatory Preferred Stock cash dividends in respect of all Preferred Stock of Restricted Subsidiaries of such Person and Disqualified Stock of such Person held by Persons other than such Person or a Restricted Subsidiary, multiplied by
(b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, determined on a consolidated basis in accordance with GAAP; and
(7) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest to any Person, other than the referent Person or any Subsidiary thereof, in connection with Indebtedness Incurred by such plan or trust; provided, however, that as to the Company, there shall be excluded therefrom any such interest expense of any Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by the Company or any Restricted Subsidiary.
For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received by such Person and its Subsidiaries with respect to Interest Rate Agreements.
"Consolidated Net Income" means, as to any Person, for any period, the consolidated net income (loss) of such Person and its Subsidiaries before preferred stock dividends, determined in accordance with GAAP; provided, however, that there shall not be included in such Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not (as to the Company) a Restricted Subsidiary and, as to any other Person, an unconsolidated Person, except that:
(a) the referent Person's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the referent Person or a Subsidiary as a dividend or other distribution, subject, in the case of a dividend or other distribution to a Subsidiary, to the limitations contained in clause (3) below, and
(b) the net loss of such Person shall be included to the extent of the aggregate Investment of the referent Person or any of its Restricted Subsidiaries in such Person;
(2) any net income (loss) of any Restricted Subsidiary, as to the Company, or of any Subsidiary, as to any other Person, if in either case such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that:
(a) such Person's equity in the net income of any such Subsidiary for such period shall be included in Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Subsidiary during such period to such Person or another Subsidiary as a dividend, subject, in the case of a dividend that could have been made to another Restricted Subsidiary, to the limitation contained in this clause, and
(b) the net loss of such Subsidiary shall be included in determining Consolidated Net Income;
(3) any extraordinary gain or loss (together with any provision for taxes related thereto);
(4) the cumulative effect of a change in accounting principles;
(5) any reduction to the Consolidated Net Income of any Person caused by the amount, if any, of (a) non-cash charges relating to the exercise of options and (b) non-cash losses (or minus non-cash gains) from foreign currency translation;
(6) any decrease in net income caused by the increase in the book value of assets as a result of the Acquisition as reflected on the Company's balance sheet solely as a result of the application of SFAS No. 141;
(7) any gain (or loss), together with any related provision for taxes on such gain (or loss), realized in connection with any asset sale (other than in the ordinary course of business);
(8) costs related to the closing of stores in connection with the Acquisition as described in the Offering Memorandum; and
(9) costs incurred by the Company relating to an election made under Section 338(h)(10) of the Code (and any corresponding election under state, local, and foreign income tax laws), as provided in the Acquisition Agreement, in an amount not to exceed $10 million.
"Consolidated Tangible Assets" means, as of any date of determination, the total assets, less goodwill and other intangibles, other than patents, trademarks, copyrights, licenses and other intellectual property, shown on the balance sheet of the Company and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP less all write-ups, other than write-ups in connection with acquisitions, subsequent to the date of this Indenture in the book value of any asset, except any such intangible assets, owned by the Company or any of its Restricted Subsidiaries.
"Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company.
"Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement, including derivative agreements or arrangements, as to which such Person is a party or a beneficiary.
"Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.
"Default" means any event or condition that is, or after notice or passage of time or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.
"Designated Senior Indebtedness" means
(1) the Bank Indebtedness; and
(2) any other Senior Indebtedness or Guarantor Senior Indebtedness which, at the date of determination, has an aggregate principal amount of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated by the Company in the instrument evidencing or governing such Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms, or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable, or upon the happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified Stock; or
(3) is redeemable at the option of the holder thereof, in whole or in part;
in the case of clauses (1), (2) and (3), on or prior to the 91st day after the Stated Maturity of the Notes. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the provisions of Section 4.07 hereof.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that Guarantees or otherwise provides direct credit support for any Indebtedness of the Company.
"EBITDA" means, as to any Person, for any period, the Consolidated Net Income for such period, plus the following to the extent included in calculating such Consolidated Net Income:
(1) income tax expense;
(2) Consolidated Interest Expense (including the amortization of any debt issuance costs to the extent such costs are included in the calculation of Consolidated Interest Expense);
(3) depreciation expense;
(4) amortization expense (including the amortization of any debt issuance costs to the extent such costs are included in the calculation of Consolidated Interest Expense);
(5) other non-cash charges or non-cash losses; and
(6) any fees or expenses paid in connection with the Acquisition as described in the Offering Memorandum.
"Equity Offering" means any issuance or sale of Capital Stock (other than Disqualified Stock and other than to the Company or any of its Subsidiaries), or a contribution to the equity capital (other than by a Subsidiary of the Company), of the Company, in each case, that results in net proceeds to the Company of at least $100 million.
"Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles in the United States of America as in effect on the date of this Indenture, for purposes of the definitions of the terms "Consolidated Coverage Ratio," "Consolidated Interest Expense," "Consolidated Net Income" and "EBITDA," all defined terms in this Indenture, to the extent used in or relating to any of the foregoing definitions, and all ratios and computations based on any of the foregoing definitions, and as in effect from time to time, for all other purposes of this Indenture, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP.
"Global Note Legend" means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depository or its nominee, substantially in the form of Exhibit A1 hereto and that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.
"Government Obligations" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness, including any such obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay, or advance or supply funds for the purchase or payment of, such Indebtedness or such other obligation of such other Person, whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise; or
(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposits made in the ordinary course of business.
The term "Guarantee" used as a verb has a correlative meaning.
"Guarantor" means
(1) the Company's direct and indirect Domestic Subsidiaries existing on the date of this Indenture; and
(2) any Domestic Subsidiary created or acquired by the Company after the date of this Indenture, other than any Immaterial Subsidiary.
"Guarantor Senior Indebtedness" means, with respect to a Guarantor, the following obligations, whether outstanding on the date of this Indenture or thereafter Incurred, without duplication:
(1) Bank Indebtedness; and
(2) all obligations consisting of the principal of and premium and liquidated damages, if any, and accrued and unpaid interest, including interest accruing on or after the filling of any petition in bankruptcy or for reorganization relating to the Guarantor regardless of whether post-filing interest is allowed in such proceeding, on, and fees and other amounts owing in respect of, all other Indebtedness of the Guarantor, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the obligations of such Guarantor under the Note Guarantee; provided, however, that Guarantor Senior Indebtedness will not include:
(a) any obligations of such Guarantor to any Subsidiary or any other Affiliate of such Guarantor or any such Affiliate's Subsidiaries;
(b) any liability for Federal, state, local, foreign or other taxes owed or owing by such Guarantor;
(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business, including Guarantees thereof or instruments evidencing such liabilities;
(d) any Indebtedness, Guarantee or obligation of such Guarantor that is expressly subordinate or junior to any other Indebtedness, Guarantee or obligation of such Guarantor, including any Guarantor Senior Subordinated Indebtedness and any Subordinated Obligations of such Guarantor;
(e) Indebtedness that is represented by redeemable Capital Stock; or
(f) that portion of any Indebtedness that is Incurred in violation of this Indenture; provided that any Guarantee of Indebtedness under the Senior Credit Facility will not cease to be Guarantor Senior Indebtedness under this clause (f) if the lenders of such Indebtedness obtained a certificate from an Officer of the Company as of the date of
Incurrence of such Indebtedness to the effect that such Indebtedness was permitted to be Incurred by this Indenture.
If any Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of the U.S. Code or any applicable state fraudulent conveyance law, such Designated Senior Indebtedness nevertheless will constitute Guarantor Senior Indebtedness.
"Guarantor Senior Subordinated Indebtedness" means with respect to a Guarantor, the obligations of such Guarantor under the Note Guarantee and any other Indebtedness of such Guarantor, whether outstanding on the date of this Indenture or thereafter Incurred, that:
(1) specifically provides that such Indebtedness is to rank pari passu in right of payment with the obligations of such Guarantor under the Note Guarantee; and
(2) is not expressly subordinated by its terms in right of payment to any Indebtedness or other obligation of such Guarantor that is not Guarantor Senior Indebtedness of such Guarantor.
"Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.
"Immaterial Subsidiary" means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $2 million and whose total revenues for the most recent 12-month period do not exceed $2 million; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of the Company.
"Incur" means issue, assume, enter into any Guarantee of, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary, whether by merger, consolidation, acquisition or otherwise, shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. Any Indebtedness issued at a discount, including Indebtedness on which interest is payable through the issuance of additional Indebtedness, shall be deemed Incurred at the time of original issuance of the Indebtedness at the initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of determination, without duplication:
(1) the principal of Indebtedness of such Person for borrowed money if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(2) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(3) all reimbursement obligations of such Person, including reimbursement obligations in respect of letters of credit or other similar instruments, the amount of such obligations being equal at any time to the aggregate then undrawn and unexpired amount of such letters of credit or other instruments plus the aggregate amount of drawings thereunder that have not then been reimbursed;
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables, which purchase price is due more than one year after the date of placing such property in final service or taking final delivery and title thereto or the completion of such services if and to the extent it would appear as a liability upon the consolidated balance sheet of such Person prepared in accordance with GAAP;
(5) all Capitalized Lease Obligations of such Person;
(6) the redemption, repayment or other repurchase amount of such Person with respect to any Disqualified Stock or, if such Person is a Subsidiary of the Company, any Preferred Stock of such Subsidiary, but excluding, in each case, any accrued dividends, the amount of such obligation to be equal at any time to the maximum fixed involuntary redemption, repayment or repurchase price for such Capital Stock, or if such Capital Stock has no fixed price, to the involuntary redemption, repayment or repurchase price therefor calculated in accordance with the terms thereof as if then redeemed, repaid or repurchased, and if such price is based upon or measured by the fair market value of such Capital Stock, such fair market value shall be as determined in good faith by the Board of Directors or the board of directors of the issuer of such Capital Stock;
(7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of:
(a) the fair market value of such asset at such date of determination; and
(b) the amount of such Indebtedness of such other Persons;
(8) all Indebtedness of other Persons to the extent Guaranteed by such Person; and
(9) to the extent not otherwise included in this definition, net Hedging Obligations of such Person, such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such time.
The amount of Indebtedness of any Person at any date shall be determined as set forth above or otherwise provided in this Indenture, or otherwise in accordance with GAAP.
"Indenture" means this Indenture, as amended or supplemented from time to time.
"Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant.
"Initial Notes" means the first $215,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.
"Initial Purchasers" means Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
"Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.
"Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement, including derivative agreements or arrangements, as to which such Person is party or a beneficiary; provided, however, any such agreements entered into in connection with the Notes shall not be included.
"Investment" in any Person by any other Person means any direct or indirect advance, loan or other extension of credit (other than to customers, suppliers, directors, officers or employees of any Person in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such Person. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Capital Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such entity is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Subsidiary not sold or disposed of.
"Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.
"Leverage Ratio" means, on any date of determination, the ratio of:
(1) the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis as of such date, to
(2) the aggregate amount of EBITDA of the Company and its Restricted Subsidiaries for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which consolidated financial statements of the Company are available; provided, however, that:
(a) if since the beginning of such period the Company or any Restricted Subsidiary has made any Asset Disposition of any company or any business or any business segment, the EBITDA for such period shall be reduced by an amount equal to the EBITDA, if positive, directly attributable to the company, business or business segment that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA, if negative, directly attributable thereto for such period;
(b) if since the beginning of such period the Company or any Restricted Subsidiary, by merger or otherwise, has made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquired any company or any business or any business segment, including any such acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, EBITDA for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a
basis consistent with Regulation S-X of the Securities Act, as if such Investment or acquisition occurred on the first day of such period; and
(c) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period, has made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (a) or (b) above if made by the Company or a Restricted Subsidiary during such period, EBITDA for such period shall be calculated after giving pro forma effect thereto, including the Incurrence of any Indebtedness and including the pro forma expenses and cost reductions calculated on a basis consistent with Regulation S-X of the Securities Act, as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including any conditional sale or other title retention agreement or lease in the nature thereof.
"Liquidated Damages" means the liquidated damages then owing under the Registration Rights Agreement.
"Mellon Letters of Credit" means the letter of credit facility between Mellon Bank, N.A. and General Nutrition, Incorporated existing on the date of this Indenture and the letters of credit issued thereunder.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received, including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other noncash form, therefrom, in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, including, without limitation, fees and expenses of legal counsel, accountants and financial advisors, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness that is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or that must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition or to any other Person, other than the Company or any Restricted Subsidiary, owning a beneficial interest in the assets disposed of in such Asset Disposition; and
(4) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or sale of any securities of the Company or any Subsidiary by the Company or any Subsidiary, or any capital contribution, the cash proceeds of such issuance, sale or contribution net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees and expenses actually incurred in connection with such issuance, sale or contribution and net of taxes paid or payable as a result thereof.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any Restricted Subsidiary;
(a) provides any Guarantee or credit support of any kind, including any undertaking, Guarantee, indemnity, agreement or instrument that would constitute Indebtedness; or
(b) is directly or indirectly liable, as a guarantor or otherwise; and
(2) no default with respect to which, including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary, would permit, upon notice, lapse of time or both, any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means, individually, any Guarantee of payment of the Notes by a Guarantor pursuant to the terms of this Indenture, and, collectively, all such Guarantees. Each such Guarantee will be in the form prescribed in this Indenture.
"Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes (and, in each case, any Exchange Notes issued in exchange therefore) shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes (and, in each case, any Exchange Notes issued in exchange therefore).
"Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the Company's offering memorandum, dated November 25, 2003, related to the issuance and sale of the Initial Notes.
"Officer" means the Chief Executive Officer, President, Chief Financial Officer, any Vice President, Controller, Secretary or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by at least one Officer and that meets the requirements of Section 12.05 hereof.
"Opinion of Counsel" means a written opinion from legal counsel satisfactory to the Trustee and that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company or the Trustee.
"Parent" means General Nutrition Centers Holding Company and its successors and assigns.
"Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
"Permitted Holder" means Apollo.
"Permitted Investment" means:
(1) any Investment by the Company or any Restricted Subsidiary in a Restricted Subsidiary, the Company or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;
(2) any Investment by the Company or any Restricted Subsidiary in another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary;
(3) any Investment by the Company or any Restricted Subsidiary in Cash Equivalents;
(4) any Investment by the Company or any Restricted Subsidiary in receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(5) any Investment by the Company or any Restricted Subsidiary in securities or other Investments received as consideration in sales or other dispositions of property or assets made in compliance with the provisions of Section 4.10 hereof;
(6) any Investment by the Company or any Restricted Subsidiary in securities or other Investments received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments, including in connection with any bankruptcy proceeding or other reorganization of another Person;
(7) Investments in existence or made pursuant to legally binding written commitments in existence on the date of this Indenture;
(8) any Investment by the Company or any Restricted Subsidiary in Hedging Obligations, which obligations are Incurred in compliance with the provisions of Section 4.09 hereof;
(9) any Investment by the Company or any Restricted Subsidiary in pledges or deposits:
(a) with respect to leases or utilities provided to third parties in the ordinary course of business; or
(b) otherwise described in the definition of "Permitted Liens;"
(10) Investments in a Related Business in an amount not to exceed $35 million (measured at the time each such Investment is made without giving effect to subsequent changes in value) in
the aggregate at any time outstanding (after giving effect to any such Investments that are returned to the Company or any Restricted Subsidiary, including through redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary);
(11) loans by the Company or any Restricted Subsidiary to franchisees in an aggregate principal amount not to exceed $75 million at any one time outstanding;
(12) the acquisition by a Receivables Subsidiary in connection with a Qualified Receivables Transaction of Capital Stock of a trust or other Person established by such Receivables Subsidiary to effect such Qualified Receivables Transaction; and any other Investment by the Company or a Restricted Subsidiary of the Company in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Transaction; provided that such other Investment is in the form of a note or other instrument that the Receivables Subsidiary or other Person is required to repay as soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that are not Affiliates of the Company entered into as part of a Qualified Receivables Transaction;
(13) any Investment in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or
similar trust) of Capital Stock of the Company (other than Disqualified
Stock); provided that the amount of any Net Cash Proceeds that are
utilized for any such Investment will be excluded from clause 3(B) of
Section 4.07(a) hereof; provided, however, that the value of any
non-cash net proceeds shall be as conclusively determined by the Board
of Directors in good faith, except that in the event the value of any
non-cash proceeds shall be $20 million or more, the value shall be as
determined in writing by an independent investment banking firm of
nationally recognized standing;
(14) any sublease of real property to a franchisee, any advertising cooperative with franchisees and any trade credit extended to franchisees, in each case in the ordinary course of business;
(15) any Investments received in compromise or resolution of
(a) obligations of trade creditors or customers that were incurred in
the ordinary course of business of the Company or any Restricted
Subsidiary, including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of any trade creditor or
customer; or (b) litigation, arbitration or other disputes with Persons
who are not Affiliates; and
(16) any Investments representing amounts held for employees of the Company and its Restricted Subsidiaries under the Company's deferred compensation plan; provided that the amount of such Investments (excluding income earned thereon) shall not exceed the amount otherwise payable to such employees the payment of which was deferred under such plan and any amounts matched by the Company under such plan.
"Permitted Junior Securities" means (1) common equity interests in the Company or any Guarantor or (2) debt or preferred equity securities of the Company or any Guarantor issued pursuant to a plan of reorganization consented to by each class of Senior Indebtedness; provided that all such securities are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes and the Guarantees are subordinated to Senior Indebtedness under this Indenture.
"Permitted Liens" means:
(1) Liens on properties or assets of (a) the Company securing Senior Indebtedness and (b) any Guarantor securing Guarantor Senior Indebtedness, in each case, that was permitted by the terms of this Indenture to be incurred;
(2) Liens for taxes, assessments or other governmental charges not yet delinquent or the nonpayment of which in the aggregate would not be reasonably expected to have a material adverse effect on the Company and its Restricted Subsidiaries, or that are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company or such Subsidiary, as the case may be, in accordance with GAAP;
(3) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations that are not overdue for a period of more than 60 days or that are bonded or that are being contested in good faith and by appropriate proceedings;
(4) pledges, deposits or Liens in connection with workers' compensation, unemployment insurance and other social security legislation and/or similar legislation or other insurance-related obligations, including, without limitation, pledges or deposits securing liability to insurance carriers under insurance or self-insurance arrangements;
(5) pledges, deposits or Liens to secure the performance of bids, tenders, trade, government or other contracts, other than for borrowed money, obligations and deposits for or under or in respect of utilities, leases, licenses, statutory obligations, surety, judgment and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(6) easements, including reciprocal easement agreements, rights-of-way, building, zoning and similar restrictions, utility agreements, covenants, reservations, restrictions, encroachments, changes, and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in the aggregate materially interfere with the ordinary conduct of the business of the Company and its Subsidiaries, taken as a whole;
(7) Liens existing on, or provided for underwritten arrangements existing on, the date of this Indenture, or, in the case of any such Liens securing Indebtedness of the Company or any of its Subsidiaries existing or arising under written arrangements existing on the date of this Indenture, securing any Refinancing Indebtedness in respect of such Indebtedness so long as the Lien securing such Refinancing Indebtedness is limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or under such written arrangements could secure, the original Indebtedness;
(8) Liens securing Hedging Obligations Incurred in compliance with the provisions of Section 4.09 hereof;
(9) Liens arising out of judgments, decrees, orders or awards in respect of which the Company shall in good faith be prosecuting an appeal or proceedings for review which appeal or proceedings shall not have been finally terminated, or the period within which such appeal or proceedings may be initiated shall not have expired and Liens arising from final judgments only to the extent, in an amount and for a period not resulting in an Event of Default with respect thereto;
(10) Liens existing on property or assets of a Person at the time such Person becomes a Subsidiary of the Company, or at the time the Company or a Restricted Subsidiary acquires such property or assets; provided, however, that such Liens are not created in connection with, or in contemplation of, such other Person becoming such a Subsidiary, or such acquisition of such property or assets, and that such Liens are limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or, under the written arrangements under which such Liens arose, could secure, the obligations to which such Liens relate;
(11) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;
(12) Liens securing the Notes or the Note Guarantees;
(13) Liens on assets of the Company or a Receivables Subsidiary incurred in connection with a Qualified Receivables Transaction;
(14) Liens securing Refinancing Indebtedness Incurred in respect of any Indebtedness secured by, or securing any refinancing, refunding, extension, renewal or replacement, in whole or in part, of any other obligation secured by, any other Permitted Liens; provided that any such new Lien is limited to all or part of the same property or assets, plus improvements, accessions, proceeds or dividends or distributions in respect thereof, that secured, or, under the written arrangements under which the original Lien arose, could secure, the obligations to which such Liens relate;
(15) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
(16) Liens to secure Indebtedness permitted by clause (7) of paragraph (b) of Section 4.09 hereof; provided that (a) any such Lien attaches to such assets concurrently with or within 180 days after the acquisition, construction or capital improvement thereof, (b) such Lien attaches solely to the assets so acquired, constructed or improved in such transaction and (c) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such assets;
(17) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods in the ordinary course of business;
(18) licenses of intellectual property granted in the ordinary course of business;
(19) Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and
(20) Liens in favor the Company or any Restricted Subsidiary.
"Permitted Payments to Parent" means, without duplication as to amounts:
(1) payments to the Parent to permit the Parent to pay reasonable directors fees and expenses when due and reasonable accounting, legal and administrative expenses of the Parent when due in an aggregate amount not to exceed $250,000 per annum; and
(2) for so long as the Company is a member of a group filing a consolidated, combined or other similar group tax return with the Parent, payments to the Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Company and its Subsidiaries ("Tax Payments"). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Company would owe if the Company and its Subsidiaries were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Company and such Subsidiaries from other taxable years (as reduced by the use of such carryovers and carrybacks by the group of which the Parent is a member) and (ii) the amount of the relevant tax, taking into account any allowed tax credits, that the Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Company shall be paid over to the appropriate taxing authority within 30 days of the Parent's receipt of such Tax Payments or refunded to the Company.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Receivables Transaction" means any transaction or series of transactions entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries sells, conveys or otherwise transfers to (1) a Receivables Subsidiary (in the case of a transfer by the Company or any of its Restricted Subsidiaries) and (2) any other Person (in the case of a transfer by a Receivables Subsidiary), or grants a security interest in, any franchise accounts receivable (whether now existing or arising in the future) of the Company or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such franchise accounts receivable, all contracts and all guarantees or other obligations in respect of such franchise accounts receivable, proceeds of such franchise accounts receivable and other assets that are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving franchise accounts receivable.
"Receivables Subsidiary" means a Restricted Subsidiary that engages in no activities other than in connection with the financing of franchise accounts receivable and that is designated by the Board of Directors (as provided below) as a Receivables Subsidiary:
(1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which:
(a) is guaranteed by the Company or any Restricted Subsidiary (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction);
(b) is recourse to or obligates the Company or any Restricted Subsidiary in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction; or
(c) subjects any property or asset of the Company or any Restricted Subsidiary (other than franchise accounts receivable and related assets as provided in the definition of "Qualified Receivables Transaction"), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction;
(2) with which neither the Company nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing franchise accounts receivable; and
(3) with which neither the Company nor any Restricted Subsidiary has any obligation to maintain or preserve such Subsidiary's financial condition or cause such Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors will be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund, refinance, replace, renew, repay or extend, including pursuant to any defeasance or discharge mechanism (collectively, "refinances," and "refinanced" shall have a correlative meaning), any Indebtedness existing on the date of this Indenture or Incurred in compliance with this Indenture, including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary, to the extent permitted in this Indenture, and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary, including Indebtedness that refinances Refinancing Indebtedness; provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced;
(3) if the Indebtedness being refunded, refinanced, replaced, renewed, repaid, extended, defeased or discharged is Subordinated Obligations, such Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being refunded, refinanced, replaced, renewed, repaid, extended, defeased or discharged;
(4) such Refinancing Indebtedness is Incurred in an aggregate principal amount, or if issued with original issue discount, an aggregate issue price, that is equal to or less than the aggregate principal amount, or if issued with original issue discount, the aggregate accreted value, then outstanding of the Indebtedness being refinanced, plus fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such Refinancing Indebtedness; provided further, however, that Refinancing Indebtedness shall not include:
(a) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company; or
(b) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary; and
(5) in the case of Indebtedness of the Company or a Guarantor, such Refinancing Indebtedness is Incurred by the Company, a Guarantor or by the Subsidiary who is the obligor on the Indebtedness being refinanced.
"Registration Rights Agreement" means the Registration Rights Agreement, dated as of December 5, 2003, among the Company, the Guarantors and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent Global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary Global Note in the form of Exhibit A2 hereto deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Business" means those businesses in which the Company or any of its Subsidiaries is engaged on the date of this Indenture or that are reasonably related or incidental thereto.
"Related Party" means:
(1) any controlling equityholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Representative" means the trustee, agent or representative, if any, for an issue of Senior Indebtedness.
"Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Period" means the 40-day distribution compliance period as defined in Regulation S.
"Restricted Subsidiary" means any Subsidiary of the Company other than as Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Secured Indebtedness" means any Indebtedness of the Company or its Subsidiaries secured by a Lien.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreement" means the credit agreement to be dated on or about the date of this Indenture, among the Company, the Parent, the banks and other financial institutions party thereto from time to time, Lehman Commercial Paper Inc., as administrative agent, JPMorgan Chase Bank, as syndication agent, and the other parties thereto, as such agreement may be assumed by any successor in interest, and as such agreement may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the Company, or any subsidiary of the Company as borrower, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior Credit Agreement, any Loan Documents, as defined therein, any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, intellectual property security agreement, mortgages, letter of credit applications and other security agreements and collateral documents, and other instruments and documents, executed and delivered pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time, whether in
whole or in part, whether with the original agent and lenders or other agents and lenders or otherwise, and whether provided under the original Senior Credit Agreement or otherwise. Without limiting the generality of the foregoing, the term "Senior Credit Facility" shall include any agreement:
(1) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby;
(2) adding Subsidiaries of the Company as additional borrowers or guarantors thereunder;
(3) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder; or
(4) otherwise altering the terms and conditions thereof.
"Senior Indebtedness" means the following obligations of the Company, whether outstanding on the date of this Indenture or thereafter Incurred, without duplication:
(1) Bank Indebtedness; and
(2) all obligations consisting of the principal of and premium and liquidated damages, if any, and accrued and unpaid interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company regardless of whether post-filing interest is allowed in such proceeding, on, and fees and other amounts owing in respect of, all other Indebtedness of the Company, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that the obligations in respect of such Indebtedness are not senior in right of payment to the Notes; provided, however, that Senior Indebtedness will not include:
(a) any obligations of the Company to any Subsidiary or any other Affiliate of the Company, or any such Affiliate's Subsidiaries;
(b) any liability for Federal, state, foreign, local or other taxes owed or owing by the Company;
(c) any accounts payable or other liability to trade creditors arising in the ordinary course of business, including Guarantees thereof or instruments evidencing such liabilities;
(d) any Indebtedness, Guarantee or obligation of the Company that is expressly subordinate or junior to any other Indebtedness, Guarantee or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations of the Company;
(e) Indebtedness that is represented by redeemable Capital Stock; or
(f) that portion of any Indebtedness that is Incurred in violation of this Indenture; provided that Indebtedness under the Senior Credit Facility will not cease to be Senior Indebtedness under this clause (f) if the lenders of such Indebtedness obtained a certificate from an Officer of the Company as of the date of Incurrence of such Indebtedness to the effect that such Indebtedness was permitted to be Incurred by this Indenture.
If any Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant to the provisions of Section 548 of Title 11 of the U.S. Code or any applicable state fraudulent conveyance law, such Designated Senior Indebtedness nevertheless will constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company, whether outstanding on the date of this Indenture or thereafter Incurred, that:
(1) specifically provides that such Indebtedness is to rank pari passu in right of payment with the Notes; and
(2) is not expressly subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company that is not Senior Indebtedness.
"Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means:
(1) any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture; and
(2) any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred.
"Subordinated Obligation" means any Indebtedness of the Company or any Guarantor, whether outstanding on the date of this Indenture or thereafter Incurred, which is expressly subordinate or junior in right of payment to the Notes or the Note Guarantees pursuant to a written agreement.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services.
"Trustee" means U.S. Bank National Association until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
"Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
"Unrestricted Definitive Note" means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a Global Note that does not bear and is not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company, including any newly acquired or newly formed Subsidiary of the Company, to be an Unrestricted Subsidiary unless at the time of such designation such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either:
(a) the Subsidiary to be so designated has total consolidated assets of $100,000 or less; or
(b) if such Subsidiary has consolidated assets greater than $100,000, then such designation would be permitted under the provisions of Section 4.07 hereof.
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation:
(a) the Company could Incur at least $1.00 of additional Indebtedness under paragraph (a) of Section 4.09 hereof; and
(b) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Company's Board of Directors giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing provisions.
"U.S. Person" means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which, other than directors' qualifying shares, is owned by the Company or another Wholly Owned Subsidiary.
Section 1.02 Other Definitions.
Defined in
Term Section
---- ------
"Affiliate Transaction"............................................................. 4.11
"Asset Disposition Offer"........................................................... 3.09
"Authentication Order".............................................................. 2.02
"Blockage Notice"................................................................... 10.03
"Change of Control Offer"........................................................... 4.15
"Change of Control Payment"......................................................... 4.15
"Change of Control Payment Date".................................................... 4.15
"Covenant Defeasance"............................................................... 8.03
"DTC"............................................................................... 2.03
"Event of Default".................................................................. 6.01
"Excess Proceeds"................................................................... 4.10
"Fairness Opinion".................................................................. 4.11
"incur"............................................................................. 4.09
"Initial Agreement"................................................................. 4.08
"Legal Defeasance".................................................................. 8.02
"Offer Amount"...................................................................... 3.09
"Offer Period"...................................................................... 3.09
"Paying Agent"...................................................................... 2.03
"Permitted Debt".................................................................... 4.09
"Payment Blockage Notice"........................................................... 10.03
"Payment Default" .................................................................. 6.01
"Purchase Date"..................................................................... 3.09
"Redemption Date" .................................................................. 3.07
"Refinancing Agreement"............................................................. 4.08
"Registrar"......................................................................... 2.03
"Restricted Payments"............................................................... 4.07
"Successor Company"................................................................. 5.01
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Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the singular;
(5) "will" shall be interpreted to express a command;
(6) provisions apply to successive events and transactions; and
(7) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibits A1 and A2 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture, and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form will be substantially in the form of Exhibits A1 or A2 hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A1 hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S will be issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period will be terminated upon the receipt by the Trustee of any certificates identified by the Company or its counsel to be required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, which may include certificates from Euroclear or Clearstream, as the case may be, certifying that it has received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof).
Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note will be exchanged for beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee will cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(1) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by Participants through Euroclear or Clearstream.
Section 2.02 Execution and Authentication.
At least one Officer must sign the Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.
A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee will, upon receipt of a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Notes for original
issue that may be validly issued under this Indenture, including any Additional
Notes. The aggregate principal amount of Notes outstanding at any time may not
exceed the aggregate principal amount of Notes authorized for issuance by the
Company pursuant to one or more Authentication Orders, except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate of the Company.
Section 2.03 Registrar and Paying Agent.
The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04 Paying Agent to Hold Money in Trust.
The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes.
Section 2.05 Holder Lists.
The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if:
(1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary;
(2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or
(3) upon request of the Trustee or the Holders of at least a majority in aggregate principal amount of outstanding Notes, if there has occurred and is continuing a Default or Event of Default with respect to the Notes.
Upon the occurrence of any of the preceding events in (1), (2) or (3) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Definitive Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures) and will bear the Private Placement Legend and the Regulation S Temporary Legend unless those legends are not required by applicable law.
Every Note authenticated and delivered in exchange for, or in lieu of,
a Global Note or any portion thereof, pursuant to this Section 2.06 or Section
2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and
shall be, a Global Note. A Global Note may not be exchanged for another Note
other than as provided in this Section 2.06(a), however, beneficial interests in
a Global Note may be transferred and exchanged as provided in Section 2.06(b),
(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will
require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).
(2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:
(A) both:
(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and
(ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or
(B) both:
(i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and
(ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above;
provided that in no event shall Definitive Notes be issued upon the transfer or
exchange of beneficial interests in the Regulation S Temporary Global Note prior
to (A) the expiration of the Restricted Period and (B) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the Securities
Act. Upon consummation of an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be
deemed to have been satisfied upon receipt by the Registrar of the instructions
contained in the Letter of Transmittal delivered by the Holder of such
beneficial interests in the Restricted Global Notes. Upon satisfaction of all of
the requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(3) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements of
Section 2.06(b)(2) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.
(2) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(3) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or
(ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(4) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with
Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.
(2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.
(3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (2)(B),
(2)(D) or (3) above at a time when an Unrestricted Global Note has not
yet been issued, the Company will issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee will authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive
Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).
(1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or
(ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate:
(1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes accepted for exchange in the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company; and
(2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company.
Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.
(1) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (5) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL IF GENERAL NUTRITION CENTERS, INC. SO REQUESTS) OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITED STATES."
(B) Notwithstanding the foregoing, any Global
Note or Definitive Note issued pursuant to subparagraphs
(b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f)
of this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) will not bear the Private
Placement Legend.
(2) Global Note Legend. Each Global Note will bear a legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF GENERAL NUTRITION CENTERS, INC.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(3) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note will bear a Legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST HEREON. DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS NOTE."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such
other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar's request.
(2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(3) The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(5) Neither the Registrar nor the Company will be required:
(A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;
(B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.
(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.
(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.
(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.
Section 2.07 Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence (which evidence may be from the Trustee) to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an affidavit of lost certificate and/or an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note, including reasonable fees and expenses of its counsel and of the Trustee and its counsel.
Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
Section 2.08 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the Trustee (including any Note represented by a Global Note) except for those canceled by it or at its direction, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.
If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Guarantor, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.
Section 2.10 Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without
unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes will be entitled to all of the benefits of this Indenture.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.
Section 2.13 Issuance of Additional Notes.
The Company will be entitled, upon delivery of an Officer's Certificate, Opinion of Counsel and Authentication Order, subject to its compliance with Section 4.09 hereof, to issue Additional Notes under this Indenture which will have identical terms as the Initial Notes issued on the date of this Indenture, other than with respect to the date of issuance and issue price.
With respect to any Additional Notes, the Company will set forth in a resolution of its Board of Directors and an Officer's Certificate, a copy of each of which shall be delivered to the Trustee, the following information:
(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;
(2) the issue price, the issue date and the CUSIP number of such Additional Notes; and
(3) whether such Additional Notes shall be transfer restricted Notes and issued in the form of Initial Notes as set forth in Section 2.02 of this Indenture or shall be issued in the form of Exchange Notes.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days (unless a longer period is acceptable to the Trustee) before a redemption date, an Officer's Certificate setting forth:
(1) the clause of this Indenture pursuant to which the redemption shall occur;
(2) the redemption date;
(3) the principal amount of Notes to be redeemed; and
(4) the redemption price.
Section 3.02 Selection of Notes to Be Redeemed or Purchased.
If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.
In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 90 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.
The Trustee will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.
Section 3.03 Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 90 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 90 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof.
The notice will identify the Notes to be redeemed and will state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; provided, however, that the Company has delivered to the Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee) prior to the redemption date, an Officer's Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. At any time prior to the mailing of a notice of redemption to the Holders pursuant to Section 3.03 hereof, the Company may withdraw, revoke or rescind any notice of redemption delivered to the Trustee without any continuing obligation to redeem the Notes as contemplated by such notice of redemption.
Section 3.05 Deposit of Redemption or Purchase Price.
At or before 10:00 a.m. Eastern Time on the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued and unpaid interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued and unpaid interest and Liquidated Damages, if any, on, all Notes to be redeemed or purchased.
If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called
for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06 Notes Redeemed or Purchased in Part.
Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company, a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.
Section 3.07 Optional Redemption.
(a) At any time prior to December 1, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 108.500% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the Net Cash Proceeds of one or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes originally issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and
(2) the redemption occurs within 60 days after the date of the closing of such Equity Offering.
(b) Except pursuant to the preceding paragraph, the Notes will not be redeemable at the Company's option prior to December 1, 2007.
(c) On or after December 1, 2007 and prior to maturity, the Company may, at its option, redeem all or a part of the Notes at any time and from time to time upon not less than 30 nor more than 90 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2007........................................................................................... 104.250% 2008........................................................................................... 102.125% 2009 and thereafter............................................................................ 100.000% |
Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08 Mandatory Redemption.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
Section 3.09 Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an offer to all Holders to purchase Notes (an "Asset Disposition Offer"), it will follow the procedures specified below.
The Asset Disposition Offer shall be made to all Holders and all
holders of other Indebtedness that is pari passu with the Notes containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem at a purchase price of 100% of the principal amount
thereof plus accrued and unpaid interest to the Purchase Date and liquidated
damages, if any, with the proceeds of sales of assets. The Company will comply
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Notes
pursuant to this Section 3.09 and Section 4.10 hereof, in each case, to the
extent applicable. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 3.09 or Section 4.10
hereof, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under this
Section or Section 4.10 hereof as a results of such compliance. Payment for any
Notes so purchased will be made in the same manner as interest payments are
made.
If the date on which Notes are purchased pursuant to an Asset Disposition Offer (the "Purchase Date") is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Liquidated Damages, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Disposition Offer.
Upon the commencement of an Asset Disposition Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Disposition Offer. The notice, which will govern the terms of the Asset Disposition Offer, will state:
(1) that the Asset Disposition Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Disposition Offer will remain open;
(2) the offer amount, which shall equal the amount of all Excess Proceeds (the "Offer Amount"), the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue to accrue interest and Liquidated Damages, if any;
(4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Disposition Offer will cease to accrue interest and Liquidated Damages, if any, after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to an Asset Disposition Offer may elect to have Notes purchased in integral multiples of $1,000 only;
(6) the instructions determined by the Company, consistent with Section 4.10 and this Section 3.09, that a Holder must follow to have its Notes purchased;
(7) that, if the aggregate principal amount of Notes and other pari passu Indebtedness surrendered in connection with the Asset Disposition Offer thereof exceeds the Offer Amount, the Company will select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and
(8) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company will, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof properly tendered and not withdrawn pursuant
to the Asset Disposition Offer, or if less than the Offer Amount has been
tendered, all Notes properly tendered and not withdrawn and will deliver or
cause to be delivered to the Trustee the Notes properly accepted together with
an Officer's Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may be, will
promptly mail or deliver to each tendering Holder an amount equal to the
purchase price of the Notes tendered by such Holder and accepted by the Company
for purchase, and the Company will promptly issue a new Note, and the Trustee,
upon written request from the Company, will authenticate and mail or deliver (or
cause to be transferred by book entry) such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Asset
Disposition Offer on or about the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes.
The Company will pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company will pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.
The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.02 Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.
Section 4.03 Reports.
(a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes or cause the Trustee to furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations:
(1) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports and, with respect to the annual information only, a report on the Company's consolidated financial statements by the Company's certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.
All such reports will be prepared in all material respects in accordance with all of the rules and regulations of the Exchange Act applicable to such reports.
In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, the Company will file a copy of each of the reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and will make such information available to securities analysts and prospective investors upon request. The Company will at all times comply with TIA Section 314(a).
If, at any time after consummation of the Exchange Offer contemplated by the Registration Rights Agreement, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding paragraphs with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings
for any reason, the Company will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports with the SEC.
(b) For so long as any Notes remain outstanding, if at any time the Company and the Guarantors are not required to file with the SEC the reports required by paragraphs (a) and (b) of this Section 4.03, the Company and the Guarantors will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04 Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officer's Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto).
(b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee, within 30 days after the occurrence of any Default or Event of Default, an Officer's Certificate specifying such Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto.
Section 4.05 Taxes.
The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment would not have a material adverse effect on the ability of the Company and the Guarantors to satisfy their obligations under the Notes, the Guarantees and this Indenture.
Section 4.06 Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.
Section 4.07 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted Subsidiaries to, take any of the following actions:
(i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Capital Stock (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Capital Stock in their capacity as such (other than dividends or distributions payable in Capital Stock (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary and other than payments of dividends on, and mandatory repurchases at Stated Maturity of, Disqualified Stock that was issued after the date of this Indenture in compliance with Section 4.09 hereof);
(ii) purchase, redeem, retire or otherwise acquire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Capital Stock of the Company, of any direct or indirect parent of the Company or of any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary;
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligation before scheduled maturity, scheduled repayment or scheduled sinking fund payment; provided that this restriction does not apply to a purchase, repurchase, redemption or other acquisition made in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption or acquisition; or
(iv) make any Restricted Investment (all such payments and other actions set forth in these clauses (i) through (iv) above being collectively referred to as "Restricted Payments"),
if at the time the Company or its Restricted Subsidiary makes a Restricted Payment:
(1) a Default occurs and continues to occur or would result therefrom;
(2) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of Section 4.09 hereof; or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made after the date of this
Indenture (excluding Restricted Payments permitted by clauses (1), (2),
(3), (5), and (6) of paragraph (b) of this Section 4.07) would exceed,
without duplication, the sum of:
(A) 50% of the Consolidated Net Income of the Company accrued during the period, treated as one accounting period, from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the most recent fiscal quarter ending before the date of such Restricted Payment for which consolidated financial statements of the Company are available, or, if such Consolidated Net Income is a deficit, then minus 100% of such deficit;
(B) 100% of the aggregate Net Cash Proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the
issue or sale of Capital Stock of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Capital Stock (other than Capital Stock (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of the Company), less the amount of any such Net Cash Proceeds that are utilized for an Investment pursuant to clause (13) of the definition of "Permitted Investments;"
(C) in the case of the disposition or repayment of any Investment constituting a Restricted Investment, without duplication of any amount deducted in calculating the amount of Investments at any time outstanding included in the amount of Restricted Payments, an amount equal to the lesser of the return of capital or similar repayment with respect to such Investment, or the initial amount of such Investment, in either case, less the cost of the disposition of such Investment;
(D) to the extent that any Unrestricted Subsidiary of the Company designated as such after the date of this Indenture is redesignated as a Restricted Subsidiary after the date of this Indenture, the lesser of (i) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation or (ii) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the date of this Indenture; and
(E) 50% of any dividends received by the Company or a Guarantor after the date of this Indenture from an Unrestricted Subsidiary of the Company, to the extent that such dividends were not otherwise included in the Consolidated Net Income of the Company for such period.
(b) The provisions of Section 4.07(a) hereof will not prohibit the following actions:
(1) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Capital Stock of the Company or Subordinated Obligations made by exchange, including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares, for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company, other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or other trust established by the Company or any of its Subsidiaries; provided that the Net Cash Proceeds or reduction of Indebtedness from such sale or exchange will be excluded in subsequent calculations of the amount of Restricted Payments;
(2) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations of the Company that is permitted to be Incurred under the provisions of Section 4.09 hereof;
(3) any purchase, redemption, repurchase, defeasance, retirement or other acquisition of Subordinated Obligations from Net Available Cash to the extent permitted by the provisions of Section 4.10 hereof;
(4) payment of dividends within 60 days after the date of declaration of such dividends, if at the date of declaration such dividend would have complied with Section 4.07(a) hereof;
(5) any purchase or redemption of any shares of Capital Stock of the Company from employees or former employees of the Company and its Restricted Subsidiaries pursuant to the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management or in connection with the termination of employment in an aggregate amount after the date of this Indenture not in excess of $5 million in any fiscal year, plus any unused amounts under this clause from prior fiscal years;
(6) the payment of any dividend by a Restricted Subsidiary to the holders of all of its common equity interests on a pro rata basis;
(7) any payments to the Permitted Holder made in connection with, and substantially concurrent with the closing of, the Acquisition by the Company and its Restricted Subsidiaries;
(8) any Permitted Payments to Parent;
(9) Restricted Payments not to exceed $50 million in the aggregate since the date of this Indenture; provided that no more than $25 million of such Restricted Payments are made in any calendar year; provided further that, after giving pro forma effect to any such Restricted Payment, the Company would have had a Leverage Ratio of less than 2.5 to 1.00; and
(10) Restricted Payments not to exceed $35 million in the aggregate since the date of this Indenture.
The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 will be determined by the Board of Directors whose resolution with respect thereto will be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment-banking firm of national standing if the fair market value exceeds $20 million.
Section 4.08 Limitation on Restrictions on Distributions from Restricted Subsidiaries.
(a) Neither the Company nor any Restricted Subsidiary will create or otherwise cause or permit to exist any consensual restriction on the ability of any Restricted Subsidiary to take the following actions:
(1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries;
(2) make any loans or advances to the Company or any of its Restricted Subsidiaries; or
(3) transfer any of its property or assets to the Company or any of its Restricted Subsidiaries.
(b) The restrictions in Section 4.08(a) hereof will not apply to encumbrances or restrictions existing or by reason of:
(1) the Senior Credit Facility and any agreements governing Indebtedness existing on the date of this Indenture, in each case, as in effect on the date of this Indenture and any amendments,
restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture;
(2) this Indenture, the Notes and the Note Guarantees;
(3) any restriction with respect to a Restricted Subsidiary that is either:
(A) pursuant to an agreement relating to any Indebtedness (i) Incurred by a Restricted Subsidiary before the date on which such Restricted Subsidiary was acquired by the Company, or (ii) of another Person that is assumed by the Company or a Restricted Subsidiary in connection with the acquisition of assets from, or merger or consolidation with, such Person and is outstanding on the date of such acquisition, merger or consolidation; provided that any restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to Indebtedness Incurred either as consideration in, or for the provision of any portion of the funds or credit support used to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, or such acquisition of assets, merger or consolidation shall not be permitted pursuant to this clause (A); or
(B) pursuant to any agreement, not relating to any Indebtedness, existing when a Person becomes a Subsidiary of the Company or acquired by the Company or any of its Subsidiaries, that, in each case, is not created in contemplation of such Person becoming such a Subsidiary or such acquisition (it being understood for purposes of this clause (B) that if another Person is the Successor Company, any Subsidiary or agreement thereof shall be deemed acquired or assumed by the Company when such Person becomes the Successor Company),
and, in the case of clauses (A) and (B), which restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the properties or assets of the Person, so acquired;
(4) any restriction with respect to a Restricted Subsidiary pursuant to an agreement (a "Refinancing Agreement") that effects a refinancing, extension, renewal or replacement of Indebtedness under an agreement referred to in this Section 4.08 (an "Initial Agreement") or contained in any amendment to an Initial Agreement; provided that the restrictions contained in any such Refinancing Agreement or amendment are not materially more restrictive, taken as a whole, than the restrictions contained in the Initial Agreement or Agreements to which such Refinancing Agreement or amendment relates;
(5) any restriction that is a customary restriction on subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or on the assignment or transfer of any lease, license or other contract;
(6) any restriction by virtue of a transfer, agreement to transfer, option, right, or Lien with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture;
(7) any restriction contained in mortgages, pledges or other agreements securing Indebtedness of the Company or a Restricted Subsidiary to the extent such restriction restricts the transfer of the property subject to such mortgages, pledges or other security agreements;
(8) any restriction with respect to a Restricted Subsidiary, or any of its property or assets, imposed pursuant to an agreement for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary, or the property or assets that are subject to such restriction, pending the closing of such sale or disposition;
(9) any restriction existing by reason of applicable law, rule, regulation or order;
(10) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of the Company's Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements;
(11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(12) restrictions existing under Indebtedness or other contractual requirements of a Receivables Subsidiary in connection with a Qualified Receivables Transaction; provided that such restrictions apply only to such Receivables Subsidiary; or
(13) restrictions contained in Indebtedness incurred by a Foreign Subsidiary pursuant to clause (10) of Section 4.09(b) hereof; provided that such restrictions relate only to one or more Foreign Subsidiaries.
Section 4.09 Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that the Company and any Restricted Subsidiary of the Company that is a Guarantor may incur Indebtedness if, on the date of the Incurrence of such Indebtedness, the Consolidated Coverage Ratio would be greater than 2.0 to 1.0.
(b) The provisions of Section 4.09(a) hereof will not prohibit the Incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the Incurrence by the Company and any Guarantor of additional Indebtedness and letters of credit under one or more Senior Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) not to exceed the greater of (a) $400 million less the aggregate amount of all Net Cash Proceeds of Asset Dispositions applied by the Company or any of its Restricted Subsidiaries since the date of this Indenture to permanently repay any term Indebtedness under a Senior Credit Facility or to permanently repay any revolving credit Indebtedness under a Senior Credit Facility and effect a corresponding commitment reduction thereunder pursuant to the provisions of Section 4.10 hereof and (b) the amount of the Borrowing Base as of the date of such Incurrence, in each case less the aggregate amount of all commitment reductions with respect to any revolving credit borrowings under a Senior Credit Facility that have been made by the Company or any of its Restricted Subsidiaries resulting from or relating to the formation of any Receivables Subsidiary or the consummation of any Qualified Receivables Transaction;
(2) the Guarantee by the Company or any Guarantor of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be Incurred by another provision of this Section 4.09;
(3) the Incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that:
(A) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes, in the case of the Company, or the applicable Note Guarantee, in the case of a Guarantor; and
(B) (i) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary, will be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause;
(4) the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement;
(5) the Incurrence by the Company and any Restricted Subsidiary of Indebtedness existing on the date of this Indenture (other than the Mellon Letters of Credit);
(6) the Incurrence by the Company or any of its Restricted
Subsidiaries of Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by this
Indenture to be Incurred under Section 4.09(a) hereof or clauses (2),
(4), (5), (6), (7) or (14) of this Section 4.09(b);
(7) the Incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capitalized Lease Obligations, mortgage financings or purchase money obligations, in each case, Incurred for the purpose of financing all or any part of the purchase price or cost of design, construction or improvement of property, plant or equipment used in the business of the Company or a Restricted Subsidiary, in an aggregate principal amount, including all Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (7), not to exceed 2.5% of Consolidated Tangible Assets at any time outstanding measured at the time of Incurrence;
(8) the Incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are Incurred in the ordinary course of business and not for speculative purposes;
(9) the Incurrence by the Company or any Restricted Subsidiary of Indebtedness evidenced by letters of credit issued in the ordinary course of business of the Company to secure workers' compensation and other insurance coverage;
(10) the Incurrence by the Foreign Subsidiaries of Indebtedness if, at the time of Incurrence of such Indebtedness, and after giving effect thereto, the aggregate principal amount
of all Indebtedness of the Foreign Subsidiaries Incurred pursuant to this clause (10) and then outstanding does not exceed the greater of (A) $30 million and (B) an amount equal to 50% of the consolidated book value of the inventories of the Foreign Subsidiaries measured at the time of Incurrence;
(11) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to the Company or to any other Restricted Subsidiary of the Company or their assets (other than such Receivables Subsidiary and its assets and, as to the Company or any Restricted Subsidiary of the Company, other than pursuant to representations, warranties, covenants and indemnities customary for such transactions) and is not Guaranteed by any such Person;
(12) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, self-insurance obligations, letters of credit (not supporting Indebtedness for borrowed money), bankers' acceptances, performance and surety bonds in the ordinary course of business;
(13) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, contribution, adjustment of purchase price, earn out or similar obligations, in each case, incurred or assumed in connection with the disposition of any business or assets of the Company or any Restricted Subsidiary or Capital Stock of a Restricted Subsidiary; provided that the maximum aggregate liability in respect of all such Indebtedness Incurred pursuant to this clause (13) shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such dispositions; and
(14) the Incurrence by the Company or any Restricted Subsidiary of Indebtedness, which may include Bank Indebtedness, in an aggregate principal amount not to exceed $35 million outstanding at any one time.
For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above, or is entitled to be Incurred pursuant to Section 4.09(a) hereof, the Company will be permitted to classify such item of Indebtedness on the date of its Incurrence, or later reclassify, all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness outstanding under Senior Credit Facilities and under the Mellon Letters of Credit on the date on which Notes are first issued and authenticated under this Indenture will initially be deemed to have been Incurred in reliance on the exception provided by Section 4.09(b)(1). In addition, for purposes of determining compliance with this Section 4.09, the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms will not be deemed to be an Incurrence of Indebtedness for purposes of this Section 4.09; provided that the amount thereof shall be included in Consolidated Interest Expense of the Company as accrued.
The Company will not permit any Unrestricted Subsidiary to Incur any Indebtedness other than Non-Recourse Debt. However, if any such Indebtedness ceases to be Non-Recourse Debt, then such event shall constitute an Incurrence of Indebtedness by the Company or a Restricted Subsidiary.
Section 4.10 Limitation on Asset Dispositions.
(a) Neither the Company nor any Restricted Subsidiary shall make any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration, including relief from, or the assumption of another Person for, any liabilities, contingent or otherwise, at the time of such Asset Disposition at least equal to the fair market value of the shares and assets subject to such Asset Disposition. The Board of Directors shall determine the fair market value, and their determination shall be conclusive, including as to the value of all non-cash consideration;
(2) at least 75% of the consideration for any Asset Disposition received by the Company or such Restricted Subsidiary is in the form of cash. For the purposes of this provision, the following are deemed to be cash:
(A) Cash Equivalents;
(B) the assumption of Indebtedness of the Company, other than Disqualified Stock of the Company, or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition;
(C) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary is released from any Guarantee, or is the beneficiary of any indemnity with respect to such Indebtedness which is secured by any letter of credit or Cash Equivalents, of such Indebtedness in connection with such Asset Disposition;
(D) securities received by the Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash within 60 days after the Asset Disposition;
(E) an amount equal to the fair market value of Indebtedness of the Company or any Restricted Subsidiary received by the Company or a Restricted Subsidiary as consideration for any Asset Disposition, determined at the time of receipt of such Indebtedness by the Company or such Restricted Subsidiary; and
(F) consideration consisting of Additional Assets;
(3) the Company or such Restricted Subsidiary applies an amount equal to 100% of the Net Available Cash from such Asset Disposition in the following manner:
(A) to the extent the Company elects, or is required by the terms of any Senior Indebtedness or Indebtedness, other than Preferred Stock, to prepay, repay or purchase Senior Indebtedness or such Indebtedness, in each case other than the Indebtedness owed to the Company or a Restricted Subsidiary, within 365 days after the date of such Asset Disposition;
(B) to the extent of the balance of Net Available Cash, to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 365 days from the date of such Asset Disposition, or, if such reinvestment in Additional Assets is a project that is authorized by the Board of Directors within such 365-day period, within 455 days from the date of such Asset Disposition;
(C) to the extent of the balance of such Net Available Cash remaining after application pursuant to clauses (A) or (B) above (the "Excess Proceeds"), to make an offer to purchase Notes in accordance with Section 3.09 hereof at a price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the Purchase Date, and, to the extent required by the terms thereof, any other Senior Subordinated Indebtedness subject to the agreements governing such other Indebtedness at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to the Purchase Date and liquidated damages, if any; and
(D) to the extent of the balance of such Excess Proceeds after application pursuant to clauses (A), (B) or (C) of this Section 4.10(3) for any purpose not prohibited by this Indenture.
However, in connection with any prepayments, repayment or purchase of revolving credit Indebtedness pursuant to clauses (A) and (C) of this Section 4.10(3), the Company or such Restricted Subsidiary will cause the related loan commitment, if any, to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased.
Pending the final application of any Net Available Cash, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Available Cash in any manner that is not prohibited by this Indenture.
(b) Notwithstanding the other provisions of this Section 4.10, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this Section 4.10, except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this Section 4.10 exceeds $15 million.
(c) To the extent that the aggregate principal amount of the Notes and other Senior Subordinated Indebtedness tendered pursuant to an Asset Disposition Offer made in accordance with this Section 4.10 and Section 3.09 hereof exceeds the amount of Excess Proceeds, the Trustee will select the Notes and Senior Subordinated Indebtedness to be purchased on a pro rata basis, based on the aggregate principal amount thereof surrendered in such Asset Disposition Offer; provided that when such Asset Disposition Offer is complete, the amount of Excess Proceeds shall be reset to zero.
(d) The Company will comply with the requirements of Section 14(e) of
the Exchange Act and any other securities laws or regulations in connection with
the repurchase of Notes pursuant to this Section 4.10 and Section 3.09 hereof,
in each case, to the extent applicable. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.10 or
Section 3.09 hereof, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
this Section 4.10 or Section 3.09 hereof as a result of such compliance.
Section 4.11 Limitation on Transactions with Affiliates.
(a) Neither the Company nor any of its Restricted Subsidiaries will engage in any transaction or series of transactions, including the purchase, sale, lease or exchange of any property or the rendering of any service with any Affiliate of the Company (an "Affiliate Transaction") on terms that:
(1) taken as a whole are less favorable to the Company or such Restricted Subsidiary than the terms that could be obtained at the time of such transaction in arm's-length dealings with a nonaffiliate; and
(2) in the event such Affiliate Transaction involves an aggregate amount in excess of $15 million, is not in writing and has not been approved by a majority of the members of the Board of Directors having no material personal financial interest in such Affiliate Transaction. If there are no such Board members, then the Company must obtain a Fairness Opinion. A "Fairness Opinion" means an opinion from an independent investment banking firm, accounting firm or appraiser of national standing which indicates that the terms of such transaction are fair to the Company or such Restricted Subsidiary from a financial point of view.
In addition, any transaction involving aggregate payments or other transfers by the Company and its Restricted Subsidiaries in excess of $30 million will also require a Fairness Opinion.
(b) The provisions of Section 4.11(a) hereof shall not prohibit the following actions:
(1) any Restricted Payment permitted by the provisions of
Section 4.07 hereof or any Permitted Investment;
(2) the performance of the obligations of the Company or a Restricted Subsidiary under any employment contract, collective bargaining agreement, service agreement, employee benefit plan, related trust agreement, severance agreement or any other similar arrangement entered into in the ordinary course of business;
(3) payment of compensation, performance of indemnification or contribution obligations in the ordinary course of business;
(4) any issuance, grant or award of stock, options or other securities, to employees, officers or directors;
(5) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or any transaction between a Receivables Subsidiary and any Person in which the Receivables Subsidiary has an Investment;
(6) any other transaction arising out of agreements existing on the date of this Indenture and described in the "Certain Relationships and Related Party Transactions" section of the Offering Memorandum;
(7) transactions with suppliers or other purchasers or sellers of goods or services, in each case in the ordinary course of business and on terms no less favorable to the Company or the Restricted Subsidiary than those that could be obtained at such time in arm's-length dealings with a nonaffiliate;
(8) the payment of rent due under the Master Lease, dated as
of March 23, 1999, between Gustine Sixth Avenue Associates, Ltd. and
General Nutrition, Incorporated, as in effect on the date of this
Indenture or as amended in compliance with the provisions of this
Section 4.11; and
(9) so long as no Default has occurred and is continuing, (a) payment of annual management fees to the Permitted Holder in an aggregate amount not to exceed, during any consecutive 12-month period, $1.5 million, (b) the payment of fees to the Permitted Holder for financial advisory and investment banking services rendered to the Company and its Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions, and (c) reimbursement of reasonable out-of-pocket expenses incurred by the Permitted Holder in
connection with the services described in clauses (a) and (b) above; provided that the foregoing payments and reimbursements are subordinated to the Notes to the same extent as the Notes are subordinated to Designated Senior Indebtedness; provided further that if any such Default prevents the payment of any such fees, the Company may pay such deferred fees at the time such Default is cured or waived.
Section 4.12 Limitation on Liens.
Neither the Company nor any Restricted Subsidiary will create or permit to exist any Lien, other than Permitted Liens, on any of its property or assets, including Capital Stock, whether owned on the date of this Indenture or thereafter acquired, securing any Indebtedness that is not Senior Indebtedness (the "Initial Lien"), unless at the same time effective provision is made to secure the obligations due under this Indenture and the Notes equally and ratably with such obligation for so long as such obligation is secured by such Initial Lien.
Any such Lien created in favor of the Notes will be automatically and unconditionally released and discharged upon:
(1) the release and discharge of the Initial Lien to which it relates; or
(2) any sale, exchange or transfer to a non-affiliate of the Company of the property or assets secured by such Initial Lien, or of all of the Capital Stock held by the Company or any Restricted Subsidiary, or all or substantially all of the assets of any Restricted Subsidiary creating such Lien.
Section 4.13 Limitation on the Sale or Issuance of Preferred Stock of Restricted Subsidiaries.
The Company will not sell any shares of Preferred Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary to issue or sell any shares of its Preferred Stock to any Person, other than to the Company or a Restricted Subsidiary.
Section 4.14 Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:
(1) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and
(2) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes.
Section 4.15 Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes, pursuant to an offer that the Company will make to all Holders (a "Change of Control Offer") at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes repurchased to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date the ("Change of Control Payment"). Unless the Company has exercised its right to redeem all of the Notes pursuant to Section 3.07 hereof, the Company will, within thirty days following any Change of Control, or at the Company's option, prior to such Change of Control but after the public announcement thereof, mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred or will occur and that such Holder has, or upon such occurrence will have, the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase, and Liquidated Damages, if any, subject to the right of Holders of Notes of record on a record date to receive interest on the relevant interest payment date;
(2) the circumstances and relevant facts and financial information regarding such Change of Control;
(3) the date of purchase, which will be no earlier than 30 days nor later than 90 days from the date such notice is mailed (the "Change of Control Payment Date");
(4) the instructions determined by the Company, consistent with this Section 4.15, that a Holder must follow in order to have its Notes purchased; and
(5) that, if such offer is made prior to such Change of Control, payment is conditioned on the occurrence of such Change of Control.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.15. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.15, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.15 as a result of
such compliance.
Prior to repurchasing any Notes pursuant to this Section 4.15, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Indebtedness and Guarantor Senior Indebtedness or obtain the requisite consents, if any, under all agreements governing such outstanding Senior Indebtedness and Guarantor Senior Indebtedness to permit the repurchase of Notes required by this Section 4.15.
(b) On or before the Change of Control Payment Date, the Company will, to the extent lawful:
(1) accept for payment all Notes or portions of Notes properly tendered and not withdrawn pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered and not withdrawn; and
(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer's Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes properly tendered and not withdrawn the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if (1) a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and purchases all Notes properly tendered
and not withdrawn under the Change of Control Offer, or (2) notice of redemption
has been given pursuant to Section 3.07 hereof, unless and until there is a
default in payment of the applicable redemption price.
Section 4.16 Limitation on Layering.
The Company will not Incur any Indebtedness that is contractually subordinate in right of payment to any Senior Indebtedness, unless such Indebtedness is Senior Subordinated Indebtedness or is subordinated in right of payment to Senior Subordinated Indebtedness by contract. In addition, no Guarantor will Incur any Indebtedness that is contractually subordinate in right of payment to any Guarantor Senior Indebtedness, unless such Indebtedness is Guarantor Senior Subordinated Indebtedness of such Guarantor, or is subordinated in right of payment to Guarantor Senior Subordinated Indebtedness by contract. Unsecured Indebtedness is not considered subordinate to Secured Indebtedness merely because it is unsecured, and Indebtedness that is not Guaranteed by a particular person is not deemed to be subordinate to Indebtedness that is so guaranteed, merely because it is not Guaranteed. No Indebtedness will be considered to be senior by virtue of being secured on a first or junior priority basis.
Section 4.17 Additional Note Guarantees.
If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of this Indenture, then the Company will cause that newly acquired or created Domestic Subsidiary to execute a Note Guarantee pursuant to a supplemental indenture in form and substance satisfactory to the Trustee and deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date on which it was acquired or created to the effect that such supplemental indenture has been duly authorized, executed and delivered by that Domestic Subsidiary and constitutes a valid and binding agreement of that Domestic Subsidiary, enforceable against that Domestic Subsidiary in accordance with its terms (subject to customary exceptions); provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary.
In addition, if any of General Nutrition Companies, Inc., GNC Newco 1 LLC, GNC Newco 2 LLC, GNC Newco DGP 1 and GNC Newco DGP 2 (each, a "Reorganized Subsidiary") are not merged with and into the Company on the date of this Indenture, then the Company will cause that Reorganized Subsidiary to execute a Note Guarantee pursuant to a supplemental indenture in form and substance satisfactory to the Trustee and deliver an Opinion of Counsel to the Trustee on the date of this Indenture to the effect that such supplemental indenture has been duly authorized, executed and delivered by that Reorganized Subsidiary and constitutes a valid and binding agreement of that Reorganized Subsidiary,
enforceable against that Reorganized Subsidiary in accordance with its terms (subject to customary exceptions).
The form of such Note Guarantee is attached as Exhibit E hereto.
Section 4.18 Designation of Unrestricted Subsidiaries.
The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default; provided that in no event will a Subsidiary of the Company that owns or holds the right to use, license or sublicense the "GNC" brand be designated as an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the provisions of Section 4.07 hereof or under one or more clauses of the definition of Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of the Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary will be evidenced to the Trustee by filing with the Trustee a
certified copy of a resolution of the Board of Directors giving effect to such
designation and an Officer's Certificate certifying that such designation
complied with the preceding conditions and was permitted by the provisions of
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the preceding requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary will be deemed to be Incurred by a
Restricted Subsidiary of the Company as of such date and, if such Indebtedness
is not permitted to be Incurred as of such date under the provisions of Section
4.09 hereof, the Company will be in default of such Section 4.09 hereof. The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided that such
designation will be deemed to be an Incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary, and such designation will only be permitted if (1) such Indebtedness
is permitted under the provisions of Section 4.09 hereof, calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event of Default would be
in existence following such designation.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets.
(a) The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or convey or transfer all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor Company") will be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia;
(2) the Successor Company, if not the Company, will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement;
(3) immediately after giving effect to such transaction or series of transactions no Default or Event of Default exists;
(4) the Company or the Successor Company, if the Company is not the continuing obligor under this Indenture, will, at the time of such transaction or series of transactions and after giving pro forma effect thereto as if such transaction or series of transactions had occurred at the beginning of the applicable four-quarter period, be permitted to Incur at least an additional $1.00 of Indebtedness under paragraph (a) of Section 4.09 hereof, and
(5) the Company will have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture; provided that:
(A) in giving such opinion such counsel may rely on such Officer's Certificate as to any matters of fact, including without limitation as to compliance with the foregoing clauses; and
(B) no Opinion of Counsel will be required for a consolidation, merger or transfer described in Section 5.01(c) hereof.
In addition, the Company will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.
(b) The Successor Company will be substituted for, and may exercise every right and power of, the Company under this Indenture. Thereafter, the Company (if it is not the Successor Company) will be relieved of all obligations and covenants under this Indenture, except that, in the case of a conveyance or transfer of less than all its assets, the Company will not be released from the obligation to pay the principal of and interest on the Notes.
(c) The provisions of this Section 5.01 do not prohibit any Restricted Subsidiary from consolidating with, merging into or transferring all or part of its properties and assets to the Company. Additionally, the Company may merge with an Affiliate incorporated or organized for the purpose of reincorporating or reorganizing the Company in another jurisdiction to realize tax or other benefits. The definition of "Successor Company" will not include companies formed by consolidations, mergers or transfers of properties or assets pursuant to this Section 5.01(c).
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
(a) Each of the following is an "Event of Default":
(1) a default in any payment of interest on, or Liquidated Damages, if any, with respect to, any Note when due, whether or not such payment is prohibited by Article 10 hereof, continued for 30 days;
(2) a default in the payment of principal of, or premium, if any, on any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by Article 10 of this Indenture;
(3) the failure by the Company or any of its Restricted Subsidiaries to comply with its obligations under Article 5 hereof;
(4) the failure by the Company or any of its Restricted Subsidiaries to comply for 30 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes with any of its obligations under Sections 4.07, 4.09, 4.10, 4.15, in each case, other than a failure to purchase Notes;
(5) the failure by the Company or any of its Restricted Subsidiaries to comply with its other agreements contained in the Notes or this Indenture for 60 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes;
(6) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20 million;
(7) the Company or any of its Significant Subsidiaries:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an involuntary case,
(C) consents to the appointment of a custodian of it or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its Significant Subsidiaries;
(B) appoints a custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries; or
(C) orders the liquidation of the Company or any of its Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive days; or
(9) the rendering of any judgment or decree for the payment of money in an amount, net of any insurance or indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful, in excess of $20 million against the Company or a Significant Subsidiary
that is not discharged, bonded or insured by a third Person if either an enforcement proceeding thereon is commenced, or such judgment or decree remains outstanding for a period of 90 days and is not discharged, waived or stayed; or
(10) the failure of any Guarantee of the Notes by a Guarantor that is a Significant Subsidiary to be in full force, except as contemplated by the terms thereof or of this Indenture, or the denial in writing by any such Guarantor of its obligations under this Indenture or any such Guarantee if such Default continues for 10 days.
(b) The events listed in Section 6.01(a) hereof will constitute Events of Default regardless of their reasons, whether voluntary or involuntary or whether effected by operation of law or pursuant to any judgment, decree, order, rule or regulation of any administrative or governmental body.
Section 6.02 Acceleration.
In the case of an Event of Default specified in clause (7) or (8) of
Section 6.01(a) hereof, with respect to the Company or any of its Significant
Subsidiaries, all outstanding Notes will become due and payable immediately
without further action or notice on the part of the Trustee or any Holder. If
any other Event of Default occurs and is continuing, the Trustee, by notice to
the Company, or the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes, by notice to the Company and the Trustee, may
declare the principal of and accrued but unpaid interest on all of the Notes to
be due and payable immediately (and upon any such declaration, the Notes shall
become due and payable immediately); provided that so long as any Designated
Senior Indebtedness is outstanding, such acceleration will not be effective
until the earlier of (1) the acceleration of such Designated Senior Indebtedness
and (2) five Business Days after the holders of such Designated Senior
Indebtedness or the Representative thereof receive notice from the Company of
the acceleration with respect to the payment of the Notes.
The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration and its consequences, if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium or Liquidated Damages, if any, that has become due solely because of the acceleration) have been cured or waived.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Liquidated Damages, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium or Liquidated Damages, if any, that has become due solely because of the acceleration) have been cured or waived. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
Section 6.05 Control by Majority.
Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that (a) conflicts with law or this Indenture, (b) the Trustee
determines is unduly prejudicial to the rights of any other Holder of Notes or
(c) that would involve the Trustee in personal liability.
Section 6.06 Limitation on Suits.
Except to enforce the right to receive payment of principal, premium and Liquidated Damages, if any, or interests when due, no Holder may pursue a remedy with respect to this Indenture or the Notes unless:
(1) such Holder has previously given to the Trustee written notice that an Event of Default is continuing;
(2) Holders of at least 25% in aggregate principal amount of the then outstanding Notes have requested to the Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the Trustee reasonable security or indemnity against any loss, liability or expense;
(4) the Trustee has not complied with the request within 60 days after receipt of the request and the offer of security or indemnity; and
(5) during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request.
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.
Section 6.07 Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the provisions of this Indenture relating to the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase) may not be changed, and the right of any Holder, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired, in each case, without the consent of such Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;
Second: to the Holders of Senior Indebtedness if and to the extent required by Article 10 hereof;
Third: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and
Fourth: to the Company or to such party as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Company, a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;
(2) the Trustee will not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. In case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee reasonable security and indemnity against any loss, liability or expense. Before taking any action under this Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.
(f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) In connection with the Trustee's rights and duties under this Indenture, the Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company.
(f) Except with respect to Section 4.01 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article Four hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(a)(1), 6.01(a)(2) and 4.01 hereof or (ii) any Default or Event of Default of which the Trustee shall have received written notification in the manner set forth in this Indenture or an Officer in the Corporate Trust Office of the Trustee shall have obtained actual knowledge. Delivery of reports, information and documents to the Trustee under Section 4.03 hereof is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on an Officer's Certificate).
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may do the same with like rights and duties.
Section 7.04 Trustee's Disclaimer.
The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.
Section 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Liquidated Damages, if any, or interest on, any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.
Section 7.06 Reports by Trustee to Holders of the Notes.
(a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA Section 313(c).
(b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07 Compensation and Indemnity.
(a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
(b) The Company and the Guarantors will indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors, any Holder or any other Person) or liability in
connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld.
(c) The obligations of the Company and the Guarantors under this
Section 7.07 will survive the satisfaction and discharge of this Indenture.
(d) To secure the Company's and the Guarantors' payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.
(f) The Trustee will comply with the provisions of TIA Section 313(b)(2) to the extent applicable.
Section 7.08 Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.
(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a custodian or public officer takes charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in aggregate principal
amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition.
This Indenture will always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may at any time elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth
in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) and the Indenture on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;
(2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof;
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and
(4) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03 Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each of the Guarantors will,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from each of their obligations under the covenants contained in
Sections 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18
hereof and clauses (3) and (4) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes will not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Notes and Note
Guarantees, the Company and the Guarantors may omit to comply with and will have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply will not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes and Note Guarantees will be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, Sections 6.01(a)(4) through 6.01(a)(10) hereof
will not constitute Events of Default; provided that clauses (7) and (8) of
Section 6.01(a) hereof will continue to constitute Events of Default with
respect to the Company, but not any Significant Subsidiary.
Section 8.04 Conditions to Legal or Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:
(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm, or firm of independent public accountants, to pay the principal of, premium and Liquidated Damages, if any, and interest on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;
(2) in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that:
(A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or
(B) since the date of this Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(3) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;
(6) the Company must deliver to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and
(7) the Company must deliver to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.
The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Liquidated Damages, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium or Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Liquidated Damages, if any, or interest on, any Note
following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes or the Note Guarantees without the consent of any Holder of Note:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the obligations of the Company under this Indenture;
(3) to provide for uncertificated Notes in addition to or in place of certificated notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company;
(5) to make any change that does not adversely affect the rights of any Holder;
(6) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA;
(7) to conform the text of this Indenture, the Note Guarantees or the Notes to any provision of the Description of Notes to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of this Indenture, the Note Guarantees or the Notes; or
(8) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof.
Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.02 With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including, without limitation,
Section 3.09, 4.10 and 4.15 hereof) and the Notes and the Note Guarantees with
the consent of the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes (including, without limitation, Additional Notes,
if any) voting as a single class (including, without limitation, consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium or Liquidated Damages, if any, or interest
on, the Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the Notes
or the Note Guarantees may be waived with the consent of the Holders of at least
a majority in aggregate principal amount of the then outstanding Notes
(including, without limitation, Additional Notes, if any) voting as a single
class (including, without limitation, consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental indenture.
It is not necessary for the consent of the Holders of Notes under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it is sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.
However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on any Note;
(3) reduce the principal amount of or extend the Stated Maturity of any Note;
(4) reduce the premium payable upon the redemption or repurchase of any Note or change the time at which any Note may be redeemed as described in the provisions of Section 3.07 hereof;
(5) make any Note payable in money other than that stated in the Note;
(6) make any change to the subordination provisions of this Indenture that adversely affects the rights of any Holder;
(7) make any change in the provisions of this Indenture relating to the rights of Holders of Notes to receive payment of principal of, and interest, premium or Liquidated Damages on, the Notes on or after the respective due dates expressed in the Notes or impair the rights of any Holder of notes to sue for the enforcement of any payment of principal of, or interest, premium or Liquidated Damages on, such Holder's Notes on or after the respective due dates;
(8) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; or
(9) make any change in the preceding amendment and waiver provisions that require each Holder's consent or in the waiver provisions.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental indenture that complies with the TIA as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective (as determined by the Company and which may be prior to any such amendment, supplement or waiver becoming operative), a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note (if so provided pursuant to any solicitation of such consent) if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective (as determined by the Company and which may be prior to any such amendment, supplement or waiver becoming operative). An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
Section 9.05 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06 Trustee to Sign Amendments, etc.
The Trustee will sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee and if such
amendment or supplement does so adversely affect the rights, duties, liabilities
or immunities of the Trustee, the Trustee may, in its discretion, but shall not
be obligated to sign such amendment or supplement. In executing any amended or
supplemental indenture, the Trustee will be entitled to receive and (subject to
Section 7.01 hereof) will be fully protected in relying upon, in addition
to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness.
Section 10.02 Liquidation; Dissolution; Bankruptcy.
Upon any distribution of the assets of the Company to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities:
(1) holders of Senior Indebtedness will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Indebtedness (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Article 8 hereof); and
(2) until all Obligations with respect to Senior Indebtedness (as provided in clause (1) above) are paid in full in cash, any payment or distribution to which Holders would be entitled but for this Article 10 will be made to holders of Senior Indebtedness (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear.
Section 10.03 Default on Designated Senior Indebtedness.
(a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of obligations, including Liquidated Damages, if any, with respect to the Notes, may not purchase, redeem or otherwise retire from the Trustee or any Holder any Notes for cash or property (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) and may not make any deposit pursuant to the provisions of Article 8 hereof until all principal and other Obligations with respect to the Senior Indebtedness have been paid in full in cash if:
(1) any Senior Indebtedness is not paid when due in cash; or
(2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless (A) the default has been cured or waived and any such acceleration has been rescinded in writing or (B) such Senior Indebtedness has been paid in full in cash.
(b) If any other default occurs under any Designated Senior Indebtedness that permits the holders thereof to declare such Indebtedness due and payable, the Company will not be permitted to pay the notes for a period (the "Payment Blockage Period") beginning upon the receipt by the Trustee of written notice (a "Blockage Notice") of such default from the Designated Senior Indebtedness Representative specifying an election to effect a Payment Blockage Period. This Payment Blockage Period will end upon the earliest to occur of:
(1) written notice to the Trustee to terminate the period by the person who gave the Blockage Notice;
(2) the discharge or repayment in full in cash of such Designated Senior Indebtedness;
(3) the date on which the default giving rise to the Blockage Notice is no longer continuing; and
(4) the date on which 179 days have passed following the delivery of the Blockage Notice.
Unless the maturity of the Designated Senior Indebtedness has been accelerated, the Company will resume payments on the Notes after the end of the Payment Blockage Period. Only one Blockage Notice may be given in a 360-day period, regardless of the number of defaults on the Designated Senior Indebtedness during that period. However, if a Blockage Notice is given by a holder of Designated Senior Indebtedness other than Bank Indebtedness during the 360-day period, a representative of Bank Indebtedness may give another Blockage Notice during the 360-day period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods in the aggregate are in effect exceed 179 days during any 360 consecutive day period.
Section 10.04 Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the Company will promptly notify holders of Senior Indebtedness of the acceleration. The Company is not permitted to pay the Notes until five Business Days after such holders or the Representative of the Designated Senior Indebtedness receive notice of such acceleration. At that time, the Company may pay the Notes only if the subordination provisions in this Article 10 otherwise permit payment at that time.
Section 10.05 When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any obligations with respect to the Notes (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by this Article 10, such payment will be held by the Trustee or such Holder, in trust for the benefit of, and will be paid forthwith over and delivered, upon written request, promptly to, the holders of Senior Indebtedness as their interests may appear or their Representative under the agreement, indenture or other document (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only those obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness will be read into this Indenture against the Trustee. The Trustee will not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and will not be liable to any such holders if the Trustee pays over or distributes to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness are then entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee.
Section 10.06 Notice by Company.
The Company will promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any obligations with respect to the Notes to violate this Article 10, but failure to give such notice will not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article 10.
Section 10.07 Subrogation.
After all Senior Indebtedness is paid in full in cash and until the Notes are paid in full, Holders of Notes will be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Indebtedness. A distribution made under this Article 10 to holders of Senior Indebtedness that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes.
Section 10.08 Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and holders of Senior Indebtedness. Nothing in this Indenture will:
(1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest and Liquidated Damages, if any, on, the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or
(3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of, premium or interest or Liquidated Damages, if any, on, a Note on the due date, the failure is still a Default or Event of Default.
Section 10.09 Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes may be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture.
Section 10.10 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes will be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.11 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee will not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee has received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 will impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.
Section 10.12 Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
Section 10.13 Amendments.
No amendment may be made to the provisions of this Article 10 and any other subordination provisions in this Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness, or any group or representative thereof authorized to give a consent, consent to such change.
ARTICLE 11
NOTE GUARANTEES
Section 11.01 Guarantee.
(a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that:
(1) the principal of, premium and Liquidated Damages, if any, and interest on, the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.
(c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder in respect of the Notes, the Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect.
(d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee.
Section 11.02 Subordination of Note Guarantee.
The obligations of each Guarantor under its Note Guarantee pursuant to this Article 11 will be junior and subordinated to the Guarantor Senior Indebtedness of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders will have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof.
Section 11.03 Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, including any Guarantees under the Senior Credit Facility, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance.
Section 11.04 Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 hereof will remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee will be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors.
In the event that the Company or any of its Restricted Subsidiaries creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.17 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.17 hereof and this Article 11, to the extent applicable.
Section 11.05 Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.05 hereof, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or a Wholly Owned Subsidiary of the Company that is a Guarantor, unless:
(1) the provisions of this Indenture, including Section 4.10 hereof, are complied with; and
(2) such Guarantor is released from all of its obligations under this Indenture and its Note Guarantee pursuant to Section 11.05 hereof; provided that termination of the Note Guarantee will only occur to the extent that the Guarantor's obligations under the Senior Credit Facility and all of its Guarantees of any other Indebtedness of the Company also terminate.
Except as set forth in Articles 4 and 5 hereof, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or a Wholly Owned Subsidiary of the Company that is a Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or a Wholly Owned Subsidiary of the Company that is a Guarantor.
Section 11.06 Releases.
(a) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) the Company or a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officer's Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee.
(b) Upon designation of any Guarantor as an Unrestricted Subsidiary in accordance with the terms of this Indenture, such Guarantor will be released and relieved of any obligations under its Note Guarantee.
(c) Upon Legal Defeasance in accordance with Article 8 hereof or satisfaction and discharge of this Indenture in accordance with Article 12 hereof, each Guarantor will be released and relieved of any obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note Guarantee as provided in this Section 11.05 will remain liable for the full amount of principal of and interest and premium and Liquidated Damages, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as and to the extent provided in this Article 11.
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties will control.
Section 12.02 Notices.
Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company and/or any Guarantor:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Facsimile No.: (412) 338-8900
Attention: Chief Legal Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 S. Grand Avenue, Suite 3400
Los Angeles, CA 90071
Facsimile No.: (213) 687-5600
Attention: Jeffrey Cohen
If to the Trustee:
U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107-2292
Facsimile No.: (651) 495-8097
Attention: Frank Leslie
The Company, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.
Section 12.03 Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).
Section 12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee, upon request:
(1) an Officer's Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.
Section 12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA
Section 314(e) and must include:
(1) a statement that the Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.
Section 12.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, this Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Section 12.08 Governing Law.
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK,
INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
Section 12.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.10 Successors.
All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.05 hereof.
Section 12.11 Severability.
In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Section 12.12 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.
Section 12.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
SIGNATURES
Dated as of December 5, 2003
GENERAL NUTRITION CENTERS, INC.
By: /s/ Andrew Jhawar
---------------------------------------
Name: Andrew Jhawar
Title: Vice President
|
GENERAL NUTRITION INVESTMENT COMPANY
GENERAL NUTRITION SALES CORPORATION
GNC (CANADA) HOLDING COMPANY
GENERAL NUTRITION DISTRIBUTION COMPANY
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
GENERAL NUTRITION INTERNATIONAL, INC.
GN INVESTMENT, INC.
GNC, LIMITED
GNC US DELAWARE, INC.
GENERAL NUTRITION SYSTEMS, INC.
INFORMED NUTRITION, INC.
GENERAL NUTRITION CORPORATION
GENERAL NUTRITION DISTRIBUTION, L.P.
GENERAL NUTRITION, INCORPORATED
GNC FRANCHISING, INC.
NUTRICIA MANUFACTURING USA, INC.
GENERAL NUTRITION COMPANIES, INC.
By: /s/ James Sander
---------------------------------------
Name: James Sander
Title: Senior Vice President, Law,
Chief Legal Officer
|
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Frank P. Leslie
---------------------------------------
Name: Frank P. Leslie
Title: Vice President
|
EXHIBIT A1
[Face of Note]
CUSIP/CINS ____________
8-1/2% Senior Subordinated Notes due 2010
No. ___ $____________
GENERAL NUTRITION CENTERS, INC.
promises to pay to_______________ or registered assigns,
the principal sum of __________________________________________________________ DOLLARS on December 1, 2010.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Dated: __________________
GENERAL NUTRITION CENTERS, INC.
By: ______________________________
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
[TRUSTEE],
as Trustee
By:_____________________________________ Authorized Signatory
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[Back of Note] 8-1/2% Senior Subordinated Notes due 2010
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
(1) INTEREST. General Nutrition Centers, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8-1/2% per annum from ________________, 20__ until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be _____________, 20__. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate that is then in effect on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
(2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the applicable Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire instructions to the Company, the Company will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds to the accounts specified by the Depositary, or its nominee will be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
(3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change
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any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.
(4) INDENTURE. The Company issued the Notes under an Indenture dated as of December 5, 2003 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company. The Company will be entitled to issue Additional Notes pursuant to Section 2.13 of the Indenture.
(5) OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to December 1, 2007. On or after December 1, 2007 and prior to maturity, the Company may, at its option, redeem all or a part of the Notes at any time and from time to time upon not less than 30 nor more than 90 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1, of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2007.......................................... 104.250% 2008.......................................... 102.125% 2009 and thereafter........................... 100.000% |
Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to December 1, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any to the redemption date, with the Net Cash Proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 60 days after the date of the closing of such Equity Offering.
(6) MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
(7) REPURCHASE AT THE OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes, pursuant to an offer that the Company will make to all Holders at a purchase
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price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Subject to the exceptions in Section 4.15 of the Indenture, within thirty days following any Change of Control, the Company will mail a notice to each Holder with a copy to the Trustee setting forth the procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset Dispositions, within 15 days of the periods specified in Section 4.10(3)(A) and (B) of the Indenture, after which Excess Proceeds exist, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem at a purchase price of 100% of the principal amount thereof, plus accrued and unpaid interest to the Purchase Date, and liquidated damages, if any, with the proceeds of sales of assets (an "Asset Disposition Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Disposition Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis.
(8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 90 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.
(9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.
(10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
(11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set forth in Section 9.02 of the Indenture, the Indenture, the Notes and the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event or Default or compliance with any provision of the Indenture or
A1-4
the Notes or the Note Guarantees may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, omission, defect or inconsistency; to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture; to provide for uncertificated Notes in addition to or in place of certificated notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company; to make any change that does not adversely affect the rights of any Holder; to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA; to conform the text of the Indenture, the Note Guarantees or the Notes to any provision of the Description of Notes to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the Notes; or to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the date of the Indenture.
(12) DEFAULTS AND REMEDIES. Events of Default include: (i) a default in any payment of interest on, or Liquidated Damages, if any, with respect to, any Note when due, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture, continued for 30 days; (ii) a default in the payment of principal of, or premium, if any, on any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture; (iii) the failure by the Company or any of its Restricted Subsidiaries to comply with its obligations under Articles 5 of the Indenture; (iv) the failure by the Company or any of its Restricted Subsidiaries to comply for 30 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes with any of its obligations under Sections 4.07, 4.09, 4.10, 4.15 of the Indenture, in each case, other than a failure to purchase Notes; (v) the failure by the Company or any of its Restricted Subsidiaries to comply with its other agreements contained in the Notes or the Indenture for 60 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes; (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20 million; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries specified in the Indenture; (viii) the rendering of any judgment or decree for the payment of money in an amount, net of any insurance or indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful, in excess of $20 million against the Company or a Significant Subsidiary that is not discharged, bonded or insured by a third Person if either an enforcement proceeding thereon is commenced, or such judgment or decree remains outstanding for a period of 90 days and is not discharged, waived or stayed; or (ix) the failure of any Guarantee of the Notes by a Guarantor that is a Significant Subsidiary to be in full force, except as contemplated by the terms thereof or of the Indenture, or the denial in writing by any such Guarantor of its obligations under the Indenture or any such Guarantee if such Default continues for 10 days. If any Event of Default occurs and is continuing, the Trustee, by notice to the Company, or the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, by notice to the Company and the Trustee, may declare all the Notes to be due and payable immediately. Notwithstanding the
A1-5
foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency set forth in the Indenture, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations set forth in the Indenture, Holders of at least a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium or Liquidated Damages, if any,) if it determines that withholding notice is in their interest. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium or Liquidated Damages, if any, on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default, in each case as provided in the Indenture.
(13) SUBORDINATION. Payment of principal, interest and premium and Liquidated Damages, if any, on the Notes is subordinated to the prior payment of Senior Indebtedness on the terms provided in the Indenture.
(14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.
(15) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
(16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of December 5, 2003, among the Company, the Guarantors and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, and
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the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement").
(19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.
(20) THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Attention: Chief Legal Officer
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date: _______________
Your Signature: _______________________________________ (Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
-Section 4.10 -Section 4.15
If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:
$_________________
Date: _______________
Your Signature: ________________________________________ (Sign exactly as your name appears on the face of this Note)
Tax Identification No.:_________________________________
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount
Amount of decrease in Amount of increase in of this Global Note following Signature of authorized
Principal Amount of Principal Amount of such decrease officer of Trustee or
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- --------------------- --------------------- ----------------------------- -----------------------
|
* This schedule should be included only if the Note is issued in global form.
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EXHIBIT A2
[Face of Regulation S Temporary Global Note]
CUSIP/CINS __________
8-1/2% Senior Subordinated Notes due 2010
No. ___ $__________
GENERAL NUTRITION CENTERS, INC.
promises to pay to ___________________ or registered assigns,
the principal sum of __________________________________________________________ DOLLARS on December 1, 2010.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Dated: ___________________
GENERAL NUTRITION CENTERS, INC.
By:_____________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
[TRUSTEE],
as Trustee
By:_________________________________
Authorized Signatory
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[Back of Regulation S Temporary Global Note] 8-1/2% Senior Subordinated Notes due 2010
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST HEREON. DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THE NOTE.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF GENERAL NUTRITION CENTERS, INC.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM THE
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REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (5) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL IF GENERAL NUTRITION CENTERS, INC. SO REQUESTS) OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITED STATES.
Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
(1) INTEREST. General Nutrition Centers, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8-1/2% per annum from ________________, 20__ until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be _____________, 20__. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate that is then in effect on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture.
(2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the applicable Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire instructions to the Company, the Company will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds to the accounts specified by the Depositary, or its nominee will be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
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(3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.
(4) INDENTURE. The Company issued the Notes under an Indenture dated as of December 5, 2003 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company. The Company will be entitled to issue Additional Notes pursuant to Section 2.13 of the Indenture.
(5) OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to December 1, 2007. On or after December 1, 2007 and prior to maturity, the Company may, at its option, redeem all or a part of the Notes at any time and from time to time upon not less than 30 nor more than 90 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1, of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2007......................................... 104.250% 2008......................................... 102.125% 2009 and thereafter.......................... 100.000% |
Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to December 1, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any to the redemption date, with the Net Cash Proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 60 days after the date of the closing of such Equity Offering.
(6) MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
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(7) REPURCHASE AT THE OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes, pursuant to an offer that the Company will make to all Holders at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Subject to the exceptions in Section 4.15 of the Indenture, within thirty days following any Change of Control, the Company will mail a notice to each Holder with a copy to the Trustee setting forth the procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset Dispositions, within 15 days of the periods specified in Section 4.10(3)(A) and (B) of the Indenture, after which Excess Proceeds exist, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem at a purchase price of 100% of the principal amount thereof, plus accrued and unpaid interest to the Purchase Date, and liquidated damages, if any, with the proceeds of sales of assets (an "Asset Disposition Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Disposition Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis.
(8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 90 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.
(9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day distribution compliance period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if
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applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note.
(10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
(11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set forth in Section 9.02 of the Indenture, the Indenture, the Notes and the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event or Default or compliance with any provision of the Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, omission, defect or inconsistency; to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture; to provide for uncertificated Notes in addition to or in place of certificated notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company; to make any change that does not adversely affect the rights of any Holder; to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA; to conform the text of the Indenture, the Note Guarantees or the Notes to any provision of the Description of Notes to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the Notes; or to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the date of the Indenture.
(12) DEFAULTS AND REMEDIES. Events of Default include: (i) a default in any payment of interest on, or Liquidated Damages, if any, with respect to, any Note when due, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture, continued for 30 days; (ii) a default in the payment of principal of, or premium, if any, on any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture; (iii) the failure by the Company or any of its Restricted Subsidiaries to comply with its obligations under Articles 5 of the Indenture; (iv) the failure by the Company or any of its Restricted Subsidiaries to comply for 30 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes with any of its obligations under Sections 4.07, 4.09, 4.10, 4.15 of the Indenture, in each case, other than a failure to purchase Notes; (v) the failure by the Company or any of its Restricted Subsidiaries to comply with its other agreements contained in the Notes or the Indenture for 60 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes; (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20 million; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries specified in the Indenture; (viii) the rendering of any judgment or decree for the payment of money in an amount, net of any insurance or
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indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful, in excess of $20 million against the Company or a Significant Subsidiary that is not discharged, bonded or insured by a third Person if either an enforcement proceeding thereon is commenced, or such judgment or decree remains outstanding for a period of 90 days and is not discharged, waived or stayed; or (ix) the failure of any Guarantee of the Notes by a Guarantor that is a Significant Subsidiary to be in full force, except as contemplated by the terms thereof or of the Indenture, or the denial in writing by any such Guarantor of its obligations under the Indenture or any such Guarantee if such Default continues for 10 days. If any Event of Default occurs and is continuing, the Trustee, by notice to the Company, or the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, by notice to the Company and the Trustee, may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency set forth in the Indenture, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations set forth in the Indenture, Holders of at least a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium or Liquidated Damages, if any,) if it determines that withholding notice is in their interest. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium or Liquidated Damages, if any, on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default, in each case as provided in the Indenture..
(13) SUBORDINATION. Payment of principal, interest and premium and Liquidated Damages, if any, on the Notes is subordinated to the prior payment of Senior Indebtedness on the terms provided in the Indenture.
(14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.
(15) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
(16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
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(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of December 5, 2003, among the Company, the Guarantors and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement").
(19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.
(20) THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Attention: Chief Legal Officer
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
and irrevocably appoint _______________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date: _______________
Your Signature: __________________________________ (Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
-Section 4.10 -Section 4.15
If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:
$_______________
Date: _______________
Your Signature: ________________________________________ (Sign exactly as your name appears on the face of this Note)
Tax Identification No.: ________________________________
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
A2-10
SCHEDULE OF EXCHANGES OF INTERESTS IN THE REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or exchanges of a part of another other Restricted Global Note for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Amount of Principal Amount
decrease in increase in of this
Principal Amount Principal Amount Global Note Signature of
of of following such authorized officer
of this of this decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Custodian
---------------- ---------------- ---------------- ---------------- ------------------
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A2-11
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107-2292
Re: 8-1/2% Senior Subordinated Notes Due 2010
Reference is hereby made to the Indenture, dated as of December 5, 2003 (the "Indenture"), among General Nutrition Centers, Inc., as issuer (the "Company"), the Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S PERMANENT GLOBAL
NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a Person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Permanent Global Note, the Regulation S Temporary Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of
the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
By: ________________________________ Name:
Title:
Dated: _______________________
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(A) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Permanent Global Note (CUSIP _________), or
(iii) [ ] Regulation S Temporary Global Note (CUSIP _________); or
(iv) [ ] IAI Global Note (CUSIP _________); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Permanent Global Note (CUSIP _________), or
(iii) [ ] Regulation S Temporary Global Note (CUSIP _________); or
(iv) [ ] IAI Global Note (CUSIP _________); or
(v) [ ] Unrestricted Global Note (CUSIP _________); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107-2292
Re: 8-1/2% Senior Subordinated Notes Due 2010
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of December 5, 2003 (the "Indenture"), among General Nutrition Centers, Inc., as issuer (the "Company"), the Guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for
a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
By: __________________________________ Name:
Title:
Dated: ______________________
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107-2292
Re: 8-1/2% Senior Subordinated Notes Due 2010
Reference is hereby made to the Indenture, dated as of December 5, 2003 (the "Indenture"), among General Nutrition Centers, Inc., as issuer (the "Company"), the guarantors party thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.
By: ____________________________________________ Name:
Title:
Dated: _______________________
EXHIBIT E
[FORM OF NOTATION OF GUARANTEE]
For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of December 5, 2003 (the "Indenture") among General Nutrition Centers, Inc., (the "Company"), the Guarantors party thereto and U.S. Bank National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium and Liquidated Damages, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee.
Capitalized terms used but not defined herein have the meanings given to them in the Indenture.
[Signatures on following pages]
EXHIBIT E
[NAME OF GUARANTOR(S)]
By: ______________________________________
Name:
Title:
EXHIBIT F
[FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS]
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, 20__, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of General Nutrition Centers, Inc. (or its permitted successor), a [___________] corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of December 5, 2003 providing for the issuance of 8-1/2% Senior Subordinated Notes due 2010 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 11 thereof.
4. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
5. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
EXHIBIT E
7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.
EXHIBIT E
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.
Dated: _______________, 20___
[GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
[COMPANY]
By: _______________________________
Name:
Title:
[EXISTING GUARANTORS]
By: _______________________________
Name:
Title:
[TRUSTEE],
as Trustee
By: _______________________________
Authorized Signatory
Exhibit 4.2
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 6, 2004, among GNC Franchising, LLC (the "Guaranteeing Subsidiary"), a Pennsylvania limited liability company and a subsidiary of General Nutrition Centers, Inc., a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of December 5, 2003 providing for the issuance of 8-1/2% Senior Subordinated Notes due 2010 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 11 thereof.
4. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
5. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.
Dated: April 6, 2004
GNC FRANCHISING, LLC
By: /s/ James M. Sander
-------------------------------------
Name: James M. Sander
Title: Senior Vice President, Chief
Legal Officer and Secretary
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GENERAL NUTRITION CENTERS, INC.
By: /s/ James M. Sander
-------------------------------------
Name: James M. Sander
Title: Senior Vice President, Chief
Legal Officer and Secretary
|
GENERAL NUTRITION INVESTMENT COMPANY
GENERAL NUTRITION SALES CORPORATION
GNC (CANADA) HOLDING COMPANY
GENERAL NUTRITION DISTRIBUTION COMPANY
GENERAL NUTRITION GOVERNMENT SERVICES,
INC.
GENERAL NUTRITION INTERNATIONAL, INC.
GN INVESTMENT, INC.
GNC, LIMITED
GNC US DELAWARE, INC.
GENERAL NUTRITION SYSTEMS, INC.
INFORMED NUTRITION, INC.
GENERAL NUTRITION CORPORATION
GENERAL NUTRITION DISTRIBUTION, L.P.
GENERAL NUTRITION, INCORPORATED
GENERAL NUTRITION COMPANIES, INC.
NUTRA MANUFACTURING, INC. (f/k/a Nutricia
Manufacturing USA Inc.)
By: /s/ James M. Sander
-------------------------------------
Name: James M. Sander
Title: Senior Vice President, Chief
Legal Officer and Secretary
|
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By: /s/ Frank Leslie
-------------------------------------
Authorized Signatory
|
EXHIBIT 4.3
CUSIP/CINS ____________
8-1/2% Senior Subordinated Notes due 2010
No. ___ $____________
GENERAL NUTRITION CENTERS, INC.
promises to pay to ____________or registered assigns,
the principal sum of _________________________________________________________ DOLLARS on December 1, 2010.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Dated: __________________
GENERAL NUTRITION CENTERS, INC.
By: ____________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
[TRUSTEE],
as Trustee
By: _________________________________
Authorized Signatory
[Back of Note] 8-1/2% Senior Subordinated Notes due 2010
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
(1) INTEREST. General Nutrition Centers, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8-1/2% per annum from ________________, 20__ until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be _____________, 20__. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate that is then in effect on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.
(2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the applicable Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire instructions to the Company, the Company will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds to the accounts specified by the Depositary, or its nominee will be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
(3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.
(4) INDENTURE. The Company issued the Notes under an Indenture dated as of December 5, 2003 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company. The Company will be entitled to issue Additional Notes pursuant to Section 2.13 of the Indenture.
(5) OPTIONAL REDEMPTION.
Except as set forth in subparagraph (b) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to December 1, 2007. On or after December 1, 2007 and prior to maturity, the Company may, at its option, redeem all or a part of the Notes at any time and from time to time upon not less than 30 nor more than 90 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1, of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2007......................................................... 104.250% 2008......................................................... 102.125% 2009 and thereafter.......................................... 100.000% |
Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to December 1, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any to the redemption date, with the Net Cash Proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 60 days after the date of the closing of such Equity Offering.
(6) MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes.
(7) REPURCHASE AT THE OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes, pursuant to an offer that the Company will make to all Holders at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Subject to the exceptions in Section 4.15 of the Indenture, within thirty days following any Change of Control, the Company will mail a notice to each Holder with a copy to the Trustee setting forth the procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary of the Company consummates any Asset Dispositions, within 15 days of the periods specified in Section 4.10(3)(A) and (B) of the Indenture, after which Excess Proceeds exist, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem at a purchase price of 100% of the principal amount thereof, plus accrued and unpaid interest to the Purchase Date, and liquidated damages, if any, with the proceeds of sales of assets (an "Asset Disposition Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Disposition Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis.
(8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 90 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.
(9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.
(10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
(11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set forth in Section 9.02 of the Indenture, the Indenture, the Notes and the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event or Default or compliance with any provision of the Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, omission, defect or inconsistency; to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture; to provide for uncertificated Notes in addition to or in place of certificated notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; to add Guarantees with respect to the Notes, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company; to make any change that does not adversely affect the rights of any Holder; to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA; to conform the text of the Indenture, the Note Guarantees or the Notes to any provision of the Description of Notes to the extent that such provision in the Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the Notes; or to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the date of the Indenture.
(12) DEFAULTS AND REMEDIES. Events of Default include: (i) a default in any payment of interest on, or Liquidated Damages, if any, with respect to, any Note when due, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture, continued for 30 days; (ii) a default in the payment of principal of, or premium, if any, on any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions of Article 10 of the Indenture; (iii) the failure by the Company or any of its Restricted Subsidiaries to comply with its obligations under Articles 5 of the Indenture; (iv) the failure by the Company or any of its Restricted Subsidiaries to comply for 30 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes with any of its obligations under Sections 4.07, 4.09, 4.10, 4.15 of the Indenture, in each case, other than a failure to purchase Notes; (v) the failure by the Company or any of its Restricted Subsidiaries to comply with its other agreements contained in the Notes or the Indenture for 60 days after written notice from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes; (vi) the failure by the Company or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $20 million; (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries specified in the Indenture; (viii) the rendering of any judgment or decree for the payment of money in an amount, net of any insurance or indemnity payments actually received in respect thereof prior to or within 90 days from the entry thereof, or to be received in respect thereof in the event any appeal thereof shall be unsuccessful, in excess of $20 million against the Company or a Significant Subsidiary that is not discharged, bonded or insured by a third Person if either an enforcement proceeding thereon is commenced, or such judgment or decree remains outstanding for a period of 90 days and is not discharged, waived or stayed; or (ix) the failure of any Guarantee of the Notes by a Guarantor that is a Significant Subsidiary to be in full force, except as contemplated by the terms thereof or of the Indenture, or the denial in writing by any such Guarantor of its obligations under the Indenture or any such Guarantee if such Default continues for 10 days. If any Event of Default occurs and is continuing, the Trustee, by notice to the Company, or the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, by notice to the Company and the Trustee, may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency set forth in the Indenture, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations set forth in the Indenture, Holders of at least a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium or Liquidated Damages, if any,) if it determines that withholding notice is in their interest. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium or Liquidated Damages, if any, on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default, in each case as provided in the Indenture.
(13) SUBORDINATION. Payment of principal, interest and premium and Liquidated Damages, if any, on the Notes is subordinated to the prior payment of Senior Indebtedness on the terms provided in the Indenture.
(14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.
(15) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for
issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.
(16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.
(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
(18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of December 5, 2003, among the Company, the Guarantors and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement").
(19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.
(20) THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK OBLIGATIONS LAW.
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Attention: Chief Legal Officer
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Date: _______________
Your Signature: _______________________________ (Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
Section 4.10 Section 4.15
If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:
$_______________
Date: _______________
Your Signature: ____________________________ (Sign exactly as your name appears on the face of this Note)
Tax Identification No.: _____________________
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *
The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal
Amount of Amount of Amount
decrease in increase in of this Global Signature of
Principal Principal Note following authorized
Date of Amount of Amount of such decrease officer of Trustee
Exchange this Global Note this Global Note (or increase) or Custodian
-------- ---------------- ---------------- ------------- ---------
|
* This schedule should be included only if the Note is issued in global form.
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
DATED AS OF DECEMBER 5, 2003
BY AND AMONG
GENERAL NUTRITION CENTERS, INC.
THE GUARANTORS LISTED ON SCHEDULE I HERETO
AND
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
UBS SECURITIES LLC
This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of December 5, 2003, by and among General Nutrition Centers, Inc., a Delaware corporation (the "COMPANY"), the guarantors listed on Schedule I hereto (the "GUARANTORS") and Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC (each, an "INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 8 1/2% Senior Subordinated Notes due 2010 (the "INITIAL NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated November 25, 2003 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Indenture, dated as of December 5, 2003, among the Company, the Guarantors and U.S. Bank, N.A., as trustee, relating to the Initial Notes and the Exchange Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on which banking institutes in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes tendered by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Company's 8 1/2% Senior Subordinated Notes due 2010 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Initial Notes that are properly tendered and not withdrawn by such Holders in connection with such exchange and issuance, as required by the terms of this Agreement.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, (i) that is filed pursuant to the provisions of this Agreement, (ii) including the Prospectus included therein, and (iii) including all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: The Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
SUSPENSION PERIOD: The period of time (a) that the Company may delay filing and distributing (i) a post-effective amendment to (x) the Shelf Registration Statement or (y) after the date on which the Exchange Offer is Consummated, the Exchange Offer Registration Statement that is required to be effective to permit resales of Exchange Notes by Broker-Dealers as contemplated by Section 3(c) below or (ii) a supplement to any related Prospectus so that, as thereafter delivered to Holders or purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading if the Company determines reasonably and in good faith that compliance with the disclosure obligations necessary to maintain the effectiveness of such Registration Statement at such time would reasonably be expected to have a material adverse effect on the Company or a pending financing, acquisition, disposition, merger or other material corporate transaction involving the Company or any of its subsidiaries (it being understood that, in the case of this clause (a), the Company shall be required to proceed in good faith to amend such Registration Statement or supplement to such related Prospectus to describe such events or to otherwise cause such Registration Statement to become effective and the related Prospectus to again be usable at such time as so doing would not have such a material adverse effect), or (b) when (i) the Shelf Registration Statement or (ii) after the date on which the Exchange Offer is Consummated, the Exchange Offer Registration Statement that is required to remain effective to permit resales of Exchange Notes by Broker-Dealers as contemplated by Section 3(c) below, in each case, ceases to be effective or any related Prospectus is not usable solely because the Company filed a post-effective amendment to any such Registration Statement to include annual audited financial information with respect to the Company and such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus (it being understood that, in the case of this clause (b), the Company shall be required to use its commercially reasonable efforts to cause any such post-effective amendment to become effective as soon as practicable); provided that such Suspension Periods shall not occur more than 45 consecutive days, or more than 75 days in the aggregate; and provided further that upon the termination of such Suspension Period, the Company shall promptly advise each Holder and purchaser and, if requested by any such person, confirm such advice in writing that such Suspension Period has been terminated.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Initial Note until the earliest to occur of (a) the date on which such Initial Note has been exchanged in the Exchange Offer by a Person other than a Broker-Dealer for an Exchange Note entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) following the exchange by a Broker-Dealer in the Exchange Offer of an Initial Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Initial Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement (and the purchasers thereof have been issued Exchange Notes) or (d) the date on which such Initial Note is distributed to the public pursuant to Rule 144.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission no later than 150 days after the Closing Date (such 150th day being the "FILING DEADLINE"), and (ii) use all commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective no later than 250 days after the Closing Date (such 250th day being the "EFFECTIVENESS DEADLINE"). The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Initial Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use all commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use all commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter, or longer, if required by the federal securities laws (such 30th (or longer) day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the Prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to use all commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(a) and (c) hereof and subject to any applicable Suspension Period and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer is Consummated or such shorter period ending on the date when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto; provided, however, that if the Exchange Offer Registration Statement ceases to be effective during any Suspension Period, such 180-day period shall be extended by the number of days such Suspension Period continued. The Company and the Guarantors shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than two Business Days after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Guarantors are not (A) required to file the Exchange Offer Registration Statement or (B) permitted to Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) any Holder of Transfer Restricted Securities notifies the Company prior to 20 Business Days following Consummation of the Exchange Offer (but not prior to the filing of the Exchange Offer Registration Statement) that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or any of its Affiliates, then the Company and the Guarantors shall:
(x) use all commercially reasonable efforts on or prior to 45 days after the earlier of (i) the date as of which the Company determines that the Exchange Offer Registration Statement will not be or cannot be, as the case may be, filed as a result of clause (a)(i) above and (ii) the date on which the Company receives the notice specified in clause (a)(ii) above (45 days after such earlier date, the "FILING DEADLINE"), to file a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (including the Prospectus included therein and all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein, the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities, and
(y) use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 75 days after the
Filing Deadline for the Shelf Registration Statement (such 75th day, the
"EFFECTIVENESS DEADLINE").
If, after the Company and the Guarantors have filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i)(B) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company and the Guarantors shall remain obligated to meet the Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use all commercially reasonable efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and subject to any Suspension Period and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of two years (as extended pursuant to Section 6(d) hereof) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto or when all Initial Notes or Exchange Notes cease to be Transfer Restricted Securities.
(b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act, or other information reasonably requested by the Company and required by Regulation S-K of the Act, for use in connection with any Shelf Registration Statement or Prospectus or preliminary prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose, except during any Suspension Period (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay, subject to Section 4(b) hereof, to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to 0.25% per annum of the principal amount of Transfer Restricted Securities held by such Holder for each day that the Registration
Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional 0.25% per annum of the principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages equal to 1.00% per annum of the principal amount of Transfer Restricted Securities; provided that the Company and the Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease accruing.
All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors, and in the case of clause
(z)(ii) of this Section 6(a), each Holder (as applicable), shall (x) comply with
all applicable provisions of Section 6(c) below, (y) use all commercially
reasonable efforts to effect such exchange and to permit the resale of Exchange
Notes by Broker-Dealers that properly tendered in the Exchange Offer Initial
Notes that such Broker-Dealer acquired for its own account as a result of its
market-making activities or other trading activities (other than Initial Notes
acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree either to (x) seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities or (y) file, in accordance with Section 4(a) hereof, a Shelf Registration Statement to permit the registration and/or resale of the Transfer Restricted Securities that would otherwise be covered by the Exchange
Offer Registration Statement but for the announcement of a change in Commission policy. In the case of clause (x) above, the Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level, but shall not be required to take commercially unreasonable actions in connection therewith. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other reasonable actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement), prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer, (C) it is acquiring the Exchange Notes in its ordinary course of business and (D) only if such Holder is a Broker-Dealer that will receive Exchange Notes in exchange for Initial Notes that such Broker-Dealer acquired for its own account as a result of market-making or other trading activities, it will deliver a Prospectus, as required by law, in connection with any sale of such Exchange Notes. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall, upon request of the Commission, provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall:
(i) comply with all the provisions of Section 6(c) below
and use all commercially reasonable efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the reasonable intended methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to
Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under
the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with such reasonable intended
methods of distribution thereof within the time periods and otherwise
in accordance with the provisions hereof; and
(ii) issue to any Holder or purchaser of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement, upon the request of any such Holder or purchaser, registered Initial Notes having an aggregate principal amount equal to the aggregate principal amount of Initial Notes, in the names as such Holder or purchaser shall designate.
(c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Guarantors shall:
(i) use all commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 hereof, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file as soon as reasonably practicable, subject to any applicable Suspension Period, an appropriate amendment to such Registration Statement to cure such defect, and, if Commission review is required,
use all commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; subject to any applicable Suspension Period, cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed as and to the extent required pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the reasonable intended methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;
(iii) advise promptly (x) each Holder of Transfer
Restricted Securities named in any Shelf Registration Statement (each,
a "SHELF HOLDER") (solely to the extent the provisions of this clause
(iii) apply to a Shelf Registration Statement) and (y) each Holder that
is a Broker-Dealer that tendered into the Exchange Offer Initial Notes
acquired by such Broker-Dealer for its own account as a result of
market-making activities or other trading activities (solely to the
extent the provisions of this clause (iii) apply to the Exchange Offer
Registration Statement), and, if requested by any such Holder, confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed (other than any
Prospectus supplement that names a Holder as a selling securityholder
therein and other than the first filing of the Prospectus included in
the Exchange Offer Registration Statement), and, with respect to any
applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective (other than the initial
effectiveness of the Exchange Offer Registration Statement), (B) of any
request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by
reference therein untrue, or that requires the making of any additions
to or changes in the Registration Statement in order to make the
statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (E) of any Suspension Period. If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and
the Guarantors shall use all commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare as soon as reasonably practicable, subject to any applicable Suspension Period, a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(v) furnish to counsel for the Initial Purchasers provided in Section 7(b) and to each Shelf Holder, in each case, in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement (in the case of such counsel) or of any Shelf Registration Statement (in the case of any such Shelf Holder) or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including, upon request, all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such counsel or, if applicable, such Shelf Holders in connection with such sale, if any, for a period of at least three Business Days, and the Company will reasonably consider any comments timely provided by such counsel or, if applicable, any such Shelf Holder; provided that the Company need not furnish (x) any amendment or supplement to any Registration Statement that solely names a Holder as a selling securityholder therein or (y) the first filing of the Exchange Offer Registration Statement; provided further, however, that the Company shall furnish to any Shelf Holder any amendment or supplement to an effective Shelf Registration Statement that names such Shelf Holder as a selling securityholder therein;
(vi) upon request, prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus in connection with such exchange or sale, if any, provide copies of such document to counsel for the Initial Purchasers provided in Section 7(b) and, in connection with any Shelf Registration Statement, each Shelf Holder; provided that this requirement shall not be applicable to any document to be filed by the Company in connection with its periodic reporting requirements under the Exchange Act, including with respect to reports to be filed on Form 8-K, Form 10-Q or Form 10-K;
(vii) in connection with any underwritten offering pursuant to a Shelf Registration Statement, make available upon reasonable request, at reasonable times, for inspection by Holders of at least 50% in aggregate principal amount of the Transfer Restricted Securities covered by such Shelf Registration Statement (the "MAJORITY HOLDERS") and any attorney or accountant retained by such Holders solely for the purpose of conducting a due diligence investigation in connection with such underwritten offering, all financial and other records, pertinent corporate documents of the Company
and the Guarantors and cause the Company's and the Guarantors' officers and employees to supply all information reasonably requested by any such Majority Holders, attorney or accountant in connection with such Shelf Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; provided that any Holder or representative thereof requesting or receiving such information shall agree to be bound by reasonable confidentiality agreements and procedures with respect thereto;
(viii) if reasonably requested by any Holders in connection with such exchange or sale, include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein that is required by the federal securities laws to be so included, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment;
(ix) upon request, furnish to each Shelf Holder in connection with such registration or sale, without charge, at least one copy of the Shelf Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);
(x) upon request, deliver to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; provided that any such copies shall only be provided to (x) Shelf Holders and (y) Broker-Dealers in order to permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy its prospectus delivery requirement; the Company and the Guarantors hereby consent to the use (in accordance with and as required by law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;
(xi) in connection with an underwritten offering pursuant to a Shelf Registration Statement, upon the reasonable request of the Majority Holders, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Shelf Registration Statement contemplated by this Agreement. In such connection, the Company and the Guarantors shall:
(A) upon the reasonable request of the Majority Holders, furnish (or in the case of paragraphs (2) and (3), use all commercially reasonable efforts to cause to be furnished), upon the consummation of such underwritten offering:
(1) to the Holders participating in such underwritten offering, a certificate, dated such date, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Guarantor, confirming, as of the date thereof, such matters as the Majority Holders may reasonably request;
(2) to the Holders participating in such underwritten offering, an opinion, dated the date of consummation of such underwritten offering, of counsel for the Company and the Guarantors in customary form and covering such matters customarily provided to selling securityholders in an underwritten offering and such other matters as the Majority Holders may reasonably request; and
(3) to each underwriter of such underwritten offering, a customary comfort letter, dated the date of consummation of such underwritten offering, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings; and
(B) deliver such other documents and certificates as may be reasonably requested by the Majority Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Company and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities pursuant to a Shelf Registration Statement, cooperate with the Shelf Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the Shelf Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) if certificated securities are permitted pursuant to the Indenture, in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use all commercially reasonable efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed global certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use all commercially efforts to comply with all applicable rules and regulations of the Commission, including Rule 158 under the Act; and
(xvii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use all commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner.
(d) Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof or of any applicable
Suspension Period (in each case, a "SUSPENSION NOTICE"), such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until (i) such Holder has received copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(iv)
hereof, or (ii) such Holder is advised in writing by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Holder's possession which have been replaced
by the Company with more recently dated Prospectuses or (ii) deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the Suspension
Notice. The time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by a number of days equal to the number of days in the period from and including
the date of delivery of the Suspension Notice to the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Guarantors and of one counsel for the Shelf Holders as a group, as selected by the Majority Holders; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including any expenses of any special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Initial Purchasers for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins LLP, unless another firm shall be chosen by the Initial Purchasers.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a preliminary prospectus or Prospectus or any supplement thereto, in the light of the circumstances under which they were made) not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. In addition, the Company shall not be liable to any Holder under the indemnity agreement in this Section 8(a) to the extent, but only to the extent, that (1) such loss, claim, damage or liability arises out of, or is based upon, an untrue statement of a material fact or an omission of a material fact contained in any
preliminary prospectus, which untrue statement or omission was completely
corrected in the Prospectus and (2) the Company sustains the burden of proving
that such Holder sold Transfer Restricted Securities to the person alleging such
loss, claim, damage or liability without sending or giving a copy of the
Prospectus within the time required by the Act and (3) the Company had
previously furnished sufficient quantities of the Prospectus to such Holder in
such amounts and within such period of time as required under this Agreement and
(4) such Holder failed to deliver the Prospectus, if required by law to have so
delivered it, and such delivery would have been a complete defense against the
person asserting such loss, claim, damage or liability.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in Section 8(a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all reasonable fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if (a) the settlement is entered into more than twenty Business Days after the indemnifying party received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party), (b) such indemnifying party received notice of the terms of such settlement at least 10 Business Days prior to such settlement being entered into and (c) such indemnifying party did not reimburse such indemnified party in accordance with such request prior to the date of such settlement; provided that an indemnifying party shall not be liable for any such settlement effected without its consent if such indemnifying party, prior to the date of such settlement, (1) reimburses such indemnified party in accordance with such request for the amount of such fees and expenses of counsel as the indemnifying party believes in good faith to be reasonable, and (2) provides written notice to the indemnified party that the indemnifying party disputes in good faith the reasonableness of the unpaid balance of such fees and expenses. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Guarantor, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A under the Act, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person that would require such securities to be included in any Registration Statement filed hereunder. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case of
Section 5 hereof and this Section 10(c)(i), the Company has obtained the written
consent of Holders of all outstanding Transfer Restricted Securities and (ii) in
the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Additional Guarantors. The Company shall cause any of its Restricted Subsidiaries (as defined in the Indenture) that becomes, prior to the consummation of the Exchange Offer, a Guarantor in accordance with the terms and provisions of the Indenture to become a party to this Agreement as a Guarantor. It is understood and agreed that if, prior to the Exchange Offer, a Guarantor that has executed this Agreement is no longer a Guarantor under the Indenture pursuant to and in accordance with the provisions of the Indenture, such Guarantor shall no longer be a Guarantor for purposes of this Agreement.
(e) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and
(ii) if to the Company or the Guarantors:
General Nutrition Centers, Inc. 300 Sixth Avenue Pittsburgh, Pennsylvania 15222 Telecopier No.: (412) 338-8900 Attention: Chief Legal Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 S. Grand Avenue, Suite 3400 Los Angeles, California 90071 Telecopier No.: (213) 687-5600 Attention: Jeffrey Cohen
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof.
(h) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, INCLUDING WITHOUT LIMITATION
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(k) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
GENERAL NUTRITION CENTERS, INC.
By: /s/ Andrew Jhawar
----------------------------------------
Name: Andrew Jhawar
Title: Vice President
|
GENERAL NUTRITION INVESTMENT COMPANY
GENERAL NUTRITION SALES CORPORATION
GNC (CANADA) HOLDING COMPANY
GENERAL NUTRITION DISTRIBUTION COMPANY
GENERAL NUTRITION GOVERNMENT SERVICES, INC.
GENERAL NUTRITION INTERNATIONAL, INC.
GN INVESTMENT, INC.
GNC, LIMITED
GNC US DELAWARE, INC.
GENERAL NUTRITION SYSTEMS, INC.
INFORMED NUTRITION, INC.
GENERAL NUTRITION CORPORATION
GENERAL NUTRITION DISTRIBUTION, L.P.
GENERAL NUTRITION, INCORPORATED
GNC FRANCHISING, INC.
NUTRICIA MANUFACTURING USA, INC.
GENERAL NUTRITION COMPANIES, INC.
By: /s/ James M. Sander
----------------------------------------
Name: James M. Sander
Title: Senior Vice President, Law,
Chief Legal Officer
|
GNC REGISTRATION RIGHTS AGREEMENT
LEHMAN BROTHERS INC.
By: /s/ Michael Goldberg
-----------------------------------------
Name: Michael Goldberg
Title: Managing Director
|
J.P. MORGAN SECURITIES INC.
By: /s/ Graham Conway
-----------------------------------------
Name: Graham Conway
Title: Vice President
|
UBS SECURITIES LLC
By: /s/ Amy Fujimoto
-----------------------------------------
Name: Amy Fujimoto
Title: Director
By: /s/ Mel Tang
-----------------------------------------
Name: Mel Tang.
Title: Associate Director
|
GNC REGISTRATION RIGHTS AGREEMENT
SCHEDULE I
General Nutrition Investment Company
General Nutrition Sales Corporation
GNC (Canada) Holding Company
General Nutrition Distribution Company
General Nutrition Government Services, Inc.
General Nutrition International, Inc.
GN Investment, Inc.
GNC, Limited
GNC US Delaware, Inc.
General Nutrition Systems, Inc.
Informed Nutrition, Inc.
General Nutrition Corporation
General Nutrition Distribution, L.P.
General Nutrition, Incorporated
GNC Franchising, Inc.
Nutricia Manufacturing USA, Inc.
General Nutrition Companies, Inc.
Exhibit 5.1
April 15, 2004
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Re: General Nutrition Centers, Inc. and the other entities listed on Schedule I - Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and each of the entities listed on Schedule I hereto (collectively, the "Guarantors") in connection with the public offering of $215,000,000 aggregate principal amount of the Company's 8 1/2% Senior Subordinated Notes due 2010 (the "Exchange Notes"). The Indenture, dated as of December 5, 2003 (the "Original Indenture"), among the Company, the Guarantors and U.S. Bank National Association, as Trustee (the "Trustee"), as supplemented by the Supplemental Indenture, dated as of April 6, 2004, by and among the Company, GNC Franchising, LLC, the guarantors party thereto and the Trustee (together with the Original Indenture, the "Indenture"), provides for the guarantee of the Exchange Notes by the Guarantors (the "Guarantees") to the extent set forth in the Indenture. The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 8 1/2% Senior Subordinated Notes due 2010 of the Company (the "Original Notes") under the Indenture, as contemplated by the Registration Rights Agreement, dated as of December 5, 2003 (the "Registration Rights Agreement"), by and among the Company, the Guarantors, Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Securities Act").
In rendering the opinions set forth herein, we have examined and relied on originals or copies of: (i) the registration statement on Form S-4 of the
Company and the Guarantors relating to the Exchange Notes and the Guarantees as
filed with the Securities and Exchange Commission (the "Commission") (such
registration statement being hereinafter referred to as the "Registration
Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii)
an executed copy of the Indenture; (iv) the form of the Exchange Notes; (v) the
Certificate of Incorporation of the Company, as amended by the Certificate of
Amendment to the Certificate of Incorporation of the Company and as certified by
the Secretary of State of the State of Delaware; (vi) the Certificate of
Incorporation of General Nutrition International, Inc. ("GNI") (f/k/a GND
Investment Company), as amended by the Certificate of Amendment to the
Certificate of Incorporation of GNI and as certified by the Secretary of State
of the State of Delaware; (vii) the Certificate of Incorporation of General
Nutrition Systems, Inc. ("Systems"), as certified by the Secretary of State of
the State of Delaware; (viii) the Certificate of Incorporation of General
Nutrition Distribution Company ("GNDC"), as amended by the Certificates of
Amendment to the Certificate of Incorporation of GNDC, dated as of January 13,
1993 and February 1, 1998 and as certified by the Secretary of State of the
State of Delaware; (ix) the Certificate of Incorporation of GNC, Limited
("Limited"), as certified by the Secretary of State of the State of Delaware;
(x) the Certificate of Incorporation of GNC (Canada) Holding Company ("Canada"),
as certified by the Secretary of State of the State of Delaware; (xi) the
Certificate of Incorporation of General Nutrition Government Services, Inc.
("Government Services"), as amended by the Certificates of Amendment to the
Certificate of Incorporation of Government Services, dated as of January 13,
1993, October 29, 2003 and November 7, 2003 and as certified by the Secretary of
State of the State of Delaware; (xii) the Certificate of Incorporation of GN
Investment, Inc. ("Investment"), as certified by the Secretary of State of the
State of Delaware; (xiii) the Certificate of Incorporation of GNC US Delaware,
Inc. ("Delaware"), as certified by the Secretary of State of the State of
Delaware; (xiv) the Certificate of Incorporation of General Nutrition Companies,
Inc. ("Companies," together with GNI, Systems, GNDC, Limited, Canada, Government
Services, Investment and Delaware, the "Delaware Guarantors"), as certified by
the Secretary of State of the State of Delaware; (xv) the By-laws of the
Company, as currently in effect; (xvi) the By-laws of each of the Delaware
Guarantors, as currently in effect; (xvii) resolutions of the Board of Directors
of the Company, dated as of November 25, 2003, and the Board of Directors of
each of the Delaware Guarantors, dated as of December 5, 2003, relating to the
Exchange Offer, the issuance of the Original Notes and the Exchange Notes, the
Indenture and related matters; and (xviii) the form
of the Exchange Notes and Guarantees. We also have examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and the Guarantors and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Company, the Guarantors and others, and such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies. In making our examination of executed documents, we have assumed that the parties thereto, other than the Company and the Delaware Guarantors, had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents and, except as set forth below, the validity and binding effect thereof on such parties. We have also assumed that each of the Guarantors, other than the Delaware Guarantors, has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization and that each such Guarantor has complied with all aspects of applicable laws of jurisdictions other than the United States of America and the State of New York in connection with the Indenture and the transactions contemplated by the Registration Statement. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company, the Guarantors and others and of public officials.
Our opinions set forth herein are limited to Delaware corporate law and the laws of the State of New York that, in our experience, are applicable to securities of the type covered by the Registration Statement and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing being referred to as "Opined on Law"). We do not express any opinion with respect to the law of any jurisdiction other than Opined on Law or as to the effect of any such non-opined-on law on the opinions herein stated.
Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that when the Exchange Notes and the Guarantees have been duly executed and authenticated in accordance with the terms of the Indenture and have been delivered upon consummation of the Exchange Offer against receipt of Original Notes surrendered in exchange therefor in accordance with the terms of the Exchange
Offer, the Exchange Notes and the Guarantees will constitute valid and binding obligations of the Company and each of the Guarantors, respectively, enforceable against the Company and each of the Guarantors, respectively, in accordance with their terms, except to the extent that enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (2) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
In rendering the opinion set forth above, we have assumed that the execution and delivery by the Company and each of the Guarantors of the Indenture, the Exchange Notes and the Guarantees, as applicable, and the performance by the Company and each of the Guarantors of their obligations thereunder do not and will not violate, conflict with or constitute a default under any agreement or instrument to which the Company or any of the Guarantors or their properties is subject, except that we do not make this assumption for those agreements and instruments which have been identified to us by the Company and the Guarantors as being material to them and which are listed as exhibits to the Registration Statement.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption "Legal Matters" in the prospectus included in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP |
SCHEDULE I
GUARANTORS
General Nutrition Companies, Inc., a Delaware corporation
General Nutrition Corporation, a Pennsylvania corporation
General Nutrition Distribution Company, a Delaware corporation
General Nutrition Distribution, L.P., a Pennsylvania limited partnership
General Nutrition Government Services, Inc., a Delaware corporation
General Nutrition, Incorporated, a Pennsylvania corporation
General Nutrition Investment Company, an Arizona corporation
General Nutrition International, Inc., a Delaware corporation
General Nutrition Sales Corporation, an Arizona corporation
General Nutrition Systems, Inc., a Delaware corporation
GNC (Canada) Holding Company, a Delaware corporation
GNC Franchising, LLC (f/k/a GNC Franchising, Inc.), a Pennsylvania limited
liability company
GNC, Limited, a Delaware corporation
GNC US Delaware, Inc., a Delaware corporation
GN Investment, Inc., a Delaware corporation
Informed Nutrition, Inc., a Florida corporation
Nutra Manufacturing, Inc. (f/k/a Nutricia Manufacturing USA, Inc.), a South
Carolina corporation
EXHIBIT 5.2
April 15, 2004
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Re: General Nutrition Centers, Inc. and the other entities listed on Schedule I -Registration Statement on Form S-4 (File No.
Ladies and Gentlemen:
We are special counsel to General Nutrition Corporation, a
Pennsylvania corporation ("GNC"), General Nutrition, Incorporated, a
Pennsylvania corporation ("GNI"), General Nutrition Distribution, L.P., a
Pennsylvania limited partnership ("GND") and GNC Franchising, LLC, a
Pennsylvania limited liability company (f/k/a GNC Franchising, Inc.)
("Franchising", together with GNC, GNI and GND, the "Pennsylvania Guarantors")
in connection with the public offering of $215,000,000 aggregate principal
amount of General Nutrition Centers, Inc.'s (the "Issuer") 8-1/2% Senior
Subordinated Notes due 2010 (the "Exchange Notes"). The Indenture, dated as of
December 5, 2003 (the "Original Indenture"), among the Issuer, the guarantors
party thereto (the "Guarantors") and U.S. Bank National Association, as Trustee
(the "Trustee"), as supplemented by the Supplemental Indenture, dated as of
April 6, 2004, by and among the Issuer, Franchising, the other Guarantors and
the Trustee (together with the Original Indenture, the "Indenture") provides for
the guarantee of the Exchange Notes by the Guarantors (the "Guarantees") to the
extent set forth in the Indenture. The Exchange Notes are to be issued pursuant
to an exchange offer (the "Exchange Offer") in exchange for a like principal
amount of the issued and outstanding 8-1/2% Senior Subordinated Notes due 2010
of the Issuer (the "Original Notes") under the Indenture, as contemplated by the
Registration Rights Agreement, dated as of December 5, 2003 (the "Registration
Rights Agreement"), by and among the Issuer, the Guarantors, Lehman Brothers
Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Securities Act").
In rendering the opinions set forth herein, we have examined and relied on originals or copies of: (i) the registration statement on Form S-4 of the Issuer and the Guarantors relating to the Exchange Notes and the Guarantees as filed with the Securities and Exchange Commission (the "Commission") (such registration statement being hereinafter referred to as the "Registration Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii) an executed copy of the Indenture including the terms and the provisions of the Guarantees; (iv)
certificates dated on or about the date hereof furnished by the Pennsylvania
Guarantors; (v) the Articles of Incorporation of GNC dated as of October 29,
2003; (vi) the Articles of Incorporation of GNI dated as of October 29, 2003;
(vii) the Certificate of Limited Partnership of GND dated as of January 29,
1998; (viii) the Certificate of Organization of Franchising dated as of December
31, 2003; (ix) the By-Laws of each of GNC and GNI; (x) the Limited Partnership
Agreement of GND dated January 27, 1998; (xi) the Limited Liability Company
Operating Agreement of Franchising, dated as of January 1, 2004; (xii)
resolutions of the Board of Directors of GNC, GNI and GNC Franchising, Inc.
(n/k/a GNC Franchising, LLC) and the general partner of GND, each dated as of
December 5, 2003 and the limited partner of GND dated as of the date hereof; and
(xiii) the form of the Guarantees. We also have examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Pennsylvania Guarantors and such agreements, certificates, receipts and
statements (oral and written) of public officials, certificates of officers or
other representatives of the Pennsylvania Guarantors and others, and such other
documents as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Pennsylvania Guarantors and others and of public officials.
Our opinions set forth herein are limited to the laws of the Commonwealth of Pennsylvania. We do not express any opinion with respect to the law of any jurisdiction other than Pennsylvania or as to the effect of any such non-opined-on law on the opinions herein stated. We express no opinion as to the effect of any federal or state securities laws, rules or regulations.
The opinion set forth in paragraph 1 below with respect to the present subsistence of the Pennsylvania Guarantors is based solely upon certificates issued by the Secretary of State of the Commonwealth of Pennsylvania for GNC, GNI and GND dated December 4, 2003, December 8, 2003, and December 4, 2003 respectively and oral statements as to subsistence of GNC, GNI, GND and Franchising made by public officials in the office of the Secretary of State of the Commonwealth of Pennsylvania.
Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that:
1. Each of the Pennsylvania Guarantors has been duly incorporated or formed, as the case may be, and is presently subsisting under the laws of the Commonwealth of Pennsylvania.
2. Each of the Pennsylvania Guarantors has the corporate, limited partnership or limited liability company power and authority, as applicable, to execute and deliver the Guarantee and to consummate the transactions contemplated thereby.
3. The execution, delivery and performance of the Guarantee by each of the Pennsylvania Guarantors has been duly authorized. When the Guarantee (in the form examined by us) has been signed by an incumbent officer authorized to do so in the respective authorizing resolution of each Pennsylvania Guarantor, the Guarantee executed by each of the Pennsylvania Guarantors will be duly executed. When each Pennsylvania Guarantor has voluntarily transferred possession of its Guarantee to the Trustee, the Guarantee of each such Pennsylvania Guarantor will have been duly delivered.
The opinions set forth herein are given as of the date hereof and we assume no obligation to update or supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or any change in the law or the facts that may occur after the date hereof. The opinions set forth herein are limited to those expressly stated and no other opinion or opinions should be implied.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Skadden, Arps, Slate, Meagher & Flom LLP is entitled to rely on this opinion in connection with the opinion being delivered by such firm in connection with the Exchange Offer.
Very truly yours,
/s/ Pepper Hamilton LLP |
.
.
.
Exhibit 5.3
[LEWIS AND ROCA LOGO]
Phoenix Office Tucson Office Las Vegas Office
40 North Central Avenue One South Church Avenue 3993 Howard Hughes Parkway
Phoenix, Arizona 85004-4429 Suite 700 Suite 600
Telephone (602) 262-5311 Tucson, Arizona 85701-1620 Las Vegas, Nevada 89109
Facsimile (602) 262-6747 Telephone (520) 622-2090 Telephone (702) 949-8200
Facsimile (520) 622-3088 Facsimile (702) 949-8398
Scott DeWald
Direct Dial: (602) 262-6333
Direct Fax: (602) 734-3745
E-Mail: SDewald@lrlaw.com
Admitted in Arizona
------------------------------------------------------------------------------------------------------
Our File Number 43460-00001
|
April 15, 2004
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
RE: GENERAL NUTRITION CENTERS, INC. AND THE OTHER ENTITIES LISTED
ON SCHEDULE I - REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We are special counsel to General Nutrition Investment Company, an Arizona corporation ("GNIC") and General Nutrition Sales Corporation, an Arizona corporation ("GNSC"), in connection with the public offering of $215,000,000 aggregate principal amount of General Nutrition Centers, Inc.'s (the "Issuer") 8-1/2% Senior Subordinated Notes due 2010 (the "Exchange Notes"). The Indenture, dated as of December 5, 2003 (the "Original Indenture"), among the Issuer, the guarantors party thereto (the "Guarantors") and U.S. Bank National Association, as Trustee (the "Trustee"), as supplemented by the Supplemental Indenture, dated as of April 6, 2004, by and among the Issuer, GNC Franchising, LLC, the Guarantors and the Trustee (together with the Original Indenture, the "Indenture"), provides for the guarantee of the Exchange Notes by the Guarantors (the "Guarantees") to the extent set forth in the Indenture. The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 8-1/2% Senior Subordinated Notes due 2010 of the Issuer (the "Original Notes") under the Indenture, as contemplated by the Registration Rights Agreement, dated as of December 5, 2003 (the "Registration Rights Agreement"), by and among the Issuer, the Guarantors, Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Securities Act").
In rendering the opinions set forth herein, we have examined and relied on originals or copies of: (i) the registration statement on Form S-4 of the Issuer and the Guarantors relating to the Exchange Notes and the Guarantees as filed with the Securities and Exchange Commission (the "Commission") (such registration statement being hereinafter referred to as the "Registration Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii) an
(LEWIS AND ROCA LOGO) APRIL 15,2004 Page 2
executed copy of the Indenture including the terms and the provisions of the Guarantees; (iv) the Articles of Incorporation of GNIC, as certified by the Corporation Commission of the State of Arizona; (v) the Articles of Incorporation of GNSC, as certified by the Corporation Commission of the State of Arizona; (vi) the By-Laws of GNIC and GNSC, as currently in effect; (vii) resolutions of the Board of Directors of GNIC and GNSC, relating to the Exchange Offer, Indenture, the issuance of the Guarantees by GNIC and GNSC and related matters; and (viii) the form of the Guarantees. We also have examined originals or copies, certified or otherwise identified to our satisfaction, of such records of GNIC and GNSC and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of GNIC and GNSC and others, and such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of GNIC and GNSC and others and of public officials.
OUR OPINIONS SET FORTH HEREIN ARE LIMITED TO THE LAWS OF THE STATE OF ARIZONA THAT, IN OUR EXPERIENCE, ARE APPLICABLE TO SECURITIES OF THE TYPE COVERED BY THE REGISTRATION STATEMENT AND, TO THE EXTENT THAT JUDICIAL OR REGULATORY ORDERS OR DECREES OR CONSENTS, APPROVALS, LICENSES, AUTHORIZATIONS, VALIDATIONS, FILINGS, RECORDINGS OR REGISTRATIONS WITH GOVERNMENTAL AUTHORITIES ARE RELEVANT, TO THOSE REQUIRED UNDER SUCH LAWS (ALL OF THE FOREGOING BEING REFERRED TO AS "OPINED ON LAW"). WE DO NOT EXPRESS ANY OPINION WITH RESPECT TO THE LAW OF ANY JURISDICTION OTHER THAN OPINED ON LAW OR AS TO THE EFFECT OF ANY SUCH NON-OPINED-ON LAW ON THE OPINIONS HEREIN STATED. THE OPINION SET FORTH IN PARAGRAPH 1 BELOW WITH RESPECT TO THE VALID EXISTENCE AND GOOD STANDING OF GNIC AND GNSC IS BASED SOLELY UPON CERTIFICATES ISSUED BY THE ARIZONA CORPORATION COMMISSION OF THE STATE OF ARIZONA OR OTHER APPROPRIATE OFFICIAL OF THE RESPECTIVE JURISDICTIONS OF ORGANIZATION.
Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that:
1. Each of GNIC and GNSC has been duly incorporated, and is validly existing in good standing under the laws of the State of Arizona.
2. Each of GNIC and GNSC has the corporate power and authority to execute and deliver the Guarantee and to consummate the transactions contemplated thereby.
3. The execution, delivery and performance of the Guarantee by each of GNIC and GNSC has been duly authorized. When the Guarantee (in the form examined by us) has been
(LEWIS AND ROCA LOGO) APRIL 15,2004 Page 3
signed by an incumbent officer authorized to do so in the respective authorizing resolution of each of GNIC and GNSC, the Guarantee executed by each of GNIC and GNSC will be duly executed. When each of GNIC and GNSC has voluntarily transferred possession of its Guarantee to the Trustee, the Guarantee of each of GNIC and GNSC will have been duly delivered.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Skadden, Arps, Slate, Meagher & Flom LLP is entitled to rely on this opinion in connection with the opinion being delivered by such firm in connection with the Exchange Offer.
Very truly yours,
/s/ LEWIS AND ROCA LLP |
Exhibit 5.4
[LETTERHEAD OF HOLLAND & KNIGHT LLP]
April 15, 2004
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Re: General Nutrition Centers, Inc. and the other entities listed on Schedule I - Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special Florida counsel to Informed Nutrition, Inc., a Florida corporation ("INI"), in connection with the public offering of $215,000,000 aggregate principal amount of 8-1/2% Senior Subordinated Notes due 2010 (the "Exchange Notes") of General Nutrition Centers, Inc. (the "Issuer"). The Indenture, dated as of December 5, 2003 (the "Original Indenture"), among the Issuer, the guarantors party thereto (the "Guarantors") and U.S. Bank National Association, as Trustee (the "Trustee"), as supplemented by the Supplemental Indenture, dated as of April 6, 2004, by and among the Issuer, GNC Franchising, LLC, the guarantors party thereto and the Trustee (together with the Original Indenture, the "Indenture"), provides for the guarantee of the Exchange Notes by the Guarantors (the "Guarantee") to the extent set forth in the Indenture. The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 8-1/2% Senior Subordinated Notes due 2010 of the Issuer (the "Original Notes") under the Indenture, as contemplated by the Registration Rights Agreement, dated as of December 5, 2003 (the "Registration Rights Agreement"), by and among the Issuer, the Guarantors, Lehman Brothers Inc., J.P. Morgan Securities Inc., and UBS Securities LLC.
General Nutrition Centers, Inc.
April 15, 2004
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Securities Act").
In rendering the opinions set forth herein, we have examined and relied on copies of the following:
(i) the registration statement on Form S-4 of the Issuer and the Guarantors relating to the Exchange Notes and the Guarantee, as filed with the Securities and Exchange Commission (the "Commission") (such registration statement being hereinafter referred to as the "Registration Statement");
(ii) the Registration Rights Agreement;
(iii) the Indenture, including the terms and the provisions of the Guarantee and the form of the Notation of Guarantee attached to the Indenture as Exhibit E, to be executed by INI (the "INI Guaranty");
(iv) the Articles of Incorporation of INI, as certified by the Florida Secretary of State;
(v) the Bylaws of INI, as certified by the Secretary of INI;
(vi) resolutions of the Board of Directors of INI, relating to the Exchange Offer, the Indenture, the issuance of the Guarantee by INI, and related matters; and
(vii) a certificate of the Secretary of State of Florida, dated April 12, 2004, attesting to the corporate existence and status of INI (the "Good Standing Certificate").
As to questions of fact material to the opinions expressed herein, we have relied upon certificates of officers of INI and of public officials. We have made no further inquiry or investigation within INI or in any court, agency, governmental office, or elsewhere with respect to the matters addressed herein. We have reviewed such questions of law as we have deemed relevant or proper as a basis for our opinions expressed herein.
In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified, or photostatic copies, and the authenticity of the originals of such copies.
General Nutrition Centers, Inc.
April 15, 2004
We are members of The Florida Bar, and we express no opinion herein concerning the laws of any jurisdiction other than the laws of Florida. Our opinions set forth herein are limited to the laws of Florida that, in our experience, are applicable transactions of the kind evidenced by the INI Guaranty. We express no opinion concerning (a) the validity or enforceability of the INI Guaranty or any other agreements, (b) the Registration Statement, the Registration Rights Agreement, or any other agreements or instruments referenced therein or executed in connection therewith (except the INI Guaranty), or (c) any federal or state securities laws. The opinion set forth in paragraph 1 below is based solely upon the Good Standing Certificate.
Based upon the foregoing and subject to the limitations, qualifications, exceptions, and assumptions set forth herein, we are of the opinion that:
1. INI is a corporation organized and existing under the laws of Florida, and its status in Florida is "active."
2. INI has the corporate power and authority to execute and deliver the INI Guaranty and to perform its obligations thereunder.
3. The execution, delivery and performance of the INI Guaranty by INI have been duly authorized. When the INI Guaranty has been signed by an incumbent officer authorized (as confirmed by the Board Resolution) to do so, the INI Guaranty will be duly executed by INI. When INI has voluntarily and irrevocably transferred possession of the executed INI Guaranty to the Trustee, with the intention of creating a binding obligation on the part of INI, the INI Guaranty will have been duly delivered to the Trustee.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Skadden, Arps, Slate, Meagher & Flom LLP is entitled to rely on this opinion in connection with the opinion being delivered by such firm in connection with the Exchange Offer.
General Nutrition Centers, Inc.
April 15, 2004
This opinion is based on the applicable law and facts as of the date hereof, and we do not undertake to advise you of any changes that might hereafter arise or be brought to our attention. Our opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein.
Very truly yours,
/s/ HOLLAND & KNIGHT LLP |
EXHIBIT 5.5
[LETTERHEAD OF KENNEDY COVINGTON LOBDELL & HICKMAN, L.L.P.]
April 15, 2004
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Re: General Nutrition Centers, Inc. and the other entities listed on Schedule I - Registration Statement on Form S-4
Ladies and Gentlemen:
We are special South Carolina counsel to Nutra Manufacturing, Inc. (f/k/a/ Nutricia Manufacturing USA, Inc.), a South Carolina corporation ("Nutra"), in connection with the public offering of $215,000,000 aggregate principal amount of General Nutrition Centers' (the "Issuer") 8-1/2% Senior Subordinated Notes due 2010 (the "Exchange Notes"). The Indenture, dated as of December 5, 2003 (the "Original Indenture"), among the Issuer, the guarantors party thereto (the "Guarantors") and U.S. Bank National Association, as Trustee (the "Trustee"), as supplemented by the Supplemental Indenture, dated as of April 6, 2004, by and among the Issuer, GNC Franchising, LLC, the guarantors party thereto and the Trustee (together with the Original Indenture, the "Indenture"), provides for the guarantee of the Exchange Notes by the Guarantors (the "Guarantees") to the extent set forth in the Indenture. The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 8-1/2% Senior Subordinated Notes due 2010 of the Issuer (the "Original Notes") under the Indenture, as contemplated by the Registration Rights Agreement, dated as of December 5, 2003 (the "Registration Rights Agreement"), by and among the Issuer, the Guarantors, Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Securities Act").
In rendering the opinions set forth herein, we have examined and relied on originals or copies of: (i) the registration statement on Form S-4 of the Issuer and the Guarantors relating to the Exchange Notes and the Guarantees as filed with the Securities and Exchange Commission (the "Commission") (such registration statement being hereinafter referred to as the "Registration Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii) an executed copy of the Indenture including the terms and the provisions of the Guarantees; (iv) the Secretary's Certificate of Nutra dated as of the date hereof, along with all attachments thereto (the "Secretary's Certificate"); (v) the Articles of Incorporation of Nutra, as amended by the Amendment to the Articles of
General Nutrition Centers, Inc.
April 15, 2004
Incorporation filed March 25, 2004, and as certified by the Secretary of State of the State of South Carolina on that same date (the "Articles"); (vi) the Bylaws of Nutra, (the "Bylaws"); (vii) resolutions of the Board of Directors of Nutra, relating to the Exchange Offer, Indenture, the issuance of the Guarantee by Nutra and related matters; (viii) the Certificate of Existence of Nutra issued by the Secretary of State of South Carolina on April 12, 2004 (the "Certificate of Existence");and (ix) the form of the Guarantee. The documents referred to in items (i), (ii), (iii) and (ix) are hereinafter referred to as the "Transaction Documents."
We have also examined such other agreements, instruments and documents as we have deemed necessary or appropriate for purposes of the opinions expressed below. With respect to certain factual matters material to our opinions, we have, to the extent that such facts were not independently established by us, relied upon representations of Nutra and on certificates or comparable documents of officers and representatives of Nutra and public officials. We have examined the corporate actions taken by Nutra in connection with the authorization, execution and delivery of the Transaction Documents, and have made such other inquiry of officers and directors of Nutra as we have deemed necessary and appropriate. In addition, we have made such investigation of law and fact, as we have deemed necessary or advisable in connection with this opinion.
In rendering the opinions expressed below, we have assumed the genuineness of all signatures; that all natural persons who have executed and who are executing all documents submitted to us were or are, at the time of execution, legally competent to do so; that all documents submitted to us as originals are authentic; and that all documents submitted to us as copies conform to the original documents, which are authentic.
Our opinions set forth herein are limited to the laws of the State of South Carolina (all of the foregoing being referred to as "Opined on Law"). We do not express any opinion with respect to the law of any jurisdiction other than Opined on Law or as to the effect of any such non-opined-on law on the opinions herein stated. The opinion set forth in paragraph 1 below with respect to the existence and good standing of Nutra is based solely upon the Secretary's Certificate and the Certificate of Existence issued by the Secretary of State of the State of South Carolina.
Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that:
1. Nutra has been duly incorporated, and is in existence under the laws of the State of South Carolina.
2. Nutra has the corporate power to execute and deliver the Guarantee and to consummate the transactions contemplated thereby under the Articles, the Bylaws and the South Carolina Business Corporation Act.
General Nutrition Centers, Inc.
April 15, 2004
3. The execution, delivery and performance of the Guarantee by Nutra has been duly authorized. When the Guarantee (in the form examined by us) has been signed by the incumbent officer authorized to do so in the respective authorizing resolution of Nutra, the Guarantee executed by Nutra will be duly executed. When Nutra, by and through the incumbent officer authorized to do so in the respective authorizing resolution of Nutra, has voluntarily transferred possession of its Guarantee to the Trustee, the Guarantee by Nutra will have been duly delivered.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Skadden, Arps, Slate, Meagher & Flom LLP is entitled to rely on this opinion in connection with the opinion being delivered by such firm in connection with the Exchange Offer.
Very truly yours,
/s/ Kennedy Covington Lobdell & Hickman, L.L.P.
3
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EXHIBIT 10.1
Execution Copy
$360,000,000
CREDIT AGREEMENT
AMONG
GENERAL NUTRITION CENTERS HOLDING COMPANY,
GENERAL NUTRITION CENTERS, INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
LEHMAN BROTHERS INC. AND
J.P. MORGAN SECURITIES INC.,
AS JOINT LEAD ARRANGERS
JPMORGAN CHASE BANK,
AS SYNDICATION AGENT
AND
LEHMAN COMMERCIAL PAPER INC.,
AS ADMINISTRATIVE AGENT
DATED AS OF DECEMBER 5, 2003
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS............................................................................... 1
1.1 Defined Terms........................................................................ 1
1.2 Other Definitional Provisions........................................................ 27
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS........................................................... 28
2.1 Term Loan Commitments................................................................ 28
2.2 Procedure for Term Loan Borrowing.................................................... 28
2.3 Repayment of Term Loans.............................................................. 28
2.4 Revolving Credit Commitments......................................................... 29
2.5 Procedure for Revolving Credit Borrowing............................................. 29
2.6 Swing Line Commitment................................................................ 30
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans.................... 30
2.8 Repayment of Loans; Evidence of Debt................................................. 32
2.9 Commitment Fees, etc................................................................. 33
2.10 Termination or Reduction of Revolving Credit Commitments............................. 33
2.11 Optional Prepayments................................................................. 33
2.12 Mandatory Prepayments and Commitment Reductions...................................... 34
2.13 Conversion and Continuation Options.................................................. 35
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches............................ 36
2.15 Interest Rates and Payment Dates..................................................... 36
2.16 Computation of Interest and Fees..................................................... 36
2.17 Inability to Determine Interest Rate................................................. 37
2.18 Pro Rata Treatment and Payments...................................................... 37
2.19 Requirements of Law.................................................................. 39
2.20 Taxes................................................................................ 40
2.21 Indemnity............................................................................ 43
2.22 Illegality........................................................................... 43
2.23 Change of Lending Office............................................................. 43
2.24 Replacement of Lenders............................................................... 43
SECTION 3. LETTERS OF CREDIT......................................................................... 44
3.1 L/C Commitment....................................................................... 44
3.2 Procedure for Issuance of Letter of Credit........................................... 45
3.3 Fees and Other Charges............................................................... 45
3.4 L/C Participations................................................................... 45
3.5 Reimbursement Obligation of the Borrower............................................. 46
3.6 Obligations Absolute................................................................. 47
3.7 Letter of Credit Payments............................................................ 47
3.8 Applications......................................................................... 48
SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................ 48
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4.1 Financial Condition.................................................................. 48
4.2 No Change............................................................................ 49
4.3 Corporate Existence; Compliance with Law............................................. 49
4.4 Corporate Power; Authorization; Enforceable Obligations.............................. 49
4.5 No Legal Bar......................................................................... 49
4.6 No Material Litigation............................................................... 50
4.7 No Default........................................................................... 50
4.8 Ownership of Property; Liens......................................................... 50
4.9 Intellectual Property................................................................ 50
4.10 Taxes................................................................................ 50
4.11 Federal Regulations.................................................................. 51
4.12 Labor Matters........................................................................ 51
4.13 ERISA................................................................................ 51
4.14 Investment Company Act; Other Regulations............................................ 52
4.15 Subsidiaries......................................................................... 52
4.16 Use of Proceeds...................................................................... 52
4.17 Environmental Matters................................................................ 52
4.18 Accuracy of Information, etc......................................................... 53
4.19 Security Documents................................................................... 54
4.20 Solvency............................................................................. 55
4.21 Senior Indebtedness.................................................................. 55
4.22 Regulation H......................................................................... 55
4.23 Insurance............................................................................ 55
4.24 Lease Payments....................................................................... 55
4.25 Acquisition Documentation............................................................ 56
4.26 Real Estate.......................................................................... 56
4.27 New GNC.............................................................................. 56
SECTION 5. CONDITIONS PRECEDENT...................................................................... 56
5.1 Conditions to Initial Extension of Credit............................................ 56
5.2 Conditions to Each Extension of Credit............................................... 62
SECTION 6. AFFIRMATIVE COVENANTS..................................................................... 62
6.1 Financial Statements................................................................. 62
6.2 Certificates; Other Information...................................................... 63
6.3 Payment of Obligations............................................................... 65
6.4 Conduct of Business and Maintenance of Existence, etc................................ 65
6.5 Maintenance of Property; Insurance................................................... 65
6.6 Inspection of Property; Books and Records; Discussions............................... 65
6.7 Notices.............................................................................. 66
6.8 Environmental Laws................................................................... 66
6.9 Interest Rate Protection............................................................. 67
6.10 Additional Collateral, etc........................................................... 67
6.11 Use of Proceeds...................................................................... 69
6.12 ERISA Documents...................................................................... 69
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6.13 Further Assurances................................................................... 69
6.14 Post Closing Obligations............................................................. 70
SECTION 7. NEGATIVE COVENANTS........................................................................ 70
7.1 Financial Condition Covenants........................................................ 70
7.2 Limitation on Indebtedness........................................................... 71
7.3 Limitation on Liens.................................................................. 73
7.4 Limitation on Fundamental Changes.................................................... 75
7.5 Limitation on Disposition of Property................................................ 75
7.6 Limitation on Restricted Payments.................................................... 76
7.7 Limitation on Capital Expenditures................................................... 78
7.8 Limitation on Investments............................................................ 78
7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc........... 80
7.10 Limitation on Transactions with Affiliates........................................... 81
7.11 Limitation on Sales and Leasebacks................................................... 81
7.12 Limitation on Changes in Fiscal Periods.............................................. 81
7.13 Limitation on Negative Pledge Clauses................................................ 82
7.14 Limitation on Restrictions on Subsidiary Distributions............................... 82
7.15 Limitation on Lines of Business...................................................... 82
7.16 Limitation on Amendments to Acquisition Documentation................................ 83
7.17 Limitation on Activities of Holdings................................................. 83
7.18 Limitation on Hedge Agreements....................................................... 83
7.19 Limitation on Activities of New GNC.................................................. 83
7.20 Limitation on Indebtedness of Gustine Associates..................................... 83
SECTION 8. EVENTS OF DEFAULT......................................................................... 84
SECTION 9. THE AGENTS; THE ARRANGERS................................................................. 87
9.1 Appointment.......................................................................... 87
9.2 Delegation of Duties................................................................. 87
9.3 Exculpatory Provisions............................................................... 88
9.4 Reliance by Agents................................................................... 88
9.5 Notice of Default.................................................................... 88
9.6 Non-Reliance on Arrangers, Agents and Other Lenders.................................. 89
9.7 Indemnification...................................................................... 89
9.8 Arrangers and Agents in their Individual Capacities.................................. 90
9.9 Successor Agents..................................................................... 90
9.10 Authorization to Release Liens and Guarantees........................................ 90
9.11 The Arrangers; the Syndication Agent................................................. 90
9.12 Withholding Tax...................................................................... 91
SECTION 10. MISCELLANEOUS............................................................................ 91
10.1 Amendments and Waivers............................................................... 91
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10.2 Notices.............................................................................. 93 10.3 No Waiver; Cumulative Remedies....................................................... 95 10.4 Survival of Representations and Warranties........................................... 95 10.5 Payment of Expenses.................................................................. 95 10.6 Successors and Assigns; Participations and Assignments............................... 97 10.7 Adjustments; Set-off................................................................. 100 10.8 Counterparts......................................................................... 100 10.9 Severability......................................................................... 101 10.10 Integration.......................................................................... 101 10.11 GOVERNING LAW........................................................................ 101 10.12 Submission To Jurisdiction; Waivers.................................................. 101 10.13 Acknowledgments...................................................................... 102 10.14 Confidentiality...................................................................... 102 10.15 Release of Collateral and Guarantee Obligations...................................... 103 10.16 Accounting Changes................................................................... 104 10.17 Delivery of Lender Addenda........................................................... 104 10.18 WAIVERS OF JURY TRIAL................................................................ 104 10.19 Subordination of Intercompany Indebtedness........................................... 104 |
ANNEXES:
A Pricing Grid
SCHEDULES:
1.1 Mortgaged Property
4.3 Subsidiaries Not In Good Standing
4.4 Consents, Authorizations, Filings and Notices
4.15(a) Subsidiaries
4.15(b) Agreements Related to Capital Stock
4.16 Store Closings
4.19(a)-1 UCC Filing Jurisdictions
4.19(a)-2 UCC Financing Statements to be Terminated
4.19(b) Mortgage Filing Jurisdictions
4.25 Acquisition Documentation
4.26 Owned Property; Manufacturing and Distribution Facilities
6.14 Post-Closing Obligations
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.10 Affiliate Transactions
7.13(h) Existing Negative Pledge Clauses
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
F-2 Form of Legal Opinion of James Sander
F-3 Form of Legal Opinion of Kennedy, Covington, Lobdell & Hickman, LLP
F-4 Form of Legal Opinion of Lewis & Roca LLP
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
G-3 Form of Swing Line Note
H Form of Exemption Certificate
I Form of Lender Addendum
J Form of Borrowing Notice
v
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CREDIT AGREEMENT, dated as of December 5, 2003, among GENERAL
|
NUTRITION CENTERS HOLDING COMPANY, a Delaware corporation ("Holdings"), GENERAL NUTRITION CENTERS, INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC. and J.P. MORGAN SECURITIES INC., as joint lead arrangers and joint bookrunners (in such capacities, the "Arrangers"), JPMORGAN CHASE BANK, as syndication agent (in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, Numico USA, Inc. a Delaware corporation ("Numico"), owns all of the sole membership interest in GNC US Newco 1 LLC, a Delaware limited liability company ("Newco 1 LLC"), and a partnership interest in GNC Newco DGP 1, a Delaware general partnership ("Newco DGP1") of which Newco 1 LLC is the only other partner;
WHEREAS, Newco DGP1 owns all of the sole membership interest in GNC US Newco 2 LLC, a Delaware limited liability company ("Newco 2 LLC"), and a partnership interest in GNC Newco DGP2, a Delaware general partnership ("Newco DGP2") of which Newco 2 LLC is the only other partner;
WHEREAS, Newco DGP2 is the sole owner of General Nutrition Companies, Inc., ("New GNC") a newly formed Delaware corporation which holds all of the former assets of GNC (as defined below);
WHEREAS, pursuant to the Acquisition Agreement (as defined below), the Borrower will acquire all of the Interests (as defined in the Acquisition Agreement) of Newco 1 LLC and Newco DGP1 and upon such acquisition it is anticipated that Newco 1 LLC, Newco DGP1, Newco 2 LLC, Newco DGP2 and New GNC will immediately be merged with and into the Borrower, a direct Wholly Owned Subsidiary of Holdings and newly formed Delaware corporation, with the Borrower as the surviving corporation (the "Mergers");
WHEREAS, the Borrower has requested that the Lenders make credit facilities available to the Borrower in order to finance the foregoing transactions and for the other purposes set forth herein; and
WHEREAS, the Lenders are willing to make such credit facilities available upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"Acquisition": as defined in Section 5.1.
"Acquisition Agreement": the Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and the Borrower, as amended as of December 4, 2003, as the same may be further amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement.
"Acquisition Documentation": collectively, the Acquisition Agreement and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith, in each case, as amended, supplemented, replaced or otherwise modified from time to time.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": as defined in the preamble hereto.
"Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
"Agents": the collective reference to the Syndication Agent and the Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans and (ii) the amount of such Lender's Revolving Credit Commitment then in effect or, if the Revolving Credit Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the sum of the Aggregate Exposures of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented, replaced or otherwise modified from time to time.
"Applicable Margin": for each Type of Loan under each Facility, the rate per annum set forth opposite such Facility under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
--------- ----------
Revolving Credit Facilities 2.00% 3.00%
(including Swing Line Loans)
Tranche B Term Loan Facility 2.00% 3.00%
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provided, that on and after the first Adjustment Date occurring after the completion of two full fiscal quarters of the Borrower after the Closing Date, the (a) Applicable Margins with respect to Revolving Credit Loans and Swing Line Loans will be determined pursuant to the Pricing Grid and (b) the Applicable Margin with respect to the Tranche B Term Loans shall be adjusted to 2.75% with respect to Eurodollar Loans and 1.75% with respect to Base Rate Loans (i) on such Adjustment Date and (ii) on any subsequent Adjustment Date, in each case, if the financial statements relating to such Adjustment Date demonstrate that the Consolidated Leverage Ratio is less than 3.00 to 1.00, with such adjustment to become effective on the date on which the relevant financial statements are delivered to the Lenders pursuant to Section 6.1 and to remain in effect until the next adjustment.
"Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit.
"Arrangers": as defined in the preamble hereto.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by clause
(a), (b), (c), (d), (h) or (l) of Section 7.5) which yields gross proceeds to
Holdings, the Borrower or any of its Subsidiaries (valued at the initial
principal amount thereof in the case of non-cash proceeds consisting of notes or
other debt securities and valued at fair market value in the case of other
non-cash proceeds) in excess of $750,000.
"Assignee": as defined in Section 10.6(c).
"Assignment and Acceptance": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Cash": (a) cash amounts available to the Borrower for Restricted Payments under Section 7.6(d) (to the extent not so used), (b) the Net Cash Proceeds of Excluded Equity and (c) the Net Cash Proceeds of any other issuance of Capital Stock not required to be applied to the prepayment of Loans and/or the permanent reduction of the Revolving Credit Commitment pursuant to Section 2.12(a).
"Available Revolving Credit Commitment": with respect to any
Revolving Credit Lender at any time, an amount equal to the excess, if any, of
(a) such Lender's Revolving Credit Commitment then in effect over (b) such
Lender's Revolving Extensions of Credit then outstanding; provided, that in
calculating any Lender's Revolving Extensions of Credit for the purpose of
determining such Lender's Available Revolving Credit Commitment pursuant to
Section 2.9(a), the aggregate principal amount of Swing Line Loans then
outstanding shall be deemed to be zero.
"Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the prime lending rate as set forth on the British Banking Association Telerate Page 5 (or such other comparable page as may, in the opinion of the Administrative Agent, replace such page for the purpose of displaying such rate), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually available. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans for which the applicable rate of interest is based upon the Base Rate.
"Benefited Lender": as defined in Section 10.7.
"Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Borrowing Notice": with respect to any request for borrowing of Loans hereunder, a notice from the Borrower, substantially in the form of, and containing the information prescribed by, Exhibit J, delivered to the Administrative Agent.
"Business Day": (a) for all purposes other than as covered by
clause (b) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close and
(b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (a) and which is also a day for trading by and
between banks in Dollar deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are required to be capitalized under GAAP on a balance sheet of such Person it being understood that Capital Expenditures do not include amounts expended to purchase assets constituting an on-going business, including, without limitation, investments that constitute Permitted Acquisitions.
"Capital Lease Obligations": with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP;
and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) United States dollars; (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality of the United States government
(provided that the full faith and credit of the United States is pledged in
support of those securities) having maturities of not more than one year from
the date of acquisition; (c) certificates of deposit and eurodollar time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case, with any Lender or with any domestic commercial bank
having capital and surplus in excess of $500,000,000 and a Thomson Bank Watch
Rating of "B" or better; (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (b) and
(c) above entered into with any financial institution meeting the qualifications
specified in clause (c) above; (e) commercial paper having one of the two
highest ratings obtainable from Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Rating Services ("S&P") and, in each case, maturing within one
year after the date of acquisition; and (f) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds described in
clauses (a) through (e) of this definition.
"Change of Control": the occurrence of any of the following events: (a) prior to an initial public offering with respect to Holdings, the Permitted Investors shall cease to beneficially own (as defined in Rules 13(d)3 and 13(d)5 under the Exchange Act) securities having a majority of the ordinary voting power for the election of directors of Holdings measured by voting power rather than number of shares (determined on a fully diluted basis but not giving effect to contingent voting rights which have not vested); (b) the Permitted Investors shall cease to beneficially own (as defined in Rules 13(d)3 and 13(d)(5) under the Exchange Act) shares of common stock of Holdings (i) prior to an initial public offering with respect to Holdings, equal to at least 50% of the aggregate number of shares of common stock of Holdings determined on a fully diluted basis (counting all outstanding shares and giving effect to all issuances and transfers that would result from the exercise of any and all outstanding options, warrants, conversions, privileges and other rights relating to the issuance or transfer of any Holdings common stock, whether or not such rights are conditional) and (ii) at any time after an initial public offering with respect to Holdings, equal to at least 30% of the Capital Stock of Holdings entitled to vote in the election of directors of Holdings measured by voting power rather than number of shares; (c) at any time after an initial public offering with respect to Holdings, any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (excluding from any determination of the amount of Capital Stock beneficially owned by such "person" or "group", where such person or group includes a person that is not a Permitted Investor, any Capital Stock beneficially owned by Permitted Investors), other than any "person" or "group" comprised solely of Permitted Investors, shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the "beneficial owner" (as
defined in Rules 13(d) 3 and 13(d) 5 under the Exchange Act), directly or indirectly, of more than the lesser of (i) 35% of the Capital Stock of Holdings entitled to vote in the election of directors of Holdings, measured by voting power rather than the number of shares and (ii) the amount of Capital Stock of Holdings entitled to vote in the election of directors of Holdings, measured by voting power rather than number of shares then beneficially owned (as defined in Rules 13(d)3 and 13(d)5 under the Exchange Act) by the Permitted Investors; (d) the board of directors of Holdings shall cease to consist of a majority of Continuing Directors; (e) Holdings shall cease to own and control, of record and beneficially, directly, 100% of each class of outstanding Capital Stock of the Borrower free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement); or (f) a Specified Change of Control.
"Closing Date": the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied or waived.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Collateral": all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.
"Commitment": with respect to any Lender, the sum of the Tranche B Term Loan Commitment and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": 1/2 of 1% per annum.
"Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible Officer, substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information Memorandum dated November 2003 and furnished to the initial Lenders in connection with the syndication of the Facilities.
"Consolidated Current Assets": of any Person at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date.
"Consolidated Current Liabilities": of any Person at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date, but excluding, with respect to the Borrower, (a) the current portion of any Funded Debt of the Borrower and its Subsidiaries and (b), without duplication of clause (a) above, all Indebtedness consisting of Revolving Credit Loans or Swing Line Loans, to the extent otherwise included therein.
"Consolidated EBITDA": of any Person for any period,
Consolidated Net Income of such Person and its Subsidiaries for such period
plus, without duplication and to the extent reflected as a charge in the
statement of such Consolidated Net Income for such period, the sum of (a) income
tax expense, (b) Consolidated Interest Expense and non-cash interest expense of
such Person and its Subsidiaries, interest expense of Income Restricted
Subsidiaries, interest expense with respect to Senior Subordinated Notes that
have been defeased or called for redemption, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness, including, in the case of the Borrower,
the Loans, Letters of Credit and Senior Subordinated Notes (including, the
exchange thereof pursuant to the Registration Rights Agreement (including
professional fees and expenses)), (c) depreciation and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring expenses or
losses (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business), (f) any fees or expenses
paid in connection with the Acquisition, in an amount not to exceed $28,000,000,
(g) any other non-cash charges (including any writedown of goodwill pursuant to
SFAS No. 142 and accrued but unpaid management fees), (h) severance costs for
Michael K. Meyers, (i) payments under Schedule 2.17(f)(i)-(v) of the Acquisition
Agreement that are required to be reimbursed by Numico, (j) fees and expenses
payable in connection with the issuance of the Preferred Stock or the resale,
following the Closing Date, to third party investors of the Preferred Stock
issued to the Initial Investors on or about the Closing Date and (k) legal and
accounting costs related to the calculation of, and resolution of disputes
relating to, purchase price adjustments under the Acquisition Agreement and
minus, to the extent included in the statement of such Consolidated Net Income
for such period, the sum of (a) interest income on cash and Cash Equivalents and
other similar securities (except to the extent deducted in determining
Consolidated Interest Expense), (b) any extraordinary, unusual or non-recurring
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, gains on
the sales of assets outside of the ordinary course of business), (c) any other
non-cash income (other than amounts accrued in the ordinary course of business
consistent under accrual-based revenue recognition procedures in accordance with
GAAP), all as determined on a consolidated basis, and (d) reimbursement payments
received from Numico in respect of payments under Schedule 2.17(f)(i)-(v) of the
Acquisition Agreement that have been or are required to be made by the Borrower;
provided that the Consolidated EBITDA of the Borrower and its Subsidiaries for
the fiscal quarter ending June 30, 2003 shall be conclusively deemed equal to
$41,300,000 and Consolidated EBITDA for the fiscal quarter ending September 30,
2003 shall be conclusively deemed equal to $45,400,000; provided further that,
for purposes of calculating Consolidated EBITDA of the Borrower and its
Subsidiaries for any period, (i) the Consolidated EBITDA of any Person or
business segment acquired by the Borrower or its Subsidiaries during such period
shall be included on a pro forma basis for such period (assuming for purposes of
the calculation of Consolidated EBITDA the consummation of such acquisition and
the incurrence, assumption or repayment of any Indebtedness in connection
therewith occurred on the first day of such period) if the consolidated balance
sheet of such acquired Person or business segment as at the end of the period
preceding the acquisition of such Person or business segment and the related
consolidated statements of income and stockholders' equity and of cash flows for
the period in respect of which Consolidated EBITDA is to be calculated (x)
have been previously provided to the Administrative Agent and the Lenders and
(y) either (1) have been reported on without a qualification arising out of the
scope of the audit by independent certified public accountants of nationally
recognized standing or (2) have been found reasonably acceptable by the
Administrative Agent and (ii) the Consolidated EBITDA of any Person or business
segment Disposed of by the Borrower or its Subsidiaries during such period shall
be excluded for such period (assuming for purposes of the calculation of
Consolidated EBITDA the consummation of such Disposition and the repayment,
incurrence or assumption of any Indebtedness in connection therewith occurred on
the first day of such period).
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period minus the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such period on account of Capital Expenditures (provided that for the fiscal quarters ending March 31, 2004, June 30, 2004 and September 30, 2004, for purposes of this definition, amounts actually paid in cash on account of Capital Expenditures in respect of the periods of four consecutive fiscal quarters ending on the last day of each such fiscal quarter, shall be deemed equal to amounts actually paid in cash during the first full fiscal quarter commencing after the Closing Date, and, in the case of the latter two such determinations, each previous full fiscal quarter commencing after the Closing Date, multiplied by 4, 2, and 4/3, respectively) to (b) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without duplication) of (a) Consolidated Interest Expense of the Borrower and its Subsidiaries for such period, (b) provision for cash income taxes made by the Borrower or any of its Subsidiaries on a consolidated basis in respect of such period, excluding up to $10,000,000 in payments made in respect of the election under Section 338(h)(10) of the Code (and any corresponding election under state, local, and foreign income tax laws) as set forth in the Acquisition Agreement and (c) scheduled amortization payments (but excluding prepayments) made during such period on account of principal of Indebtedness of the Borrower or any of its Subsidiaries, other than Non-Recourse Indebtedness of any Income Restricted Subsidiary (including scheduled principal amortization payments (but excluding prepayments) in respect of the Term Loans); provided that, for the fiscal quarters ending March 31, 2004, June 30, 2004 and September 30, 2004, for purposes of this definition (i) provision for cash income taxes made in respect of the periods of four consecutive fiscal quarters ending on the last day of each such fiscal quarters, shall be deemed equal to the provision for cash income taxes made in the first full fiscal quarter commencing after the Closing Date, and, in the case of the latter two such determinations, each previous full fiscal quarter commencing after the Closing Date, multiplied by 4, 2 and 4/3, respectively, and (ii) scheduled amortization payments on account of principal of Indebtedness during such periods shall be deemed equal to the scheduled amortization payments of principal of Indebtedness for the first full fiscal quarter commencing after the Closing Date, and, in the case of the latter two such determinations, each previous full fiscal quarter commencing after the Closing Date, multiplied by 4, 2, and 4/3, respectively.
"Consolidated Interest Expense": of any Person for any period, total cash interest expense (including that attributable to Capital Lease Obligations) net of interest income on cash, Cash Equivalents and other similar securities of such Person and its Subsidiaries for such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries, other than Non-Recourse
Indebtedness of any Income Restricted Subsidiary (including, without limitation, all commissions, discounts and other fees and charges owed by such Person with respect to letters of credit and bankers' acceptance financing and net costs of such Person under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP), minus, to the extent included in such interest expense, amortization or write-off of financing costs and minus interest expense with respect to any Senior Subordinated Notes that have been defeased or called for redemption to the extent and from the date that sufficient funds for such defeasance or redemption have been set aside for such purpose; provided that for the fiscal quarters ending March 31, 2004, June 30, 2004 and September 30, 2004, for purposes of this definition, Consolidated Interest Expense for the periods of four consecutive fiscal quarters ending on the last day of such fiscal quarter shall be deemed equal to Consolidated Interest Expense for such fiscal quarter, and, in the case of the latter two such determinations, each previous full fiscal quarter commencing after the Closing Date, multiplied by 4, 2 and 4/3, respectively.
"Consolidated Leverage Ratio": as at the last day of any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for such period.
"Consolidated Net Income": of any Person for any period, the
consolidated net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided,
that in calculating Consolidated Net Income of the Borrower and its consolidated
Subsidiaries for any period, there shall be excluded (a) the income (or deficit)
of any Person accrued prior to the date it becomes a Subsidiary of the Borrower
or is merged into or consolidated with the Borrower or any of its Subsidiaries,
(b) the income (or deficit) of any Person (other than a Subsidiary of the
Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar distributions,
(c) the undistributed earnings of any Subsidiary of the Borrower to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary, (d) any reduction in net income (determined on a pre-tax
basis) caused by the amount, if any, of (i) non-cash charges relating to the
exercise of options and (ii) non-cash losses (or minus non-cash gains) from
foreign currency translation, (e) any decrease in net income (determined on a
pre-tax basis) caused by the increase in the book value of assets as a result of
the Acquisition as reflected on the Borrower's balance sheet solely as a result
of the application of SFAS No. 141, (f) costs related to the closing of stores
in connection with the Acquisition as described in Section 4.16 and (g) costs
incurred by the Borrower in respect of the election made under Section
338(h)(10) of the Code (and any corresponding election under state, local, and
foreign income tax laws), as set forth in the Acquisition Agreement, in an
amount not to exceed $10,000,000; provided that for purposes of Section
7.6(d)(z), Consolidated Net Income may be determined in the manner set forth in
the Senior Subordinated Note Indenture as of the date hereof if the Borrower
provides the Lenders with a certificate reasonably satisfactory to the
Administrative Agent demonstrating such calculation of Consolidated Net Income
in reasonable detail; and provided further that the costs referred to in clauses
(f) and (g) shall be calculated without giving effect to any tax benefit
realized directly from such costs.
"Consolidated Secured Leverage Ratio": as at the last day of any period of four consecutive fiscal quarters, the ratio of (a) Consolidated Secured Total Debt on such day to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for such period.
"Consolidated Secured Total Debt": at any date, the sum of (i) the aggregate principal amount of all Term Loans then outstanding, (ii) the Total Revolving Extensions of Credit and (iii) any other secured Consolidated Total Debt.
"Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date that would be classified as a liability on the consolidated balance sheet of the Borrower, in accordance with GAAP, except Non-Recourse Debt of Income Restricted Subsidiaries and, if defeased pursuant to the terms of Article 8 of the Senior Subordinated Note Indenture or irrevocably called for redemption pursuant to the terms of Article 3 thereof, the Senior Subordinated Notes.
"Consolidated Working Capital": at any date, the difference of
(a) Consolidated Current Assets of the Borrower on such date less (b)
Consolidated Current Liabilities of the Borrower on such date.
"Continuing Directors": the directors of Holdings on the Closing Date, after giving effect to the Acquisition and the other transactions contemplated hereby, and each other director of Holdings, if, in each case, such other director's nomination for election to the board of directors of Holdings is recommended by at least 50% of the then Continuing Directors or such other director receives the vote of the Permitted Investors in his or her election by the shareholders of Holdings.
"Contractual Obligation": with respect to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound.
"Control Investment Affiliate": with respect to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
"Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Derivatives Counterparty": as defined in Section 7.9.
"Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof (excluding Liens); and the terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollars" and "$": lawful currency of the United States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States of America.
"ECF Percentage": with respect to any fiscal year of the Borrower, 75%; provided, that, (i) the ECF Percentage shall be 50% if the Consolidated Leverage Ratio as of the last day of such fiscal year is less than or equal to 3.00 to 1.00 and greater than 2.5 to 1.0 and (ii) the ECF Percentage shall be 25% if the Consolidated Leverage Ratio as of the last day of such fiscal year is less than or equal to 2.5 to 1.0.
"Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, enforceable guidelines, codes, decrees, or other legally enforceable requirements of any international authority, foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct for protection of the environment or of human health, or employee health and safety (insofar as it relates to environmental exposure), as has been, is now, or may at any time hereafter be, in effect.
"Environmental Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and other authorizations required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the British Banking Association Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the British Banking Association Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent.
"Eurodollar Loans": Loans for which the applicable rate of interest is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):
"Eurodollar Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net
Income of the Borrower and its Subsidiaries for such fiscal year, (ii) the
amount of all non-cash charges (including depreciation and amortization)
deducted in arriving at such Consolidated Net Income, (iii) the amount of the
net decrease, if any, in Consolidated Working Capital for such fiscal year and
(iv) the aggregate net amount of non-cash loss on the Disposition of Property by
the Borrower and its Subsidiaries during such fiscal year (other than sales of
inventory in the ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income minus (b) the sum, without duplication,
of (i) the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by the Borrower
and its Subsidiaries in cash during such fiscal year on account of Capital
Expenditures (minus the principal amount of Indebtedness (other than the Loans)
incurred in connection with such expenditures and minus the amount of any such
expenditures financed with the proceeds of any Reinvestment Deferred Amount or
Available Cash), (iii) the aggregate amount of all prepayments of Revolving
Credit Loans and Swing Line Loans during such fiscal year to the extent
accompanying permanent optional reductions of the Revolving Credit Commitments
and all optional prepayments of the Term Loans during such fiscal year, (iv) the
aggregate amount of all regularly scheduled principal payments of Funded Debt
(including, without limitation, the Term Loans) of the Borrower and its
Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (v) the amount of the net increase, if
any, in Consolidated Working Capital for such fiscal year, (vi) the aggregate
net amount of non-cash gain on the Disposition of Property by Holdings, the
Borrower and its Subsidiaries during such fiscal year (other than sales of
inventory in the ordinary course of business), to the extent included in
arriving at such Consolidated Net Income, (vii) cash payments made during such
period in satisfaction of non-current liabilities of the Borrower and its
Subsidiaries to the extent such amounts were included as non-cash charges and
added back in a previous period pursuant to clause (a)(ii) above, (viii) the
aggregate amount actually paid by the Borrower and its Subsidiaries in cash
during such fiscal year on account of Investments permitted by Sections 7.8(h)
and (i) (minus the principal amount of Indebtedness (other than the Loans) used
to finance such Investments and minus the amount of such Investments made with
the proceeds of any Reinvestment Deferred Amount or Available Cash), (ix) an
amount equal to the increase in Consolidated Net Income of the Borrower and its
Subsidiaries pursuant to the application of clauses (e), (f) and (g) of the
definition thereof, (x) the aggregate amount of all mandatory prepayments made
pursuant to subsection 2.12(b) with the proceeds of Asset Sales during such year
to the extent such proceeds are included in the calculation of such Consolidated
Net Income for such fiscal year, (xi) cash purchase price adjustments paid by
the Borrower (including costs incurred (and paid) in the
determination thereof) in accordance with the Acquisition Agreement to the
extent not previously deducted in arriving at such Consolidated Net Income,
(xii) to the extent resulting in a gain to Consolidated Net Income, amounts
received in settlement of pending anti-trust litigation which the Borrower has
paid to Numico pursuant to the terms of the Acquisition Agreement, (xiii) to the
extent resulting in a gain to Consolidated Net Income, any amounts received from
Numico with respect to payments under Schedule 2.17(f)(i)-(v) of the Acquisition
Agreement that have been paid by the Borrower and (xiv) to the extent paid by
the Borrower and not previously deducted in arriving at such Consolidated Net
Income, fees and expenses payable in connection with the issuance of the
Preferred Stock or the resale following the Closing Date of the Preferred Stock
issued to the Initial Investors on or about the Closing Date.
"Excess Cash Flow Application Date": as defined in Section 2.12(c).
"Exchange Act": the Securities Exchange Act of 1934, as amended.
"Excluded Debt": all Indebtedness permitted by (a) Section 7.2, except Section 7.2(i) and (b) to the extent the proceeds of such Indebtedness are used to consummate a Permitted Acquisition within 90 days of the incurrence thereof, Section 7.2(i).
"Excluded Equity": all Capital Stock (other than the Preferred
Stock) issued after the Closing Date (a) to the Initial Investors, (b) to
directors, officers or employees of Holdings, the Borrower or its Subsidiaries
(i) pursuant to any management stock option plan or (ii) in connection with the
exercise of options granted to such directors, officers or employees in the
ordinary course of business or (c) in a transaction not constituting a public
offering, so long as, in each case, if the net proceeds thereof are contributed
to the Borrower, such net proceeds are contributed as common equity capital to
the Borrower and used for general corporate purposes permitted by this
Agreement.
"Excluded Foreign Subsidiaries": any Foreign Subsidiary that is (or is treated for United States federal tax purposes as) either (i) a corporation or (ii) any entity owned directly or indirectly by another Foreign Subsidiary that is (or is treated as) a corporation.
"Facility": each of (a) the Tranche B Term Loan Commitments and the Tranche B Term Loans made thereunder (the "Tranche B Term Loan Facility") and (b) the Revolving Credit Commitments and the extensions of credit made thereunder (the "Revolving Credit Facility").
"Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary.
"FQ1", "FQ2", "FQ3", and "FQ4": when used with a numerical year designation, means the first, second, third or fourth fiscal quarters, respectively, of such fiscal year of the Borrower. (e.g., FQ1 2003 means the first fiscal quarter of the Borrower's 2003 fiscal year, which ends March 31, 2003).
"Funded Debt": with respect to any Person, all Indebtedness of such Person of the types described in clauses (a) through (e) of the definition of "Indebtedness" in this Section.
"Funding Office": the office specified from time to time by the Administrative Agent as its funding office by notice to the Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United States of America as in effect from time to time.
"GNC": General Nutrition Companies, Inc., a Delaware corporation, prior to the Restructuring.
"Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by Holdings, the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented, replaced or otherwise modified from time to time.
"Guarantee Obligation": with respect to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
"Guarantors": the collective reference to Holdings and the Subsidiary Guarantors.
"Gustine Associates": Gustine Sixth Avenue Associates, Ltd, a Pennsylvania limited partnership.
"Hedge Agreements": all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar arrangements entered into by Holdings, the Borrower or its Subsidiaries providing for protection against fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies.
"Immaterial Subsidiary": on any date of determination, (a) any Subsidiary with (i) total assets with a book value equal to or less than $2,000,000 or (ii) total revenue equal to or less than $2,000,000 and (b) any Subsidiary that if aggregated with all other Domestic Subsidiaries which are not Guarantors, as of the last day of the most recently completed fiscal quarter of the Borrower would have, either (i) total assets with a book value equal to or less than $10,000,000 of the Borrower and its Subsidiaries, on a consolidated basis or (ii) total revenue equal to or less than $10,000,000 of the Borrower and its Subsidiaries, on a consolidated basis, in each case as determined in accordance with GAAP, and with respect to revenue, for the immediately preceding twelve-month period for which financial statements are available.
"Income Restricted Subsidiary": any Subsidiary of the Borrower whose undistributed earnings are excluded from the calculation of Consolidated Net Income pursuant to clause (c) of the definition thereof.
"Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations or Synthetic Lease Obligation of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit, surety bonds (except unsecured and unmatured reimbursement obligations in respect of surety bonds obtained in the ordinary course of business to secure the performance of obligations that are not Indebtedness pursuant to another clause of this definition) or similar facilities, (g) the liquidation value of all redeemable preferred Capital Stock of such Person, to the extent mandatorily redeemable in cash on or prior to the date which is one year after the final maturity date of the Loans (other than in connection with change of control events and asset sales to the extent that the terms of such Capital Stock provide that such Person may not repurchase or redeem any such
Capital Stock in connection with such change of control or asset sale unless
such repurchase or redemption complies with the provisions of this Agreement),
(h) all Guarantee Obligations of such Person in respect of obligations of the
kind referred to in clauses (a) through (g) above; (i) all obligations of the
kind referred to in clauses (a) through (h) above secured by (or for which the
holder of such obligation has an existing right, contingent or otherwise, to be
secured by) any Lien on Property (including, without limitation, accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation and (j) for the purposes of
Section 8(e) only, all obligations of such Person in respect of Hedge
Agreements.
"Indemnified Liabilities": as defined in Section 10.5.
"Indemnitee": as defined in Section 10.5.
"Initial Investors": the collective reference to the Permitted Investors and any other investor identified to the Administrative Agent who beneficially owns (as defined in Rule 13(d)3 and 13(d)5 of the Exchange Act) the Capital Stock of Holdings on the Closing Date and each such Person's Control Investment Affiliates.
"Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, state, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, service-marks, technology, know-how and processes, recipes, formulas, trade secrets, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Loan (other than any Revolving Credit Loan that is a Base Rate Loan (unless all Revolving Credit Loans are being repaid in full and the Revolving Credit Commitments terminated) and any Swing Line Loan), the date of any repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six or, with the consent of all Lenders holding loans under the affected Facility, nine or twelve months thereafter, as selected by the Borrower in its Borrowing Notice or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or, with the consent of all Lenders holding loans under the affected Facility, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period that would otherwise extend beyond the Revolving Credit Termination Date (in the case of Revolving Credit Loans) or beyond the date final payment is due on the Tranche B Term Loans shall end on the Revolving Credit Termination Date or such due date, as applicable; and
(c) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period.
"Investments": as defined in Section 7.8.
"Issuing Lender": any Revolving Credit Lender from time to time designated by the Borrower as an Issuing Lender with the consent of such Revolving Credit Lender and the Administrative Agent.
"L/C Commitment": $50,000,000.
"L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters of
Credit that have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": with respect to any Letter of Credit, the collective reference to all the Revolving Credit Lenders other than the Issuing Lender that issued such Letter of Credit.
"Lender Addendum": with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit I, to be executed and delivered by such Lender on the Closing Date as provided in Section 10.17.
"Lenders": as defined in the preamble hereto.
"Letters of Credit": as defined in Section 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). For the avoidance of doubt, precautionary UCC financing statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries as lessees shall not constitute Liens on Property of the Borrower or such Subsidiary for purposes of the Loan Documents.
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the Applications and the Notes.
"Loan Parties": Holdings, the Borrower and each Subsidiary of the Borrower that is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or, in the case of the Revolving Credit Facility, prior to any termination of the Revolving Credit Commitments, the holders of more than 50% of the Total Revolving Credit Commitments).
"Majority Revolving Facility Lenders": the Majority Facility Lenders in respect of the Revolving Credit Facility.
"Management Agreement": the Management Services Agreement, dated as of December 5, 2003, among the Borrower, Holdings and the Sponsor, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement.
"Material Adverse Effect": a material adverse effect on (a) the Acquisition, (b) the condition (financial or otherwise), results of operations, assets or liabilities of Holdings, the Borrower and its Subsidiaries taken as a whole or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants, contaminants, radioactivity, and any other substances or forces of any kind, whether or not any such substance or force is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or subject to liability under any Environmental Law.
"Mortgaged Properties": the real properties and leasehold estates listed on Schedule 1.1, as to which the Administrative Agent for the benefit of the Secured Parties shall be
granted a Lien on the Closing Date pursuant to the Mortgages and such other real properties and leasehold estates as to which the Administrative Agent for the benefit of the Secured Parties shall be granted a Lien after the Closing Date pursuant to Section 6.10(b).
"Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Secured Parties, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded), as the same may be amended, supplemented, replaced or otherwise modified from time to time.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note (other than notes payable by franchisees in connection with a Disposition permitted by Section 7.5(e)(ii)) or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of reasonable and customary attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other reasonable and customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and, in connection with any Asset Sale, net of any reserve established in accordance with GAAP; provided that such reserved amounts shall be Net Cash Proceeds to the extent and at the time not required to be so reserved and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. The Net Cash Proceeds received in connection with any Asset Sale permitted by Section 7.5(e)(ii) shall be deemed to exclude scheduled amortization payments on any Investments permitted by Section 7.8(o) received as consideration for such Asset Sale.
"Non-Excluded Taxes": as defined in Section 2.20(a).
"Non-Recourse Indebtedness": Indebtedness incurred by a Subsidiary of the Borrower as to which (a) neither the Borrower nor any of its other Subsidiaries other than Specified Subsidiaries of the Subsidiary incurring such Indebtedness: (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly or indirectly liable as a guarantor or otherwise, or (iii) constitutes the lender; and (b) the lenders do not have any recourse to the stock or assets of the Borrower or any of its Subsidiaries other than the assets of such Subsidiary and the assets of any Specified Subsidiary thereof, in each case, which are permitted by the terms of this Agreement to be pledged to secure such Indebtedness.
"Non-Surviving Subsidiaries": collectively, Newco 1 LLC, Newco DGP1, Newco 2 LLC, Newco DGP2 and New GNC.
"Non-U.S. Lender": as defined in Section 2.20(d).
"Note": any promissory note evidencing any Loan.
"Numico": as defined in the recitals hereto.
"Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender or any Qualified Counterparty, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Arrangers, to the Agents or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the Borrower or any Subsidiary under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements.
"Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"Payment Office": the office specified from time to time by the Administrative Agent as its payment office by notice to the Borrower and the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permits": the collective reference to (i) Environmental Permits, and (ii) any and all other franchises, licenses, leases, permits, approvals, notifications, certifications, registrations, authorizations, exemptions, qualifications, easements, and rights of way.
"Permitted Acquisitions": as defined in Section 7.8(i).
"Permitted Investors": the collective reference to the Sponsor and its Control Investment Affiliates.
"Permitted Liens": the collective reference to (i) in the case of Collateral other than Pledged Capital Stock, Liens permitted by Section 7.3 and (ii) in the case of Collateral consisting of Pledged Capital Stock, non-consensual Liens permitted by Section 7.3 to the extent arising by operation of law.
"Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledged Capital Stock": as defined in the Guarantee and Collateral Agreement.
"Preferred Stock": the Cumulative Senior Exchangeable Preferred Stock of Holdings issued on terms reasonably acceptable to the Administrative Agent on or within 45 days of the Closing Date.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.
"Purchase Agreement": the Purchase Agreement, dated November 25, 2003, among General Nutrition Centers, Inc., Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC.
"Qualified Counterparty": with respect to any Specified Hedge Agreement, any counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or an affiliate of a Lender.
"Real Estate": as defined in Section 4.26.
"Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of Holdings, the Borrower or any of its Subsidiaries.
"Refunded Swing Line Loans": as defined in Section 2.7(b).
"Refunding Date": as defined in Section 2.7(c).
"Register": as defined in Section 10.6(d).
"Registration Rights Agreement": the Registration Rights Agreement, dated December 5, 2003, among the Borrower, Lehman Brothers Inc., J.P. Morgan Securities Inc., and UBS Securities LLC.
"Regulation H": Regulation H of the Board as in effect from time to time.
"Regulation U": Regulation U of the Board as in effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing Lender.
"Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate amount of Net Cash Proceeds received by Holdings, the Borrower or any of its Subsidiaries in connection therewith that are not applied to prepay the Term Loans or reduce the Revolving Credit Commitments pursuant to Section 2.12(b) as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Default or Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Wholly Owned Subsidiary Guarantor) intends and expects to use all or a specified portion of the amount of Net Cash Proceeds of an Asset Sale or Recovery Event to acquire assets useful in its or such Subsidiary's business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring one year after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire assets useful in the Borrower's business with all or any portion of the relevant Reinvestment Deferred Amount.
"Related Fund": with respect to any Lender, any fund that (x) invests in commercial loans and (y) is managed or advised by the same investment advisor as such Lender, by such Lender or an Affiliate of such Lender.
"Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. Section 4043.
"Required Lenders": at any time, the holders of more than 50%
of (a) until the Closing Date, the Commitments and (b) thereafter, the sum of
(i) the aggregate unpaid principal amount of the Term Loans then outstanding and
(ii) the Total Revolving Credit Commitments then in effect or, if the Revolving
Credit Commitments have been terminated, the Total Revolving Extensions of
Credit then outstanding.
"Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.
"Responsible Officer": as to any Person, the chief executive officer, president, chief financial officer or treasurer of such Person, but in any event, with respect to financial matters, the chief financial officer or treasurer of such Person. Unless otherwise qualified, all references to a "Responsible Officer" shall refer to a Responsible Officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
"Restructuring": the restructuring of GNC and its Subsidiaries prior to the consummation of the Acquisition, as contemplated by Section 4.05 of the disclosure schedules to the Acquisition Agreement.
"Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Credit Loans and participate in Swing Line Loans and Letters of Credit, in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Credit Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Total Revolving Credit Commitments is $75,000,000.
"Revolving Credit Commitment Period": the period from and including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Facility": as defined in the definition of
"Facility" in this Section 1.1.
"Revolving Credit Lender": each Lender that has a Revolving
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Credit Commitment or that is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Note": as defined in Section 2.8(e).
"Revolving Credit Percentage": as to any Revolving Credit Lender at any time, the percentage which such Lender's Revolving Credit Commitment then constitutes of the Total Revolving Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate amount of such Lender's Revolving Extensions of Credit then outstanding constitutes of the amount of the Total Revolving Extensions of Credit then outstanding).
"Revolving Credit Termination Date": December 5, 2008.
"Revolving Extensions of Credit": as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (b) such Lender's Revolving Credit Percentage of the L/C Obligations then outstanding and (c) such Lender's Revolving Credit Percentage of the aggregate principal amount of Swing Line Loans then outstanding.
"SEC": the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority).
"Secured Parties": as defined in the Guarantee and Collateral Agreement.
"Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages, any intellectual property security agreements or control agreements required to be delivered pursuant to the Guarantee and Collateral Agreement or any other Loan Document and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.
"Senior Subordinated Note Documentation": the Senior Subordinated Note Indenture, the Purchase Agreement and the Registration Rights Agreement, together with any other instruments and agreements entered into by the Borrower or its Subsidiaries in connection therewith, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement.
"Senior Subordinated Note Indenture": the Indenture entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes, together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with Section 7.9.
"Senior Subordinated Notes": the subordinated notes of the Borrower due 2010 issued from time to time pursuant to the Senior Subordinated Note Indenture.
"SFAS No. 141": Financing Accounting Statement No. 141 issued by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants.
"SFAS No. 142": Financial Accounting Statement No. 142 issued by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants.
"Single Employer Plan": any Plan that is covered by Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent": with respect to any Person, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, (d) such Person will be able to pay its debts as they mature and (e) such Person is not insolvent within the meaning of any applicable Requirements of Law. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control", or like event, as defined in the Senior Subordinated Note Indenture.
"Specified Hedge Agreement": any Hedge Agreement entered into by the Borrower or any Guarantor and any Qualified Counterparty.
"Specified Subsidiary": with respect to any Income Restricted Subsidiary, any Subsidiary thereof which is either wholly owned by such Income Restricted Subsidiary or if not so wholly owned, owned in part by a Person who is not a Subsidiary of the Borrower.
"Sponsor": Apollo Management V, L.P.
"Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. As of the Closing Date, the ownership structure of Gustine Associates is such that it would not be considered a Subsidiary of the Borrower under this definition.
"Subsidiary Guarantor": each Subsidiary of the Borrower existing on the Closing Date (other than any Excluded Foreign Subsidiary) and each Subsidiary of the Borrower created or acquired after the Closing Date other than an Excluded Foreign Subsidiary or an Immaterial
Subsidiary that has elected not to guarantee the Obligations and does not, directly or indirectly, guarantee or otherwise provide direct credit support for any Indebtedness of the Borrower.
"Swing Line Commitment": the obligation of the Swing Line Lender to make Swing Line Loans pursuant to Section 2.6 in an aggregate principal amount at any one time outstanding not to exceed $10,000,000.
"Swing Line Lender": Lehman Commercial Paper Inc., in its capacity as the lender of Swing Line Loans.
"Swing Line Loans": as defined in Section 2.6.
"Swing Line Note": as defined in Section 2.8(e).
"Swing Line Participation Amount": as defined in Section 2.7(c).
"Syndication Agent": as defined in the preamble hereto.
"Synthetic Lease Obligations": all monetary obligations of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment).
"Term Loan Facility": the Tranche B Term Loan Facility.
"Term Loan Lenders": the Tranche B Term Loan Lenders.
"Term Loans": the Tranche B Term Loans.
"Term Notes": as defined in Section 2.8(e).
"Total Revolving Credit Commitments": at any time, the aggregate amount of the Revolving Credit Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving Credit Lenders outstanding at such time.
"Tranche B Term Loan": as defined in Section 2.1.
"Tranche B Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Tranche B Term Loan Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Tranche B Term Loan Commitments is $285,000,000.
"Tranche B Term Loan Facility": as defined in the definition of "Facility" in this Section 1.1.
"Tranche B Term Loan Lender": each Lender that has a Tranche B Term Loan Commitment or is the holder of a Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Tranche B Term Loan Lender at any time, the percentage which such Lender's Tranche B Term Loan Commitment then constitutes of the aggregate Tranche B Term Loan Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Tranche B Term Loans then outstanding constitutes of the aggregate principal amount of the Tranche B Term Loans then outstanding).
"Transferee": as defined in Section 10.14.
"Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.
"Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Borrower.
"UCC": the Uniform Commercial Code, as in effect from time to time in any jurisdiction.
1.2 Other Definitional Provisions.(a) (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to Holdings, the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(e) All calculations of financial ratios set forth in
Section 7.1 and the calculation of the Consolidated Leverage Ratio for purposes
of determining the Applicable Margin shall be calculated to the same number of
decimal places as the relevant ratios are
expressed in and shall be rounded upward if the number in the decimal place immediately following the last calculated decimal place is five or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place and the calculation of the ratio is 5.126, the ratio will be rounded up to 5.13.
(f) The expressions "payment in full," "paid in full" and any other similar terms or phrases when used herein with respect to the Obligations shall mean the payment in full, in immediately available funds, of all of the Obligations (excluding Obligations in respect of any Specified Hedge Agreements and contingent reimbursement and indemnification obligations in each case that are not due and payable at or prior to the time the Commitments have expired or have been terminated, the Loans and Reimbursement Obligations have been paid in full and all Letters of Credit have been discharged or cash collateralized or backed with other letters of credit in accordance with Section 10.15(c)).
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions hereof the Tranche B Term Loan Lenders severally agree to make term loans (each, a "Tranche B Term Loan") to the Borrower on the Closing Date in an amount for each Tranche B Term Loan Lender not to exceed the amount of the Tranche B Term Loan Commitment of such Lender. The Term Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.13.
2.2 Procedure for Term Loan Borrowing. The Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Term Loan Lenders make the Term Loans on the Closing Date and specifying the amount to be borrowed. The Term Loans made on the Closing Date shall initially be Base Rate Loans, and no Term Loan may be converted into or continued as a Eurodollar Loan prior to the day which is 10 Business Days after the Closing Date or such shorter period as the Administrative Agent may agree to in writing. Upon receipt of such Borrowing Notice the Administrative Agent shall promptly notify each Term Loan Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Term Loan Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Term Loan or Term Loans to be made by such Lender. The Administrative Agent shall make available to the Borrower the aggregate of the amounts made available to the Administrative Agent by the Term Loan Lenders, in like funds as received by the Administrative Agent.
2.3 Repayment of Term Loans.
The Tranche B Term Loan of each Tranche B Term Loan Lender shall mature in 24 consecutive quarterly installments, commencing on March 31, 2004, each of which shall be in an amount equal to such Lender's Tranche B Term Loan Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount ----------- ---------------- March 31, 2004 $ 712,500 June 30, 2004 $ 712,500 September 30, 2004 $ 712,500 December 31, 2004 $ 712,500 March 31, 2005 $ 712,500 June 30, 2005 $ 712,500 September 30, 2005 $ 712,500 December 31, 2005 $ 712,500 March 31, 2006 $ 712,500 June 30, 2006 $ 712,500 September 30, 2006 $ 712,500 December 31, 2006 $ 712,500 March 31, 2007 $ 712,500 June 30, 2007 $ 712,500 September 30, 2007 $ 712,500 December 31, 2007 $ 712,500 March 31, 2008 $ 712,500 June 30, 2008 $ 712,500 September 30, 2008 $ 712,500 December 31, 2008 $ 712,500 March 31, 2009 $67,687,500 June 30, 2009 $67,687,500 September 30, 2009 $67,687,500 December 5, 2009 $67,687,500 |
2.4 Revolving Credit Commitments(a) . (a) Subject to the terms and conditions hereof, the Revolving Credit Lenders severally agree to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding for each Revolving Credit Lender which, when added to such Lender's Revolving Credit Percentage of the sum of (i) the L/C Obligations then outstanding and (ii) the aggregate principal amount of the Swing Line Loans then outstanding, does not exceed the amount of such Lender's Revolving Credit Commitment. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.5 and 2.13, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Revolving Credit Commitments on any Business Day during the Revolving Credit
Commitment Period, provided that the Borrower shall deliver to the
Administrative Agent an irrevocable Borrowing Notice (which Borrowing Notice
must be received by the Administrative Agent prior to 12:00 Noon, New York City
time, (a) three Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing
Date, in the case of Base Rate Loans). Any Revolving Credit Loans made on the
Closing Date shall initially be Base Rate Loans, and no Revolving Credit Loan
may be made as, converted into or continued as a Eurodollar Loan prior to the
day which is 10 Business Days after the Closing Date or such shorter period as
the Administrative Agent may agree to in writing. Each borrowing of Revolving
Credit Loans under the Revolving Credit Commitments shall be in an amount equal
to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple thereof
(or, if the then aggregate Available Revolving Credit Commitments are less than
$1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; provided, that
the Swing Line Lender may request, on behalf of the Borrower, borrowings of Base
Rate Loans under the Revolving Credit Commitments in other amounts pursuant to
Section 2.7. Upon receipt of any such Borrowing Notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender thereof.
Each Revolving Credit Lender will make its Revolving Credit Percentage of the
amount of each borrowing of Revolving Credit Loans available to the
Administrative Agent for the account of the Borrower at the Funding Office prior
to 12:00 Noon, New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent in like funds as received by the Administrative Agent.
2.6 Swing Line Commitment(a) . (a) Subject to the terms and
conditions hereof, the Swing Line Lender agrees that, during the Revolving
Credit Commitment Period, it will make available to the Borrower in the form of
swing line loans ("Swing Line Loans") a portion of the credit otherwise
available to the Borrower under the Revolving Credit Commitments; provided that
(i) the aggregate principal amount of Swing Line Loans outstanding at any time
shall not exceed the Swing Line Commitment then in effect (notwithstanding that
the Swing Line Loans outstanding at any time, when aggregated with the Swing
Line Lender's other outstanding Revolving Credit Loans hereunder, may exceed the
Swing Line Commitment then in effect or such Swing Line Lender's Revolving
Credit Commitment then in effect) and (ii) the Borrower shall not request, and
the Swing Line Lender shall not make, any Swing Line Loan if, after giving
effect to the making of such Swing Line Loan, the aggregate amount of the
Available Revolving Credit Commitments would be less than zero. During the
Revolving Credit Commitment Period, the Borrower may use the Swing Line
Commitment by borrowing, repaying and reborrowing, all in accordance with the
terms and conditions hereof. Swing Line Loans shall be Base Rate Loans only.
(b) The Borrower shall repay all outstanding Swing Line Loans on the Revolving Credit Termination Date.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing Line Loans(a) . (a) The Borrower may borrow under the Swing Line Commitment on any Business Day during the Revolving Credit Commitment Period, provided, the Borrower shall give the Swing Line Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swing Line Lender not later than 1:00 P.M., New York City time, on the
proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date. Each borrowing under the Swing Line Commitment shall be in an amount equal to $500,000 or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M., New York City time, on the Borrowing Date specified in the borrowing notice in respect of any Swing Line Loan, the Swing Line Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the amount of such Swing Line Loan. The Administrative Agent shall make the proceeds of such Swing Line Loan available to the Borrower on such Borrowing Date in like funds as received by the Administrative Agent.
(b) The Swing Line Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf), on one Business Day's notice given by the Swing Line Lender no later than 12:00 Noon, New York City time, request each Revolving Credit Lender to make, and each Revolving Credit Lender hereby agrees to make, a Revolving Credit Loan (which shall initially be a Base Rate Loan), in an amount equal to such Revolving Credit Lender's Revolving Credit Percentage of the aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date of such notice, to repay the Swing Line Lender. Each Revolving Credit Lender shall make the amount of such Revolving Credit Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Credit Loans shall be made immediately available by the Administrative Agent to the Swing Line Lender for application by the Swing Line Lender to the repayment of the Refunded Swing Line Loans. The Borrower irrevocably authorizes the Swing Line Lender to charge the Borrower's accounts with the Administrative Agent (up to the amount available in each such account) in order to immediately pay the amount of such Refunded Swing Line Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full such Refunded Swing Line Loans.
(c) If prior to the time a Revolving Credit Loan would
have otherwise been made pursuant to Section 2.7(b), one of the events described
in Section 8(f) shall have occurred and be continuing with respect to the
Borrower, or if for any other reason, as determined by the Swing Line Lender in
its sole discretion, Revolving Credit Loans may not be made as contemplated by
Section 2.7(b), each Revolving Credit Lender shall, on the date such Revolving
Credit Loan was to have been made pursuant to the notice referred to in Section
2.7(b) (the "Refunding Date"), purchase for cash an undivided participating
interest in the then outstanding Swing Line Loans by paying to the Swing Line
Lender an amount (the "Swing Line Participation Amount") equal to (i) such
Revolving Credit Lender's Revolving Credit Percentage times (ii) the sum of the
aggregate principal amount of Swing Line Loans then outstanding which were to
have been repaid with such Revolving Credit Loans.
(d) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit Lender such Lender's Swing Line Participation Amount, the Swing Line Lender receives any payment on account of the Swing Line Loans, the Swing Line Lender will distribute to such Lender its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect
such Lender's pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swing Line Loans then due); provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender will return to the Swing Line Lender any portion thereof previously distributed to it by the Swing Line Lender.
(e) Each Revolving Credit Lender's obligation to make the Loans referred to in Section 2.7(b) and to purchase participating interests pursuant to Section 2.7(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the Borrower may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Revolving Credit Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
2.8 Repayment of Loans; Evidence of Debt(a) . (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Revolving Credit Lender or Term Loan Lender, as the
case may be, (i) the then unpaid principal amount of each Revolving Credit Loan
of such Revolving Credit Lender on the Revolving Credit Termination Date (or on
such earlier date on which the Loans become due and payable pursuant to Section
8), (ii) the then unpaid principal amount of each Swing Line Loan of such Swing
Line Lender on the Revolving Credit Termination Date (or on such earlier date on
which the Loans become due and payable pursuant to Section 8) and (iii) the
principal amount of each Term Loan of such Term Loan Lender in installments
according to the amortization schedule set forth in Section 2.3 (or on such
earlier date on which the Loans become due and payable pursuant to Section 8).
The Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Loans from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth in
Section 2.15.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.8(b) shall, to the extent permitted by applicable law, be prima
facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will promptly execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans, Revolving Credit Loans or Swing Line Loans, as the case may be, of such Lender, substantially in the forms of Exhibit G-1, G-2 or G-3, respectively (a "Term Note", "Revolving Credit Note" or "Swing Line Note", respectively), with appropriate insertions as to date and principal amount; provided, that delivery of Notes shall not be a condition precedent to the occurrence of the Closing Date or the making of the Loans on the Closing Date.
2.9 Commitment Fees, etc(a) . (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Credit Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date, commencing on the first of such dates to occur after the date hereof.
(b) The Borrower agrees to pay to the Arrangers the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Arrangers.
(c) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates from time to time agreed to in writing by the Borrower and the Administrative Agent.
2.10 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitments; provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans and Swing Line Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Credit Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitments then in effect.
2.11 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (except as otherwise provided herein), upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurodollar Loans and at least one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of such
prepayment, whether such prepayment is of Term Loans or Revolving Credit Loans, and whether such prepayment is of Eurodollar Loans or Base Rate Loans; provided, that (i) if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.21 and (ii) no prior notice is required for the prepayment of Swing Line Loans. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swing Line Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof.
2.12 Mandatory Prepayments and Commitment Reductions(a) .
(a) Unless the Required Lenders shall otherwise agree, if (i) any Capital Stock
is issued (other than Excluded Equity and Capital Stock issued to any Loan Party
in the ordinary course of business), or (ii) Indebtedness is incurred, by
Holdings, the Borrower or any of its Subsidiaries (other than Excluded Debt),
then no later than one Business Day after the date of such issuance or
incurrence, an amount equal to, in the case of an issuance of Capital Stock, 50%
of the Net Cash Proceeds thereof or, in the case of the incurrence of
Indebtedness, 100% of the Net Cash Proceeds thereof, shall be applied to the
prepayment of the Term Loans (together with accrued interest thereon) and or the
permanent reduction of the Revolving Credit Commitments, in each case as set
forth in Section 2.12(d). The provisions of this Section do not constitute a
consent to the issuance of any equity securities by any entity whose equity
securities are pledged pursuant to the Guarantee and Collateral Agreement, or a
consent to the incurrence of any Indebtedness by Holdings, the Borrower or any
of its Subsidiaries.
(b) Unless the Required Lenders shall otherwise agree, if
on any date Holdings, the Borrower or any of its Subsidiaries shall receive Net
Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, no later than three Business Days
(or, if a Default or Event of Default has occurred and is continuing, one
Business Day) after the date of receipt by Holdings, the Borrower or any of its
Subsidiaries of such Net Cash Proceeds, an amount equal to the amount of such
Net Cash Proceeds shall be applied to the prepayment of the Term Loans (together
with accrued interest thereon) and/or the permanent reduction of the Revolving
Credit Commitments, as set forth in Section 2.12(d); provided that,
notwithstanding the foregoing, (i) an aggregate amount of Net Cash Proceeds of
Asset Sales not to exceed $20,000,000 in any fiscal year of the Borrower may be
excluded from the foregoing requirement pursuant to a Reinvestment Notice and
(ii) on each Reinvestment Prepayment Date an amount equal to the Reinvestment
Prepayment Amount with respect to the relevant Reinvestment Event shall be
applied to the prepayment of the Term Loans (together with accrued interest
thereon) and/or the permanent reduction of the Revolving Credit Commitments, as
set forth in Section 2.12(d). The provisions of this Section do not constitute a
consent to the consummation of any Disposition not permitted by Section 7.5.
(c) Unless the Required Lenders shall otherwise agree, if, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2004, there shall be Excess Cash Flow, then, on the relevant Excess Cash Flow Application Date, the Borrower shall
apply an amount equal to the ECF Percentage of such Excess Cash Flow to the
prepayment of the Term Loans (together with accrued interest thereon) and/or the
permanent reduction of the Revolving Credit Commitments, as set forth in Section
2.12(d). Each such prepayment and commitment reduction shall be made on a date
(an "Excess Cash Flow Application Date") no later than ten days after the
earlier of (i) the date on which the financial statements of the Borrower
referred to in Section 6.1(a), for the fiscal year with respect to which such
prepayment is made, are required to be delivered to the Lenders and (ii) the
date such financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and Commitment reductions made pursuant to this Section 2.12 shall be applied, first, to the prepayment of the Term Loans and, second, to reduce permanently the Revolving Credit Commitments. Any such reduction of the Revolving Credit Commitments shall be accompanied by prepayment of the Revolving Credit Loans and/or Swing Line Loans to the extent, if any, that the Total Revolving Extensions of Credit exceed the amount of the Total Revolving Credit Commitments as so reduced, provided that if the aggregate principal amount of Revolving Credit Loans and Swing Line Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Secured Parties on terms and conditions satisfactory to the Administrative Agent.
2.13 Conversion and Continuation Options(a) . (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may be made only on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan under a particular Facility may be converted into a Eurodollar Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
(b) The Borrower may elect to continue any Eurodollar Loan as such upon the expiration of the then current Interest Period with respect thereto by giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan under a particular Facility may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility, provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph, such Loans
shall be continued automatically as Eurodollar Loans with an Interest Period of one month on the last day of such then expiring Interest Period, and provided, further, that if such continuation is not permitted pursuant to the first proviso in this Section 2.13, such Loans shall be converted automatically to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
2.14 Minimum Amounts and Maximum Number of Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than fifteen Eurodollar Tranches shall be outstanding at any one time.
2.15 Interest Rates and Payment Dates(a). (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin in effect for such day.
(b) Each Base Rate Loan shall bear interest for each day on which it is outstanding at a rate per annum equal to the Base Rate in effect for such day plus the Applicable Margin in effect for such day.
(c) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement Obligations (whether or not overdue) (to the extent legally permitted) shall bear interest at a rate per annum that is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2.0% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Credit Facility plus 2.0%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans under the relevant Facility plus 2.0% (or, in the case of any such other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate Loans under the Revolving Credit Facility plus 2.0%), in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.
2.16 Computation of Interest and Fees(a). (a) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans on which interest is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.16(a).
2.17 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the relevant Facility shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans under the relevant Facility shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurodollar Loans.
2.18 Pro Rata Treatment and Payments(a) . (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee or Letter of Credit fee, and any reduction of the Commitments of the Lenders, shall be made pro rata according to the respective Tranche B Term Loan Percentages or Revolving Credit Percentages, as the case may be, of the relevant Lenders. Each payment (other than prepayments) in respect of principal or interest in respect of the Loans and each payment in respect of fees or expenses payable hereunder shall be applied to the amounts of such obligations
owing to the Lenders pro rata according to the respective amounts then due and owing to the Lenders.
(b) Each payment (including each prepayment) of the Term Loans outstanding under the Term Loan Facility shall be allocated among the Term Loan Lenders holding such Term Loans pro rata based on the principal amount of such Term Loans held by such Term Loan Lenders. Each prepayment of the Term Loans shall be applied to the installments of such Term Loans pro rata based on the remaining outstanding principal amount of such installments. Amounts prepaid on account of the Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Revolving Credit Lenders. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letters of Credit.
(d) The application of any payment of Loans under any Facility (including optional and mandatory prepayments) shall be made, first, to Base Rate Loans under such Facility and, second, to Eurodollar Loans under such Facility. Each payment of the Loans (except in the case of Swing Line Loans and Revolving Credit Loans that are Base Rate Loans) shall be accompanied by accrued interest to the date of such payment on the amount paid.
(e) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars and in immediately available funds. Any payment made by the Borrower after 12:00 Noon, New York City time, on any Business Day shall be deemed to have been made on the next following Business Day. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
(f) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal
Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower.
(g) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.
2.19 Requirements of Law(a) . (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate hereunder; or
(ii) shall impose on such Lender any other condition (excluding any condition relating to taxes);
and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application
thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.
(c) A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(d) A Lender shall notify the Borrower within 180 days after it becomes aware that it is entitled to amounts under this Section 2.19. The Borrower shall not have any obligation to indemnify a Lender for interest and penalties on amounts payable under this Section to the extent such interest and penalties are attributable to such Lender's failure to comply with the foregoing sentence.
2.20 Taxes(a) . (a) All payments made by or on behalf of the Borrower under this Agreement or any other Loan Documents shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes (including branch profits taxes) and franchise taxes imposed on any Arranger, any Agent or any Lender as a result of a present or former connection between such Arranger, such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Arranger's, such Agent's or such Lender's having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or any Other Taxes are required to be withheld from any amounts payable to any Arranger, any Agent or any Lender hereunder, the amounts so payable to such Arranger, such Agent or such Lender shall be increased to the extent necessary to yield to such Arranger, such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Arranger, any Agent or any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Arranger's, such Agent's or such Lender's failure to comply with the requirements of paragraph (e) or (f) of this Section or (ii) in the case of any Non-U.S. Lender, that are United States withholding taxes imposed on amounts payable to such Arranger, such Agent or such Lender at the time such Arranger, such Agent or such
Lender becomes a party to this Agreement, except to the extent that such Arranger's, such Agent's or such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a). The Borrower or the applicable Guarantor shall make any required withholding and pay the full amount withheld to the relevant tax authority or other Governmental Authority in accordance with applicable Requirements of Law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent
and any Lender (or Transferee) for the full amount of Non-Excluded Taxes or
Other Taxes arising in connection with payments made under this Agreement
(including, without limitation, any Non-Excluded Taxes or other Taxes imposed by
any jurisdiction on amounts paid under this Section 2.20) paid by the
Administrative Agent or such Lender or any of their respective Affiliates and
any liability (including penalties, additions to tax, interest and expenses)
other than under those circumstances as to which no additional payment would
have been payable under subsection (a) above arising therefrom or with respect
thereto. Payment under this indemnification shall be made within 10 days from
the date the Administrative Agent, any Lender or any of their respective
Affiliates makes written demand therefor. If a Lender (or Transferee) or the
Administrative Agent shall become aware that it is entitled to receive a refund
in respect of Non-Excluded Taxes or Other Taxes as to which it has been
indemnified by the Borrower pursuant to this Section 2.20 or with respect to
which the Borrower has paid additional amounts pursuant to this Section 2.20, it
shall (i) promptly notify the Borrower of the availability of such refund and
(ii) within 30 Business Days after receipt of a request by the Borrower, apply
for such refund at the Borrower's expense unless to do so will unduly prejudice
or cause undue hardship to such Lender (or Transferee) or the Administrative
Agent (as determined in the reasonable discretion of such Lender (or Transferee)
or the Administrative Agent). If any Lender (or Transferee) or the
Administrative Agent receives a refund in respect of any Non-Excluded Taxes or
Other Taxes as to which it has been indemnified by the Borrower pursuant to this
Section 2.20 or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.20, it shall promptly notify the Borrower of such
refund and shall, within 30 Business Days after receipt of a request by the
Borrower (or promptly upon receipt, if the Borrower has requested application
for such refund pursuant hereto), repay such refund to the Borrower to the
extent attributable to amounts that have been paid by the Borrower under this
Section 2.20), net of all reasonable out-of-pocket expenses of such Lender (or
Transferee) or the Administrative Agent; provided that the Borrower, upon the
request of such Lender (or Transferee) or the Administrative Agent, shall
promptly return such refund (plus penalties, interest or other charges) to such
Lender (or Transferee) or the Administrative Agent in the event such Lender (or
Transferee) or the Administrative Agent is required to repay such refund.
Nothing contained in this subsection (c) shall require any Lender (or
Transferee) or the Administrative Agent to make available any of its tax returns
(or any other information relating to its taxes that it deems to be
confidential). The Lender (or Transferee) or the Administrative Agent, as the
case may be, shall have full control over computations (which shall be carried
out in a reasonable manner) relating to the amount of any refund of Non-Excluded
Taxes or Other Taxes and any payment to the Borrower relating to such refund as
described in this Section 2.20(c).
(d) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as reasonably possible thereafter the Borrower shall send to the Administrative Agent for the account of the relevant Arranger, Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(e) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest" a statement substantially in the form of Exhibit I to the effect that such Lender is eligible for a complete exemption from withholding of U.S. taxes under Section 871(h) or 881(c) of the Code and a Form W-8BEN, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (and, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.
(f) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Lender.
(g) A Lender shall notify the Borrower within 180 days after it becomes aware of the incurrence of Non-Excluded Taxes. The Borrower shall not have any obligation to indemnify a Lender for any interest or penalties to the extent that such interest or penalties are attributable to such Lender's failure to comply with the foregoing sentence.
2.21 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.22 Illegality. Notwithstanding any other provision herein, if the adoption after the date hereof of any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.21.
2.23 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.19, 2.20(a) or 2.22 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant to Section 2.19, 2.20(a) or 2.22.
2.24 Replacement of Lenders. The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.19 or 2.20(a), (b) defaults in its obligation to make Loans hereunder or (c) does not consent to a proposed
amendment, modification or waiver of this Agreement requested by the Borrower
which requires the consent of all of the Lenders or all of the Lenders under any
Facility to become effective (and which is approved by at least the Required
Lenders), with a replacement financial institution or an investment fund which
invests in bank loans in the ordinary course of business; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall have taken no action
under Section 2.23 so as to eliminate the continued need for payment of amounts
owing pursuant to Section 2.19 or 2.20(a) (in the case of clause (a) hereof),
(iv) such replacement financial institution or investment fund shall purchase,
at par, all Loans and other amounts owing to such replaced Lender on or prior to
the date of replacement, (v) the Borrower shall be liable to such replaced
Lender under Section 2.21 if any Eurodollar Loan owing to such replaced Lender
shall be purchased other than on the last day of the Interest Period relating
thereto, (vi) solely with respect to replacements of Lenders pursuant to clause
(a) or (b) of this Section 2.24, such replacement financial institution or
investment fund, if not already a Lender, shall be reasonably satisfactory to
the Administrative Agent, (vii) the replaced Lender shall be obligated to make
such replacement in accordance with the provisions of Section 10.6 (provided
that the Borrower shall be obligated to pay the registration and processing fee
referred to therein), (viii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts (if any) required
pursuant to Section 2.19 or 2.20(a), as the case may be, and (ix) any such
replacement shall not be deemed to be a waiver of any rights that the Borrower,
the Administrative Agent or any other Lender shall have against the replaced
Lender. In connection with any such replacement, if the replaced Lender does not
execute and deliver to the Administrative Agent a duly completed Assignment and
Acceptance reflecting such replacement within 5 Business Days of the date on
which the replacement Lender executes and delivers such Assignment and
Acceptance to the replaced Lender, then such replaced Lender shall be deemed to
have executed and delivered such Assignment and Acceptance. On the effective
date of such replacement, the replaced Lender shall be released from its
obligations under this Agreement and shall cease to be a party hereto, except as
to Section 2.19, 2.20, 2.21, 9.12 and 10.5 in respect of the period prior to
such effective date.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment(a) . (a) Subject to the terms and
conditions hereof, each Issuing Lender, in reliance on the agreements of the
other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue
letters of credit ("Letters of Credit") for the account of the Borrower on any
Business Day during the Revolving Credit Commitment Period in such form as may
be approved from time to time by such Issuing Lender; provided, that no Issuing
Lender shall have any obligation to issue any Letter of Credit if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment
or (ii) the aggregate amount of the Available Revolving Credit Commitments would
be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and
(ii) expire no later than the earlier of (x) the first anniversary of its date
of issuance and (y) the date which is five Business Days prior to the Revolving
Credit Termination Date; provided that any Letter of Credit with a one-year term
may provide for the renewal thereof for additional one-year periods (which shall
in no event extend beyond the date referred to in clause (y) above).
(b) No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender, with a copy to the Administrative Agent, at their addresses for notices specified herein an Application therefor, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may request. Upon receipt of any Application, an Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower (but in no event shall any Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto). Promptly after issuance by an Issuing Lender of a Letter of Credit, such Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent. Each Issuing Lender shall promptly give notice to the Administrative Agent of the issuance of each Letter of Credit issued by such Issuing Lender (including the amount thereof).
3.3 Fees and Other Charges(a) . (a) The Borrower will pay a fee on the aggregate drawable amount of all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Revolving Credit Facility, shared ratably among the Revolving Credit Lenders in accordance with their respective Revolving Credit Percentages and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date of such Letter of Credit. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account a fronting fee on the aggregate drawable amount of all outstanding Letters of Credit issued by it of 1/4 of 1% per annum, payable quarterly in arrears on each L/C Fee Payment Date after the issuance date of such Letter of Credit.
(b) In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.
3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk, an undivided interest equal to such L/C Participant's Revolving Credit Percentage in each Issuing Lender's obligations and rights under each Letter of Credit issued by such Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance
with the terms of this Agreement, such L/C Participant shall pay to such Issuing
Lender, regardless of the occurrence or continuance of a Default or Event of
Default or the failure to satisfy any of the other conditions specified in
Section 5, upon demand at the Administrative Agent's address for notices
specified herein (and thereafter, the Administrative Agent shall promptly pay to
the Issuing Lender) an amount equal to such L/C Participant's Revolving Credit
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed.
(b) If any amount required to be paid by any L/C Participant to an Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit is paid to such Issuing Lender within three Business Days after the date such payment is due, the Issuing Lender shall so notify the Administrative Agent, who shall promptly notify the L/C Participants and each such L/C Participant shall pay to the Administrative Agent, for the account of the Issuing Lender on demand (and thereafter the Administrative Agent shall promptly pay to the Issuing Lender) an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to the Administrative Agent, for the account of such Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Administrative Agent, on behalf of such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Revolving Credit Facility. A certificate of the Administrative Agent on behalf of such Issuing Lender submitted to any L/C Participant with respect to any such amounts owing under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after an Issuing Lender has
made payment under any Letter of Credit and has received from the Administrative
Agent any L/C Participant's pro rata share of such payment in accordance with
Section 3.4(a), such Issuing Lender receives any payment related to such Letter
of Credit (whether directly from the Borrower or otherwise, including proceeds
of collateral applied thereto by such Issuing Lender), or any payment of
interest on account thereof, such Issuing Lender will distribute to the
Administrative Agent for the account of such L/C Participant (and thereafter,
the Administrative Agent will promptly distribute to such L/C Participant) its
pro rata share thereof; provided, however, that in the event that any such
payment received by such Issuing Lender shall be required to be returned by such
Issuing Lender, such L/C Participant shall return to the Administrative Agent
for the account of such Issuing Lender the portion thereof previously
distributed by such Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse each Issuing Lender, within one Business Day of the date on which such Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Lender, for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by such Issuing Lender in connection with such payment (the amounts described in the foregoing clauses (a) and (b) in respect of any drawing, collectively, the "Payment Amount"). Each such payment shall be made to such
Issuing Lender at its address for notices specified herein in lawful money of
the United States of America and in immediately available funds. Interest shall
be payable on each Payment Amount from the date of the applicable drawing until
payment in full at the rate set forth in (i) until the second Business Day
following the date of the applicable drawing, Section 2.15(b) and (ii)
thereafter, Section 2.15(c). Each drawing under any Letter of Credit shall
(unless an event of the type described in clause (i) or (ii) of Section 8(f)
shall have occurred and be continuing with respect to the Borrower, in which
case the procedures specified in Section 3.4 for funding by L/C Participants
shall apply) constitute a request by the Borrower to the Administrative Agent
for a borrowing pursuant to Section 2.5 of Base Rate Loans (or, at the option of
the Administrative Agent and the Swing Line Lender in their sole discretion, a
borrowing pursuant to Section 2.7 of Swing Line Loans) in the amount of such
drawing. The Borrowing Date with respect to such borrowing shall be the first
date on which a borrowing of Revolving Credit Loans (or, if applicable, Swing
Line Loans) could be made, pursuant to Section 2.5 (or, if applicable, Section
2.7), if the Administrative Agent had received a notice of such borrowing at the
time the Administrative Agent receives notice from the relevant Issuing Lender
of such drawing under such Letter of Credit.
3.6 Obligations Absolute. The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors, actions or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit issued by it or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards or care specified in the UCC of the State of New York, shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Administrative Agent and the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit, in addition to any payment obligation expressly provided for in such Letter of Credit issued by such Issuing Lender, shall be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit.
3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Arrangers, the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, Holdings and the Borrower hereby jointly and severally represent and warrant to each Arranger, each Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2003 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Acquisition, (ii) the Loans to be made and the Senior Subordinated Notes to be issued on the Closing Date and the use of proceeds thereof and (iii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to the Borrower as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of Borrower and its consolidated Subsidiaries as at September 30, 2003, assuming that the events specified in the preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of GNC as at December 31, 2000, December 31, 2001 and December 31, 2002, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from PricewaterhouseCoopers, present fairly the consolidated financial condition of GNC as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of GNC as at September 30, 2003, and the related unaudited consolidated statements of income and cash flows for the 9-month period ended on such date, present fairly the consolidated financial condition of GNC as at such date, and the consolidated results of its operations and its consolidated cash flows for the 9-month period then ended (subject to normal year-end audit adjustments and the absence of footnotes). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). As of the Closing Date, Holdings, the Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any material long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph and the footnotes to the most recent audited financial statements referred to in this paragraph (other than the Obligations under the Loan Documents and the obligations of the Borrower and the Guarantors under the Senior Subordinated Note Documentation). During the period from December 31, 2002 to and including the date hereof there has been no Disposition by GNC of any material part of its
business or Property other than to the Loan Parties and their Subsidiaries as contemplated by the Restructuring.
4.2 No Change. Since December 31, 2002 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Except as set
forth on Schedule 4.3, each of Holdings, the Borrower and its Subsidiaries (a)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its Property, to lease the Property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of Property or
the conduct of its business requires such qualification and (d) is in compliance
with all Requirements of Law except, in the case of the foregoing clauses (c)
and (d), to the extent that the failure to be so qualified or to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents and Acquisition Documentation to
which it is a party and, in the case of the Borrower, to borrow hereunder. Each
Loan Party has taken all necessary corporate or other action to authorize the
execution, delivery and performance of the Loan Documents and Acquisition
Documentation to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
material consent or authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Loan Documents, except (i) consents, authorizations, filings and notices that
have been obtained or made and are in full force and effect, (ii) the consents,
authorizations, filings and notices described in Schedule 4.4 and (iii) the
filings referred to in Section 4.19. No material consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the Acquisition or
the Acquisition Documentation, except (i) consents, authorizations, filings and
notices that have been obtained or made and are in full force and effect and
(ii) consents, authorizations, filings or notices of which the failure to obtain
or make could not reasonably be expected to have a Material Adverse Effect. Each
Loan Document and each item of Acquisition Documentation has been duly executed
and delivered on behalf of each Loan Party that is a party thereto. This
Agreement constitutes, and each other Loan Document upon execution will
constitute, a legal, valid and binding obligation of each Loan Party that is a
party thereto, enforceable against each such Loan Party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this Agreement, the other Loan Documents, the Senior Subordinated Note Documentation, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any material Contractual Obligation of Holdings, the Borrower or any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). The execution, delivery and performance of the Acquisition Documentation will not violate any Requirement of Law or Contractual Obligation of Holdings, the Borrower or its Subsidiaries, except for such violations of Contractual Obligations which could not reasonably be expected to have a Material Adverse Effect, and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to Holdings, the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of Holdings or the Borrower, threatened by or against Holdings, the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents, the Acquisition Documentation or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect (after giving effect to indemnification from certain manufacturers, the provisions of the Acquisition Documentation and applicable insurance).
4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries is the sole owner of, legally and beneficially, and has good marketable and insurable title in fee simple to, or a valid leasehold interest in, all its material real property the loss of which could not reasonably be expected to have a Material Adverse Effect, and good title to, or a valid leasehold interest in, all its other material Property, and none of such Property is subject to any Lien except for Permitted Liens. None of the Pledged Capital Stock is subject to any Lien except for Permitted Liens.
4.9 Intellectual Property. Except as could not reasonably be expected to result in a Material Adverse Effect, (i) Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted; (ii) no claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does Holdings or the Borrower know of any valid basis for any such claim; and (iii) the use of Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person.
4.10 Taxes. Each of Holdings, the Borrower and each of its Subsidiaries has filed or caused to be filed all Federal income and all material state and other tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns and all
amounts shown to be due and payable on any material assessments made against it or any of its Property and all other material taxes, fees or other charges imposed on it or any of its Property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); and no material tax Lien has been filed with respect to any such tax, fee or other charge (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be), and, to the knowledge of Holdings and the Borrower, no material claim is being asserted, with respect to any such tax, fee or other charge (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be). No Loan Party and no Subsidiary thereof (i) intends to treat the Loans as being a "reportable transaction" (within the meaning of Treasury Regulation 1.6011-4) or (ii) is aware of any facts or events that would result in such treatment.
4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.
4.12 Labor Matters. There are no strikes, stoppages or slowdowns or other labor disputes against Holdings, the Borrower or any of its Subsidiaries pending or, to the knowledge of Holdings or the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of Holdings, the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from Holdings, the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of Holdings, the Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan
allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) which limits or conditions its ability to incur Indebtedness.
4.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 4.15(a) constitute all the Subsidiaries of Holdings as of the Closing Date. Schedule 4.15(a) sets forth as of the Closing Date and after giving effect to the Acquisition, the exact legal name (as reflected on the certificate of incorporation (or formation) and jurisdiction of incorporation (or formation) of each Subsidiary of Holdings and, as to each such Subsidiary, the percentage and number of each class of Capital Stock owned by each Loan Party and its Subsidiaries.
(b) As of the Closing Date, except as set forth on Schedule 4.15(b), there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of Holdings, the Borrower or any Subsidiary.
4.16 Use of Proceeds. The proceeds of the Term Loans and up to $600,000 of Revolving Credit Loans shall be used on the Closing Date to finance a portion of the Acquisition, to pay related fees and expenses and to fund up to $12,200,000 of expenses incurred as a result of the store closings listed on Schedule 4.16 which are planned in connection with the Acquisition. The proceeds of all other Revolving Credit Loans and the Swing Line Loans, and the Letters of Credit, shall be used for general corporate purposes of the Borrower and its Subsidiaries.
4.17 Environmental Matters. Other than exceptions to any of the following that could not, in the aggregate, reasonably be expected to have a Material Adverse Effect:
(a) Holdings, the Borrower and its Subsidiaries: (i) are in compliance with all applicable Environmental Laws; (ii) hold all Environmental Permits required for any of their current operations or for any property owned, leased, or otherwise operated by any of them; (iii) are in compliance with all of their Environmental Permits; and (iv) reasonably believe that: each of their Environmental Permits will be timely renewed and complied with, without material expense; any additional Environmental Permits that may be required of any of them will be timely obtained and complied with, without material expense; and compliance with any Environmental Law that is or is expected to become applicable to any of them will be timely attained and maintained, without material expense;
(b) Materials of Environmental Concern are not present at, on, under or in any real property now or formerly owned, leased or operated by Holdings, the Borrower or any of its Subsidiaries, or at any other location (including, without limitation, any location to which Materials of Environmental Concern have been sent by Holdings, the Borrower or any of its Subsidiaries for re-use or recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give rise to liability of Holdings, the Borrower or any of its Subsidiaries under any applicable Environmental Law or otherwise result in material costs to Holdings, the Borrower or any of its Subsidiaries, or (ii) materially interfere with Holdings', the Borrower's or any of its Subsidiaries' continued operations, or (iii) materially impair the fair saleable value of any real property owned or leased by Holdings, the Borrower or any of its Subsidiaries;
(c) There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) pursuant to any Environmental Law to which Holdings, the Borrower or any of its Subsidiaries is named as a party that is pending or, to the knowledge of Holdings, the Borrower or any of its Subsidiaries, threatened;
(d) Neither Holdings, the Borrower nor any of its Subsidiaries has received any written request for information, or been notified that it is a potentially responsible party under or relating to the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any Materials of Environmental Concern;
(e) Neither Holdings, the Borrower nor any of its Subsidiaries has entered into or agreed to any consent decree, order, or settlement or other agreement, or is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance with or liability under any Environmental Law; and
(f) Neither Holdings, the Borrower nor any of its Subsidiaries has assumed or retained by contract any liabilities under any Environmental Law or with respect to any Materials of Environmental Concern.
4.18 Accuracy of Information, etc. No statement or information (other than projections) contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished to the Arrangers, the Agents or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of Holdings and the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. As of the Closing Date, the representations and warranties of the
Borrower and, to the best knowledge of Holdings or the Borrower of Royal Numico N.V. and Numico USA, Inc., contained in the Acquisition Documentation are true and correct in all material respects (except as set forth on Schedule 4.3). As of the Closing Date, there is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Arrangers, the Agents and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.
4.19 Security Documents(a) . (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable security interest in the Collateral described therein and proceeds and products thereof. In the case of the Pledged Capital Stock described in the Guarantee and Collateral Agreement, when any stock certificates representing such Pledged Capital Stock are delivered to the Administrative Agent, in the case of any deposit accounts, when control agreements have been executed with respect to such deposit accounts, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 4.19(a)-1 (which financing statements may be filed by the Administrative Agent at any time) and such other filings as are specified on Schedule 3 to the Guarantee and Collateral Agreement have been completed (all of which filings may be filed by the Administrative Agent at any time), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds and products thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except Permitted Liens). Schedule 7.3(f) lists each UCC Financing Statement evidencing a Lien that (i) names any Loan Party as debtor and (ii) will remain on file after the Closing Date. Schedule 4.19(a)-2 lists each UCC Financing Statement that (i) names any Loan Party as debtor and (ii) will be terminated on or prior to the Closing Date; and on or prior to the Closing Date, the Borrower will have delivered to the Administrative Agent, or caused to be filed, duly completed UCC termination statements, authenticated by the relevant secured party, in respect of each such UCC Financing Statement.
(b) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable Lien on the Mortgaged Properties described therein and proceeds and products thereof; and when the Mortgages are filed or recorded in the offices specified on Schedule 4.19(b) (in the case of Mortgages to be executed and delivered on the Closing Date) or in the office designated by the Borrower (in the case of any Mortgage to be executed and delivered pursuant to Section 6.10 (b)), each Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties described therein and the proceeds and products thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (other than Persons holding Liens or other encumbrances or rights permitted by the relevant Mortgage or the Loan Documents).
4.20 Solvency. Each Loan Party is, and after giving effect to the Acquisition and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith, and after giving effect to Sections 2.1(b) and 2.2 of the Guarantee and Collateral Agreement, will be and will continue to be, Solvent.
4.21 Senior Indebtedness. The Obligations constitute "Senior Indebtedness" of the Borrower under and as defined in the Senior Subordinated Note Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Guarantor Senior Indebtedness" of such Subsidiary Guarantor under and as defined in the Senior Subordinated Note Indenture.
4.22 Regulation H. No Mortgage encumbers improved real property which is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (except any Mortgaged Properties as to which such flood insurance as required by Regulation H has been obtained and is in full force and effect as required by this Agreement).
4.23 Insurance. Each of Holdings, the Borrower and its Subsidiaries is insured, in accordance with Section 5.3 of the Guarantee and Collateral Agreement, by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which it is engaged, including, without limitation, at least $100,000,000 of product liability insurance, to the extent available on commercially reasonable terms (provided that such product liability insurance is not required to insure against ephedra product liability or other product liability for which insurance is not available or is not available on commercially reasonable terms (it being understood that commercially reasonable terms shall mean a cost not to exceed $20,000,000 per year); provided further that the Loan Parties and their Subsidiaries may self insure their inventory and equipment located at the retail store level), and none of Holdings, the Borrower or any of its Subsidiaries (i) has received notice from any insurer or agent of such insurer that substantial capital improvements or other material expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers at a cost that could not reasonably be expected to have a Material Adverse Effect. Third party insurance policies that as of the Closing Date but prior to the Restructuring and Acquisition covered certain claims against GNC, continue to cover such claims, after giving effect to the Restructuring and the Acquisition.
4.24 Lease Payments. (a) Each of Holdings, the Borrower and its Subsidiaries has paid all payments required to be made by it within any specified grace periods under leases of real property where any of the Collateral is or may be located from time to time (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or such Subsidiary, as the case may be), except as could not reasonably be expected to have a Material Adverse Effect;
(b) To the knowledge of the Borrower, no landlord Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such payments,
in each case that could, when taken together with any other such liens or claims, reasonably be expected to have a Material Adverse Effect.
4.25 Acquisition Documentation. The Acquisition Documentation listed on Schedule 4.25 attached hereto constitute all of the material agreements, instruments and undertakings to which Holdings, the Borrower or any of its Subsidiaries is bound or by which such Person or any of its property or assets is bound or affected relating to, or arising out of, the Acquisition (including, without limitation, any agreements, instruments or undertakings assumed pursuant to the Acquisition Agreement). None of such material agreements, instruments or undertakings have been amended, supplemented or otherwise modified in any material respect except after the Closing Date as permitted by Section 7.16, and all such material agreements, instruments and undertakings are in full force and effect in accordance with their terms except after the Closing Date as permitted by Section 7.16. No party to any Acquisition Documentation is currently in material default thereunder and no party thereto, or any other Person, has the right to terminate any Acquisition Documentation.
4.26 Real Estate. As of the Closing Date, Schedule 4.26 sets forth a true, complete and correct list of all real property (i) owned by any Loan Party or its Subsidiaries in fee simple or (ii) leased by any Loan Party or its Subsidiaries and used as a distribution or manufacturing facility (collectively, the "Real Estate").
4.27 New GNC. New GNC (a) does not conduct, transact or otherwise engage in any business or operations other than those incidental to its ownership of the Capital Stock of General Nutrition Incorporated, (b) has no material Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations imposed by operation of law and (ii) pursuant to the Loan Documents to which it is a party and the Senior Subordinated Note Indenture.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it hereunder is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of Holdings and the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of Holdings, the Borrower and each Subsidiary Guarantor, (iii) a Mortgage covering each of the Mortgaged Properties, executed and delivered by a duly authorized officer of each party thereto and (iv) a Lender Addendum executed and delivered by each Lender and accepted by the Borrower.
(b) Acquisition, etc. The following transactions shall have been consummated, in each case on terms and conditions reasonably satisfactory to the Lenders:
(i) the Borrower shall have acquired all of the limited liability company interests of Newco 1 LLC and all of the general partnership interests of Newco DGP1 pursuant to the terms of the Acquisition Agreement and the Mergers shall have
become effective by the filing of Certificates of Merger with respect to Newco 1 LLC, Newco DGP1, Newco 2 LLC, and Newco DGP2 with the Secretary of State of the State of Delaware and no material provision of the Acquisition Documentation shall have been waived, amended, supplemented or otherwise modified without the prior written consent of the Arrangers (the "Acquisition");
(ii) Holdings shall have received at least $274,700,000 from the proceeds of equity issued by Holdings to funds managed by the Sponsor and to the other Initial Investors, and all of such proceeds shall have been contributed to the Borrower as common equity;
(iii) the Borrower shall have received at least $215,000,000 in gross cash proceeds from the issuance of the Senior Subordinated Notes on terms and pursuant to documentation reasonably satisfactory to the Arrangers and no provision thereof shall have been waived, amended, supplemented or otherwise modified without prior written consent of the Arrangers; and
(iv) the capital structure of each Loan Party after the Acquisition shall be as described in Schedule 4.15.
(c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements of GNC for the 2000, 2001 and 2002 fiscal years and (iii) unaudited interim consolidated financial statements of GNC for each fiscal month and quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial statements are available; and such financial statements (x) shall be reasonably satisfactory in form and substance to the Arrangers and (y) shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of GNC, as reflected in the financial statements or projections contained in the Confidential Information Memorandum.
(d) Approvals. All governmental and material third party approvals (i) required under the Acquisition Documentation, or (ii) necessary for the continuing operations of Holdings, the Borrower and its Subsidiaries shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Acquisition or the financing contemplated hereby or by the Senior Subordinated Note Documentation.
(e) Related Agreements. The Administrative Agent shall have received (in a form reasonably satisfactory to the Administrative Agent), true and correct copies, certified as to authenticity by the Borrower, of (i) the Senior Subordinated Note Documentation, (ii) the Acquisition Documentation and (iii) such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Loan Parties may be a party.
(f) Fees. The Lenders, the Arrangers and the Agents shall have received all fees required to be paid, and all expenses for which invoices have been presented (including reasonable fees, disbursements and other charges of counsel to the Agents), on or before the Closing Date. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or before the Closing Date.
(g) Business Plan. The Administrative Agent shall have received a business plan for fiscal years 2004-2009 and a satisfactory written analysis of the business and prospects of Holdings, the Borrower and its Subsidiaries for the period from the Closing Date through the final maturity of the Facilities, all in form and substance reasonably satisfactory to the Administrative Agent.
(h) Solvency Analysis. The Lenders shall have received a reasonably satisfactory solvency certificate by the chief financial officer of Holdings and the Borrower which shall document the solvency of each of the Loan Parties after giving effect to the transactions contemplated hereby.
(i) Lien Searches. The Administrative Agent shall have received the results of a recent lien, tax lien, judgment and litigation search in each of the jurisdictions or offices (including, without limitation, in the United States Patent and Trademark Office and the United States Copyright Office) in which UCC financing statement or other filings or recordations should be made to evidence or perfect (with the priority required under the Loan Documents) security interests in all assets of the Loan Parties (or would have been made at any time during the five years immediately preceding the Closing Date to perfect Liens on any assets of the Borrower or its subsidiaries), and such search shall reveal no liens on any of the assets of the Loan Party, except for Permitted Liens or Liens set forth on Schedule 4.19(a)-2.
(j) Environmental Matters. The Administrative Agent shall have received, with a copy for each Lender, all existing written environmental assessments pertaining to manufacturing facilities owned or leased by the Borrower and its Subsidiaries, in form, scope, and substance satisfactory to the Administrative Agent.
(k) Expenses. The Administrative Agent shall have received satisfactory evidence that the fees and expenses to be incurred in connection with the Acquisition and the financing thereof shall not exceed $28,000,000.
(l) Closing Certificate. The Administrative Agent shall have received a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments.
(m) Other Certifications. The Administrative Agent shall have received the following:
(i) a copy of the charter of Holdings, the Borrower and each of the Subsidiary Guarantors and each amendment thereto, certified (as of a date reasonably near the date of the initial extension of credit) as being a true and correct copy thereof by
the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized;
(ii) a copy of a certificate of the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized, dated reasonably near the date of the initial extension of credit, listing the charter of such Loan Party and each amendment thereto on file in such office and, if available, certifying that (A) such amendments are the only amendments to such Person's charter on file in such office, (B) such Person has paid all franchise taxes to the date of such certificate and (C) such Person is duly organized and in good standing under the laws of such jurisdiction;
(iii) an electronic or facsimile written confirmation, prepared by, or on behalf of, a filing service acceptable to the Administrative Agent, stating that each Secretary of State or other applicable Governmental Authority of each jurisdiction in which a Loan Party is organized has certified that such Loan Party is duly organized and in good standing under the laws of such jurisdiction on the date of the initial extension of credit; and
(iv) a copy of a certificate of the Secretary of State or other applicable Governmental Authority of each state where any Loan Party is required to be qualified as a foreign corporation or entity, other than any state where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, dated reasonably near the date of the initial extension of credit, stating that such Loan Party is duly qualified and in good standing as a foreign corporation or entity in each such jurisdiction and has filed all annual reports required to be filed to the date of such certificate; and an electronic or facsimile written confirmation, prepared by or on behalf of, a filing service acceptable to the Administrative Agent, stating that the Secretary of State or other applicable Governmental Authority of each such jurisdiction on the date of the initial extension of credit has confirmed the due qualification and continued good standing of each such Person as a foreign corporation or entity in each such jurisdiction on or about such date.
(n) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions:
(i) the legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Holdings, the Borrower and its Subsidiaries, substantially in the form of Exhibit F-1;
(ii) the legal opinion of James Sander, general counsel of the Borrower and its Subsidiaries, substantially in the form of Exhibit F-2;
(iii) the legal opinion of Kennedy, Covington, Lobdell & Hickman LLP, as South Carolina local counsel;
(iv) the legal opinion of Lewis & Roca LLP, as Arizona local counsel;
(v) each legal opinion, if any, delivered in connection with the Acquisition Agreement, accompanied by a reliance letter in favor of the Agents and the Lenders; and
(vi) the legal opinion of such other special and local counsel as may be required by the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.
(o) Pledged Capital Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement (if such shares are certificated), together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, (ii) an Acknowledgment and Consent, substantially in the form of Annex II to the Guarantee and Collateral Agreement, duly executed by any issuer of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement that is not itself a party to the Guarantee and Collateral Agreement and (iii) each promissory note pledged pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank satisfactory to the Administrative Agent) by the pledgor thereof.
(p) Filings, Registrations and Recordings. Each document (including, without limitation, any UCC financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Permitted Liens), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation.
(q) Title Insurance. The Administrative Agent shall have received the following:
(i) in respect of each Mortgaged Property an extended (to the extent available without surveys) coverage mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on, and security interest in, such Mortgaged Property free and clear of all defects and encumbrances, except for Permitted Liens disclosed therein; (D) name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder; (E) be in the form of an extended (to the extent available without surveys) coverage leasehold loan policy - 1970 form B (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request in form and substance acceptable to the Administrative Agent, including, without limitation (to the extent applicable with respect to such Mortgaged Property and available in the jurisdiction in which such Mortgaged Property is located), the following: variable
rate endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage (if available without survey); separate tax parcel coverage; contiguity coverage (if available without a survey); usury; doing business; subdivision; environmental protection lien (if reasonably available); CLTA 119.2 and CLTA 119.3 (for leased Real Estate, only);and such other endorsements as the Administrative Agent shall reasonably require in order to provide insurance against specific risks identified by the Administrative Agent in connection with such Mortgaged Property, and (G) be issued by title companies satisfactory to the Administrative Agent. The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid; and
(ii) a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (i) above and a copy of all other material documents affecting the Mortgaged Properties to the extent in the Borrower's possession or available from the title companies.
(r) Flood Insurance. If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage and lies within a Federal Emergency Management Agency flood zone such that a prudent lender would require such insurance, (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the indebtedness secured by such Mortgage or that may be extended to such maturity date and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board.
(s) Insurance. The Administrative Agent (x) shall be satisfied that (i) with respect to the Borrower's operations after the Closing Date, the Borrower has obtained insurance which meets the requirements set forth in Section 5.3 of the Guarantee and Collateral Agreement and which is otherwise customary in scope and amount for similarly situated businesses, including, without limitation, at least $100,000,000 of product liability insurance (provided that such product liability insurance is not required to insure against ephedra product liability and provided further that the Loan Parties and their Subsidiaries may self insure their inventory and equipment located at the retail store level); provided that such insurance shall not be required to cover ephedra products and (ii) with respect to past operations of GNC, the Administrative Agent shall be satisfied that third party insurance policies that as of the Closing Date but prior to the consummation of the Restructuring or the Acquisition covered certain claims against GNC will continue to do so after the Closing Date and after giving effect to the Restructuring and the Acquisition for occurrences prior to the Closing Date and (y) shall have received insurance certificates satisfying the requirements of Section 5.3 of the Guarantee and Collateral Agreement.
(t) Miscellaneous. The Administrative Agent shall have received such other documents, agreements, certificates and information as it shall reasonably request.
5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it hereunder on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.
(c) Senior Debt. A Responsible Officer of the Borrower shall certify in writing, to the Administrative Agent that the incurrence of Indebtedness represented by the requested extension of credit is permitted under the Senior Subordinated Notes.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by Holdings and the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding (unless such Letter of Credit has been cash collateralized or otherwise backed by another letter of credit in accordance with Section 10.15(c)) or any Loan or other amount is owing to any Lender, any Agent or any Arranger hereunder, each of Holdings and the Borrower shall and shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such year and of Holdings and its consolidated Subsidiaries as at the end of such fiscal year and the related audited consolidated and consolidating statements of income and of cash flows for such year, setting forth in each case in comparative form the figures as of the end of and for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers or other independent certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited
consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarter and of Holdings and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated and consolidating statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures as of the end of and for the corresponding period in the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and
(c) when distributed to management, copies of monthly sales and revenue reports and such other reports as may be reasonably requested by the Administrative Agent, in each case as prepared for the management of Holdings or the Borrower on a monthly basis;
all such financial statements set forth in Sections 6.1(a) and (b) to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Agent and each Lender, or, in the case of clause (i), to the relevant Lender:
(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate (it being understood that such certificate shall be limited to the items that independent certified public accountants are permitted to cover in such certificates pursuant to their professional standards and customs of the profession);
(b) concurrently with the delivery of any financial statements pursuant to Sections 6.1(a) and (b), (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of quarterly or annual financial statements, (x) a Compliance Certificate containing all information and calculations necessary for determining compliance by Holdings, the Borrower and its Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, (y) to the extent not previously disclosed to the Administrative Agent in writing, a listing of (A) any store openings or closings since the last such certificate (or, since the Closing Date, in the case of the first such certificate delivered after the Closing Date) delivered and any new warehouse or distribution locations within the United States or otherwise where any Loan Party keeps material inventory or equipment and of (B) any registered Intellectual Property acquired, created or developed by any Loan Party since the date of the most recent list delivered pursuant to this clause (y) (or, in the case of the first such list so delivered, since the Closing Date) and (z) any UCC financing statements or other filings specified in such Compliance Certificate as being required to be delivered therewith;
(c) as soon as available, and in any event no later than 60 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, and the related consolidated statements of projected cash flow, projected changes in financial position and projected income), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions at the time made (it being understood that the Projections are based upon good faith estimates and assumptions believed by management of Holdings and the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount);
(d) within 45 days after the end of each of the first three fiscal quarters of the Borrower in each fiscal year, or within 90 days after the fourth fiscal quarter of the Borrower in each fiscal year, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year;
(e) no later than 5 Business Days prior to the effectiveness thereof or such later date as may be reasonably agreed to by the Administrative Agent, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Subordinated Note Indenture or the Acquisition Agreement, or the governing documents of any Loan Party;
(f) within five days after the same are sent, copies of all financial statements and reports that Holdings or the Borrower or any of its Subsidiaries sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that Holdings or the Borrower or any of its Subsidiaries may make to, or file with, the SEC;
(g) as soon as possible and in any event within five days of obtaining knowledge thereof: any notice that any Governmental Authority may deny any application for an Environmental Permit sought by, or revoke or refuse to renew any Environmental Permit or any other material Permit held by, the Borrower or condition approval of any such material Permit on terms and conditions that are materially burdensome to Holdings, the Borrower or any of its Subsidiaries, or to the operation of any of its businesses (both before and after giving effect to the Acquisition) or any property owned, leased or otherwise operated by such Person;
(h) on the date of the occurrence thereof, notice that
(i) any or all of the obligations under the Senior Subordinated Note Indenture
have been accelerated, or (ii) the trustee or the required holders of Senior
Subordinated Notes has given notice that any or all such obligations are to be
accelerated; and
(i) promptly, such additional financial and other information as any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material tax, license, lease and accounts payable obligations, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence,
etc(a) . (a) (i) Preserve, renew and keep in full force and effect its corporate
or other existence and (ii) take all reasonable action to maintain all rights,
privileges, franchises, Permits and licenses necessary or desirable in the
normal conduct of its business, except, in each case, as otherwise permitted by
Section 7.4 and except, in the case of clause (ii) above, to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (b) to the extent not in conflict with this Agreement or the other
Loan Documents, comply with all Contractual Obligations and Requirements of Law,
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance(a) . (a) Keep all material Property and systems useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) (i) maintain with financially sound and reputable insurance companies insurance (or, with respect to inventory and equipment at the retail store level, a program of self-insurance) on all its Property meeting the requirements of Section 5.3 of the Guarantee and Collateral Agreement and in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business, including, without limitation, $100,000,000 of product liability insurance, to the extent available on commercially reasonable terms; provided that such insurance shall not be required to cover ephedra products or other products for which insurance is not available or is not available on commercially reasonable terms (it being understood that commercially reasonable terms shall mean a cost not to exceed $20,000,000 per year) and (ii) with respect to operations of GNC prior to the Closing Date, ensure that third party insurance policies that, as of the Closing Date but prior to the Restructuring or the Acquisition covered certain claims against GNC will continue to do so after the Closing Date and after giving effect to the Restructuring and the Acquisition.
6.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender, upon reasonable prior notice, to visit and inspect any of its properties and examine and, at the Borrower's expense, make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of Holdings, the Borrower and its Subsidiaries with officers and employees of Holdings, the Borrower and its Subsidiaries and with their respective independent certified public accountants. Notwithstanding the foregoing, so long as no Default or Event of Default
has occurred and is continuing, such visits, inspections and examinations of the Lenders (but not the Administrative Agent) shall be limited to two per fiscal year plus any additional visits in connection with Lender meetings.
6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default (or alleged default) under any Contractual Obligation of Holdings, the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between Holdings, the Borrower or any of its Subsidiaries and any Governmental Authority, that in either case, if not cured or if reasonably likely to be adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting Holdings, the Borrower or any of its Subsidiaries in which the amount involved is $5,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within 30 days after Holdings or the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;
(e) any notice of default given to Holdings, the Borrower or any of its Subsidiaries from a landlord in connection with any leased property where inventory of the Borrower or its Subsidiaries is located, if such notice relates to a payment default under the applicable leases and the aggregate amount of all payment defaults claimed under such notices exceeds $10,000,000 at any one time outstanding; and
(f) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action Holdings, the Borrower or the relevant Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply in all respects with, and ensure compliance in all respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and Environmental Permits, and obtain, maintain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain, maintain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws, except to the extent the failure to so obtain, maintain or comply could not reasonably be expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, except, in each case, to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.
6.9 Interest Rate Protection. In the case of the Borrower, within 120 days after the Closing Date enter into Hedge Agreements to the extent necessary to provide that at least 40% of the aggregate principal amount of the Senior Subordinated Notes and the Term Loans is subject to either a fixed interest rate or interest rate protection for a period of not less than three years, which Hedge Agreements shall have terms and conditions reasonably satisfactory to the Administrative Agent.
6.10 Additional Collateral, etc. (a) With respect to
any Property acquired, created or developed (including, without limitation, the
filing of any applications for the registration or issuance of any Intellectual
Property) after the Closing Date by Holdings, the Borrower or any of its
Subsidiaries (other than (i) Property acquired by a non-Guarantor Immaterial
Subsidiary to the extent, after giving effect to such acquisition, such
Subsidiary still qualifies as an Immaterial Subsidiary, (ii) any leasehold
estate in a retail store, (iii) any Property described in paragraph (b) or
paragraph (c) of this Section (without regard to the value threshold set forth
therein), (iv) any Property subject to a Lien expressly permitted by Section
7.3(g), (v) Property acquired by an Excluded Foreign Subsidiary or that portion
of the Capital Stock of such Excluded Foreign Subsidiary excluded from the
Collateral pursuant to the terms of the Guarantee and Collateral Agreement and
(vi) Property consisting of deposit accounts which are not required by the terms
of the Guarantee and Collateral Agreement to be subject to control agreements)
as to which the Administrative Agent, for the benefit of the Secured Parties,
does not have a perfected Lien, promptly (x) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
or such other documents as the Administrative Agent deems necessary to grant to
the Administrative Agent, for the benefit of the Secured Parties, a security
interest in such Property and (y) take all actions reasonably necessary to grant
to the Administrative Agent, for the benefit of the Secured Parties, a perfected
first priority security interest in such Property, including without limitation,
the filing of UCC financing statements in such jurisdictions as may be required
by the Guarantee and Collateral Agreement or by law or as may be requested by
the Administrative Agent.
(b) With respect to any fee interest (or leasehold interest, to the extent such leasehold is created under a triple net ground lease or similar arrangement) in any real property having a value (together with improvements thereof) of at least $2,000,000 acquired after the Closing Date and which is not primarily used as a retail store location (other than any such real property owned or leased by an Excluded Foreign Subsidiary), promptly (i) execute and deliver a first priority Mortgage in favor of the Administrative Agent, for the benefit of the Secured Parties, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended (to the extent available without surveys) coverage insurance, complying with the provisions of Section 5.1(q), covering such real property in an amount at
least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as, if reasonably requested by the Administrative Agent, a current ALTA survey (in form and substance reasonably satisfactory to the Administrative Agent) and (y) any consents or estoppels reasonably deemed necessary by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.
(c) With respect to (x) any new Subsidiary (other than an Excluded Foreign Subsidiary or a non-Guarantor Immaterial Subsidiary) created or acquired after the Closing Date (which, for the purposes of this paragraph, shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary or non-Guarantor Immaterial Subsidiary), by Holdings, the Borrower or any of its Subsidiaries or (y) any of the Non-Surviving Subsidiaries not liquidated by merger with and into the Borrower on the Closing Date as contemplated by the recitals hereto, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by Holdings, the Borrower or any of its Subsidiaries or such Non-Surviving Subsidiary, as the case may be, (ii) deliver to the Administrative Agent the certificates, if any, representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Holdings, the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary or such Non-Surviving Subsidiary, as the case may be (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary to grant to the Administrative Agent for the benefit of the Secured Parties a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such Subsidiary, including, without limitation, the recording of instruments in the United States Patent and Trademark Office and the United States Copyright Offices, the execution and delivery by all necessary persons of control agreements, and the filing of UCC financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by Holdings, the Borrower or any of
its Subsidiaries (other than any Excluded Foreign Subsidiaries), promptly (i)
execute and deliver to the Administrative Agent such amendments to the Guarantee
and Collateral Agreement or such other documents as the Administrative Agent
deems necessary in order to grant to the Administrative Agent, for the benefit
of the Secured Parties, a perfected first priority security interest in the
Capital Stock of such new Subsidiary that is owned by Holdings, the Borrower or
any of its Subsidiaries (other than any Excluded Foreign Subsidiaries),
(provided that in no event shall more than 65% of the total outstanding Capital
Stock of any such new Excluded Foreign Subsidiary be required to be so pledged),
(ii) deliver to the Administrative Agent the certificates, if any, representing
such
Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Holdings, the Borrower or such Subsidiary, as the case may be, and take such other action as may be necessary to perfect the Lien of the Administrative Agent thereon, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.
(e) Notwithstanding anything to the contrary in this
Section 6.10, paragraphs (a), (b), (c) and (d) of this Section 6.10 shall not
apply to any Property, new Subsidiary or new Excluded Foreign Subsidiary created
or acquired after the Closing Date, as applicable, (i) as to which the
Administrative Agent has determined in its reasonable discretion that the
collateral value thereof is insufficient to justify the difficulty, time and/or
expense of obtaining a perfected security interest therein or (ii) with respect
to leases of real property described in paragraph (b) of this Section 6.10, as
to which the consent of the landlord is required to grant a security interest to
the Administrative Agent and the Borrower has not been able to obtain such
consent after having used commercially reasonably efforts to do so.
6.11 Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in Section 4.16.
6.12 ERISA Documents. The Borrower will cause to be delivered to the Administrative Agent, promptly upon the Administrative Agent's request, any or all of the following: (i) a copy of each Plan sponsored by the Borrower or any Subsidiary thereof (or, where any such Plan is not in writing, a complete description thereof) and, if applicable, related trust agreements or other funding instruments and all amendments thereto; (ii) the most recent determination letter issued by the Internal Revenue Service with respect to each Plan sponsored by the Borrower or any Subsidiary thereof; (iii) for the three most recent plan years preceding the Administrative Agent's request, Annual Reports on Form 5500 Series required to be filed with any governmental agency for each Plan sponsored by the Borrower or any Subsidiary thereof; (iv) a listing of all Multiemployer Plans, with the aggregate amount of the most recent annual contributions required to be made by the Borrower or any Commonly Controlled Entity to each such Plan and copies of the collective bargaining agreements requiring such contributions; (v) any information that has been provided in writing to the Borrower or any Commonly Controlled Entity regarding withdrawal liability under any Multiemployer Plan within the 12 months immediately preceding any such request by the Administrative Agent; provided that the Borrower shall use its reasonable best efforts to ensure that it is provided with such withdrawal liability information at least once per year; (vi) the aggregate amount of payments made under any employee welfare benefit plan (as defined in Section 3(1) of ERISA) to any retired employees of the Borrower or any of its Subsidiaries (or any dependents thereof) during the most recently completed fiscal year; and (vii) documents reflecting any agreements between the PBGC and the Borrower or any Commonly Controlled Entity with respect to any Plan.
6.13 Further Assurances. (a) From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take all such actions, as the Administrative Agent may reasonably request for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with
respect to the Collateral (or with respect to any additions thereto or replacements or proceeds or products thereof or with respect to any other property or assets hereafter acquired by Holdings, the Borrower or any Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording, qualification or authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lender may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization.
(b) Preserve and protect the Lien status of each
respective Mortgage and, if any Lien (other than unrecorded Liens permitted
under Section 7.3 that arise by operation of law and other Liens permitted under
Section 7.3(f)) is asserted against a Mortgaged Property, promptly and at its
expense, give the Administrative Agent a detailed written notice of such Lien
and pay the underlying claim in full or take such other action so as to cause it
to be released or bonded over in a manner satisfactory to the Administrative
Agent.
6.14 Post Closing Obligations. Comply with all of the obligations set forth in Schedule 6.14.
SECTION 7. NEGATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding (unless such Letter of Credit has been cash collateralized or backed with another letter of credit in accordance with Section 10.15(c)) or any Loan or other amount is owing to any Lender, any Agent or any Arranger hereunder, each of Holdings and the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with the last day of any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:
Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
FQ1 2004 4.70:1.00
FQ2 2004 4.70:1.00
FQ3 2004 4.70:1.00
FQ4 2004 4.70:1.00
FQ1 2005 4.45:1.00
FQ2 2005 4.45:1.00
FQ3 2005 4.25:1.00
FQ4 2005 4.25:1.00
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Consolidated
Fiscal Quarter Leverage Ratio
-------------- --------------
FQ1 2006 4.00:1.00
FQ2 2006 4.00:1.00
FQ3 2006 3.75:1.00
FQ4 2006 3.75:1.00
FQ1 2007 3.50:1.00
FQ2 2007 3.50:1.00
FQ3 2007 3.50:1.00
FQ4 2007 3.25:1.00
FQ1 2008 3.25:1.00
FQ2 2008, and thereafter 3.00:1.00
|
(b) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with the last day of any fiscal quarter commencing with the fiscal quarter ending March 31, 2004 to be less than 1.25:1.00.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary Guarantor to the Borrower or any other Subsidiary;
(c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate principal amount not to exceed $15,000,000 at any one time outstanding;
(d) Indebtedness (other than the Indebtedness referred to in Section 7.2(f)) outstanding on the date hereof and listed on Schedule 7.2(d) and any refinancings, refundings, renewals or extensions thereof (without any increase in the principal amount thereof or any shortening of the maturity of any principal amount thereof);
(e) Guarantee Obligations made in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of the Borrower or any Wholly Owned Subsidiary Guarantor;
(f) (i) Indebtedness of the Borrower in respect of the Senior Subordinated Notes in an aggregate principal amount not to exceed $215,000,000 and any Indebtedness that refinances the Senior Subordinated Notes (including pursuant to a defeasance, discharge or redemption mechanism); provided that (x) such Indebtedness does not increase the principal amount thereof (other than by the amount of call premiums or accrued and unpaid interest payable on the Senior Subordinated Notes in connection with such refinancing and fees in connection therewith), (y) such indebtedness is issued on customary market terms and conditions
(including subordination terms) reasonably satisfactory to the Administrative Agent and (z) no Default or Event of Default exists and is continuing at the time of issuance thereof; and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness; provided that such Guarantee Obligations are subordinated to the obligations of such Subsidiary Guarantor under the Guarantee and Collateral Agreement to the same extent as the obligations of the Borrower in respect of the Senior Subordinated Notes are subordinated to the Obligations or any notes issued pursuant to a refinancing permitted pursuant to clause (i) of this Section 7.2(f);
(g) (i) Indebtedness of the Borrower or any Subsidiary acquired pursuant to, or assumed in connection with, any Permitted Acquisition under Sections 7.8(i); provided that such Indebtedness was not incurred (x) to provide all or a portion of the funds utilized to consummate the transaction or series of related transactions constituting such Permitted Acquisition or (y) otherwise in connection with, or in contemplation of, such Permitted Acquisition; and provided, further, that the aggregate amount of such Indebtedness shall not exceed $15,000,000 at any time outstanding; and (ii) any refinancings, refundings, renewals or extensions thereof (without any increase in the principal amount thereof and on terms no less favorable to the Borrower or the applicable Subsidiary);
(h) Indebtedness of Excluded Foreign Subsidiaries; provided that the aggregate amount of such Indebtedness shall not exceed $20,000,000;
(i) Unsecured subordinated Indebtedness of the Borrower
in an aggregate amount not exceeding $150,000,000 at any one time outstanding
and the unsecured guarantee by any Guarantor hereunder of the Borrower's
obligations thereunder; provided that (i) the proceeds thereof are used either
(x) to repay the Obligations hereunder or (y) to consummate Permitted
Acquisitions and (ii) (w) no part of the principal part of such Indebtedness
shall have a maturity date earlier than the final maturity of the Loans
hereunder, (x) after giving effect to the incurrence of any such Indebtedness
(and any substantially concurrent repayment of Obligations or consummation of a
Permitted Acquisition) on a pro forma basis, as if such incurrence of
Indebtedness (and any substantially concurrent repayment of Obligations or
consummation of a Permitted Acquisition) had occurred on the first day of the
twelve month period ending on the last day of the Borrower's then most recently
completed fiscal quarter for which financial statements are available, the
Borrower and its Subsidiaries would have been in compliance with all the
financial covenants set forth in Section 7.1 and the Borrower shall have
delivered to the Administrative Agent a certificate of a Responsible Officer of
the Borrower to such effect setting forth in reasonable detail the computations
necessary to determine such compliance, (y) at the time of the incurrence of
such Indebtedness and after giving effect thereto, no Default or Event of
Default shall exist or be continuing and (z) the documentation governing such
Indebtedness contains customary market terms (including subordination terms
reasonably acceptable to the Administrative Agent);
(j) to the extent constituting Indebtedness, customary overdraft and similar protections in connection with deposit accounts in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of its incurrence;
(k) to the extent constituting Indebtedness of the Borrower or Holdings, customary indemnification, deferred purchase price adjustments, earn-outs or similar obligations,
in each case, incurred or assumed in connection with the acquisition of any
business or assets permitted to be acquired hereunder provided that the maximum
aggregate liability in respect of all such Indebtedness permitted by this clause
(k) shall not exceed 30% of the aggregate purchase price for such acquisitions;
(l) Indebtedness of an Excluded Foreign Subsidiary which would be permitted as an Investment pursuant to Sections 7.8(m) and (n);
(m) Indebtedness issued to insurance companies to finance insurance premiums payable to such insurance companies in connection with insurance policies purchased by a Loan Party in the ordinary course of business in an aggregate amount not to exceed $10,000,000; and
(n) additional Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $15,000,000 at any one time outstanding.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(b) (i) carriers', warehousemen's, landlord's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 45 days or that are being contested in good faith by appropriate proceedings; provided that adequate reserves with respect thereto are maintained in the books of the applicable Loan Party, in conformity with GAAP and (ii) Liens of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods;
(c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;
(d) deposits by or on behalf of the Borrower or any of its Subsidiaries to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, so long as the aggregate amount of deposits at any one time securing appeal bonds does not exceed $10,000,000;
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries taken as a whole;
(f) Liens in existence on the date hereof and either (i)
listed on Schedule 7.3(f) securing Indebtedness permitted by Section 7.2(d) or
(ii) disclosed on any title
insurance policies obtained in connection with the Mortgages, and replacement Liens on the same assets securing permitted refinancings thereof provided that no such Lien is spread to cover any additional Property (other than proceeds thereof) after the Closing Date and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any of its Subsidiaries incurred pursuant to Section 7.2(c) to finance the acquisition of fixed or capital assets or the refinancing thereof, provided that (i) such Liens shall be created within 90 days of the acquisition or refinancing of such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness when such Indebtedness was originally incurred, and the proceeds of such Property, (iii) the amount of Indebtedness secured thereby is not increased (in the case of a refinancing) and (iv) the principal amount of Indebtedness initially secured thereby is not more than 100% of the purchase price of such fixed or capital asset;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor or sublessor under any lease or sublease entered into by the Borrower or any Subsidiary in the ordinary course of its business and covering only the assets so leased or subleased and any Liens on such lessor's or sublessor's interest or title;
(j) Liens in connection with attachments or judgments in circumstances not constituting an Event of Default under Section 8(h);
(k) Liens on the property or assets of a Person which becomes a Subsidiary of the Borrower after the date hereof, or is acquired by such Person after the date hereof, securing Indebtedness permitted by Section 7.2(g); provided that (i) such Liens existed at the time such Person became a Subsidiary of the Borrower, (ii) such Liens were not granted in connection with or in contemplation of the applicable Permitted Acquisition and (iii) the amount of Indebtedness secured thereby is not increased and such Liens are not expanded to cover additional Property (other than proceeds therof);
(l) Liens on the assets of any Excluded Foreign Subsidiary (other than intercompany notes payable to a Loan Party) which secure Indebtedness permitted pursuant to Section 7.2(h);
(m) Liens consistent with those arising by operation of law consisting of customary and ordinary course rights of setoff upon deposits of cash in favor of banks or other depository institutions in the ordinary course of business;
(n) Liens on unearned premiums in respect of insurance policies securing insurance premium financing permitted under Section 7.2(m);
(o) Liens on cash proceeds of refinancing Indebtedness permitted under Section 7.2(f) in favor of the holders of the Senior Subordinated Notes or such refinancing Indebtedness to the extent such Lien is required by the terms of the documentation governing
such refinancing Indebtedness or the Senior Subordinated Note Documentation in connection with a defeasance, redemption or other repayment of the Senior Subordinated Notes; and
(p) Liens not otherwise permitted by this Section 7.3 so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined, in the case of each such Lien, as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all Subsidiaries) $10,000,000 at any one time.
7.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its Property or business, except that:
(a) any Solvent Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Wholly Owned Subsidiary Guarantor (provided that (i) such Subsidiary Guarantor shall be the continuing or surviving corporation or (ii) simultaneously with such transaction, the continuing or surviving corporation shall become a Subsidiary Guarantor and the Borrower shall comply with Section 6.10 in connection therewith);
(b) any Subsidiary of the Borrower may Dispose of any or all of its assets (i) (upon voluntary liquidation, windup, dissolution or otherwise) to the Borrower or any Wholly Owned Subsidiary Guarantor or (ii) pursuant to a Disposition permitted by Section 7.5;
(c) any Excluded Foreign Subsidiary may (i) be merged or consolidated with or into any other Excluded Foreign Subsidiary, or (ii) Dispose of any or all of its assets to (upon voluntary liquidation, windup, dissolution or otherwise) any other Excluded Foreign Subsidiary;
(d) a Foreign Subsidiary may merge with another Foreign Subsidiary, incorporated or organized for the purpose of reincorporating or reorganizing such Foreign Subsidiary in another jurisdiction to realize tax or other benefits; provided that the Borrower notifies the Administrative Agent at least 30 days (or such shorter period as is acceptable to the Administrative Agent) prior to such merger and takes all actions necessary to maintain the Administrative Agent's Liens on the Collateral; and
(e) any Permitted Acquisition made by the Borrower or a Subsidiary Guarantor may be structured as a merger, consolidation or amalgamation; provided that the surviving legal entity of such merger, consolidation or amalgamation is the Borrower or such Subsidiary Guarantor.
7.5 Limitation on Disposition of Property. Dispose of any of its Property (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary of Holdings, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b)(i) and 7.4(c)(ii);
(d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Wholly Owned Subsidiary Guarantor or the sale or issuance of any Excluded Foreign Subsidiary's Capital Stock to another Excluded Foreign Subsidiary, provided that any Guarantor's ownership interest therein is not diluted;
(e) (i) the closure and Disposition of retail stores in
the ordinary course of business and (ii) the Disposition, other than pursuant to
Section 7.5(h), of stores to franchisees having a fair market value not to
exceed $7,500,000 in the aggregate for any fiscal year of the Borrower;
(f) the Disposition of cash or Cash Equivalents in the ordinary course of business;
(g) the license or sub-license of Intellectual Property in the ordinary course of business;
(h) the closure and Disposition of 117 stores in connection with the Acquisition as contemplated by the Acquisition Agreement;
(i) a Disposition consisting of a sublease of real property which is permitted by Section 7.3(i);
(j) the Disposition of surplus or other property no longer used or useful in the business of the Borrower and its Subsidiaries in the ordinary course of business;
(k) the Disposition of other assets having a fair market value not to exceed $20,000,000 in the aggregate for any fiscal year of the Borrower; and
(l) any Recovery Event.
7.6 Limitation on Restricted Payments. Declare or pay any dividend on (other than dividends payable solely in common stock of the Person making the dividend so long as the ownership interest of any Guarantor in such Person is not diluted), or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of Holdings, the Borrower or any of its Subsidiaries, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Holdings, the Borrower or any of its Subsidiaries (collectively, "Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor;
(b) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may pay dividends to Holdings to permit Holdings to (i) purchase Holdings' common stock or common stock options from present or former officers or employees of Holdings, the Borrower or any Subsidiary upon the death, disability or termination of employment of such officer or employee, provided, that the aggregate amount of payments under this clause (i) subsequent to the date hereof (net of any proceeds received by Holdings and contributed to the Borrower subsequent to the date hereof in connection with resales of any common stock or common stock options so purchased) shall not exceed $5,000,000 and (ii) pay management fees and other fees and reasonable expenses to the Sponsor and its Control Investment Affiliates permitted by Section 7.10;
(c) the Borrower may pay dividends to Holdings to permit Holdings to (i) pay corporate overhead expenses (including, without limitation, directors' fees and expenses) incurred in the ordinary course of business not to exceed $500,000 in any fiscal year and (ii) pay any taxes which are due and payable by Holdings as the parent of a consolidated, combined, unitary or other similar group that includes the Borrower; provided, that (x) the amount of such dividends shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Borrower would owe if the Borrower and its Subsidiaries were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Borrower and such Subsidiaries from other taxable years (as reduced by the use of such carryovers and carrybacks by the group of which Holdings is a member) and (ii) the amount of the relevant tax, taking into account any allowed tax credits, that Holdings actually owes to the appropriate taxing authority and (y) such dividends pursuant to this Section 7.6(c) are used by Holdings for such purpose within 30 days of the receipt of such dividends;
(d) the Borrower may pay cash dividends to Holdings to permit Holdings to pay cash dividends, and Holdings shall be permitted to pay such dividends to the holders of Holding's Capital Stock, in each case so long as (x) no Default or Event of Default shall have occurred and be continuing, (y) both prior to and immediately after giving effect to such dividend (i) the Consolidated Secured Leverage Ratio of the Borrower and its Subsidiaries is less than 1.50:1.00 and (ii) the Consolidated Fixed Charge Coverage Ratio of the Borrower and its Subsidiaries is greater than 1.25:1.00 (in each case, based on the most recent twelve month period for which financial statements are available) and (z) as of the date of such cash dividend, the aggregate amount of all Restricted Payments made pursuant to this Section 7.6(d) through such date, pro forma to include such cash dividend, does not exceed 50% of the aggregate amount of Consolidated Net Income of the Borrower and its Subsidiaries from January 1, 2004 through such date;
(e) any non-Wholly Owned Subsidiary of the Borrower may declare and pay cash dividends to its equity holders generally so long as the Borrower or its respective Subsidiary which owns the equity interests in the Subsidiary paying such dividends receives at least its proportionate share thereof (based upon the relative holding of the equity interests in the Subsidiary paying such dividends);
(f) Holdings may make additional Restricted Payments with
Available Cash to the extent such cash has not been used to make Investments
pursuant to Sections 7.8(i), (l), (m) or (p), Capital Expenditures pursuant to
Section 7.7(c) or make Restricted Payments pursuant to Section 7.6(d), or to
pay, prepay, repurchase, redeem or defease the Senior Subordinated Notes
pursuant to Section 7.9(a);
(g) any non-Guarantor Wholly Owned Subsidiary of the Borrower may declare and pay cash dividends to any Subsidiary of the Borrower which owns the equity interests in such non-Guarantor Subsidiary;
(h) Holdings may pay cash dividends to the holders of its Capital Stock in an amount equal to the fees and expenses payable by the Initial Investors in connection with the issuance of the Preferred Stock or the resale following the Closing Date of the Preferred Stock issued to the Initial Investors on or about the Closing Date and, to the extent that the proceeds from such issuance or resale of such Preferred Stock are less than the sum of such fees and expenses plus the cumulative value of the Preferred Stock, the Borrower may pay cash dividends to Holdings in an amount equal to the difference between such sum and the amount of such proceeds; and
(i) Holdings may make Restricted Payments to its equity holders in the form of Capital Stock of Holdings.
7.7 Limitation on Capital Expenditures. Make or commit to
make any Capital Expenditure, except (a) Capital Expenditures (excluding Capital
Expenditures referred to in clauses (b) and (c) of this Section 7.7) of the
Borrower and its Subsidiaries in the ordinary course of business not exceeding
$45,000,000 per fiscal year; provided, that (i) up to 50% of any such amount
referred to above, if not so expended in the fiscal year for which it is
permitted, may be carried over for expenditure in the next succeeding fiscal
year and (ii) Capital Expenditures made pursuant to this clause (a) during any
fiscal year shall be deemed made, first, in respect of amounts permitted for
such fiscal year as provided above and second, in respect of amounts carried
over from the prior fiscal year pursuant to subclause (i) above, (b) Capital
Expenditures made with the proceeds of any Reinvestment Deferred Amount and (c)
Capital Expenditures made with Available Cash to the extent such Available Cash
has not been used to make Investments pursuant to Sections 7.8(i), (l), (m) or
(p) or Restricted Payments pursuant to Sections 7.6(d) or (f), or to pay,
prepay, repurchase, redeem or defease the Senior Subordinated Notes pursuant to
Section 7.9(a).
7.8 Limitation on Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting an ongoing business from, or make any other investment in, any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit or the holding of receivables in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of Indebtedness permitted by Section 7.2(b), (e) and (g);
(d) loans and advances to employees of Holdings, the Borrower or any Subsidiaries of the Borrower in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) in an aggregate amount for Holdings, the Borrower and Subsidiaries of the Borrower not to exceed $2,000,000 at any one time outstanding;
(e) the Acquisition;
(f) Investments in assets useful in the Borrower's or the applicable Subsidiary Guarantor's business made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment Deferred Amount;
(g) Investments (other than those relating to the incurrence of Indebtedness permitted by Section 7.8(c)) by Holdings, the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such Investment, is a Subsidiary Guarantor;
(h) Investments consisting of notes payable by franchisees to the Borrower or any Subsidiary Guarantor in an amount not to exceed $75,000,000 in aggregate principal amount (including amounts outstanding as of the Closing Date) at any one time outstanding;
(i) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any Subsidiary Guarantors constituting acquisitions of franchisees, franchisee store locations or other Persons in the same or similar line of business as the Borrower or its Subsidiaries ("Permitted Acquisitions"); provided that
(i) immediately prior to and after giving effect to any such Permitted Acquisition, (x) no Default or Event of Default shall have occurred and be continuing and (y) the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 7.1 and the Borrower shall have certified each of the same to the Administrative Agent in writing;
(ii) if such Permitted Acquisition is structured as a stock acquisition, or a merger or consolidation, then either (A) the Person so acquired becomes a Wholly Owned Subsidiary or (B) such Person is merged with and into either the Borrower or a Wholly Owned Subsidiary of the Borrower (with the Borrower or such Subsidiary being the surviving corporation in such merger);
(iii) all of the provisions of Section 6.10 have been or will be complied with in respect of such Permitted Acquisition; and
(iv) (A) any cash consideration shall not exceed $10,000,000 in the aggregate in any fiscal year plus up to $75,000,000 received as the proceeds from Indebtedness permitted under Section 7.2(i), in the aggregate in any fiscal year plus Available Cash to the extent such cash has not been used to make Investments pursuant to Sections 7.8(l), (m) or (p), Restricted Payments pursuant to Sections 7.6(d) or (f) or
Capital Expenditures pursuant to Section 7.7(c) and (B) Holdings may also consummate such Permitted Acquisition in exchange for or with Capital Stock of Holdings;
(j) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, franchisees, customers and suppliers;
(k) any Loan Party may make Investments consisting of loans to employees, officers and directors of the Loan Parties not to exceed $5,000,000, net of recoveries and distributions received in cash thereon by any Loan Party, at any time outstanding;
(l) Investments by the Borrower or any of its Subsidiaries in joint ventures with any Available Cash which has not been used to make Restricted Payments pursuant to Sections 7.6(d) or (f), Capital Expenditures pursuant to 7.7(c) or Investments pursuant to Sections 7.8(i), (m) or (p), or to pay, prepay, repurchase, redeem or defease the Senior Subordinated Notes pursuant to Section 7.9(a);
(m) intercompany Investments by the Borrower or any of
its Subsidiaries in any Person, that, prior to such Investment, is an Excluded
Foreign Subsidiary not to exceed $10,000,000 at any one time outstanding net of
recoveries and distributions thereon received in cash by any Loan Party, plus
the amount of any Available Cash which has not been used to make Restricted
Payments pursuant to Sections 7.6(d) or (f), Capital Expenditures pursuant to
Section 7.7(c) or Investments pursuant to Sections 7.8(i), (l) or (p), or to
pay, prepay, repurchase, redeem or defease the Senior Subordinated Notes
pursuant to Section 7.9(a);
(n) intercompany Investments among Excluded Foreign Subsidiaries;
(o) Investments consisting of promissory notes and other deferred payment obligations delivered as the purchase consideration for a Disposition permitted by Section 7.5, so long as such notes and deferred payment obligations (i) comprise less than 25% of the aggregate purchase consideration for such Disposition and (ii) do not exceed $10,000,000 in the aggregate, net of recoveries and distributions thereon received in cash by any Loan Party, at any time outstanding;
(p) additional Investments (other than Permitted
Acquisitions) made (i) with any Available Cash which has not been used to make
Restricted Payments pursuant to Sections 7.6(d) or (f), Capital Expenditures
pursuant to Section 7.7(c) or Investments pursuant to Sections 7.8(i), (l) or
(m), or to pay, prepay, repurchase, redeem or defease the Senior Subordinated
Notes pursuant to Section 7.9(a) or (ii) in exchange for or with Capital Stock
of Holdings; and
(q) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Subsidiaries in an aggregate amount (initially valued at cost) not to exceed $10,000,000 net of recoveries and distributions thereon received in cash by any Loan Party during the term of this Agreement.
7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc(a) . (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of, or otherwise voluntarily or optionally defease, the Senior Subordinated Notes or segregate funds for any such payment, prepayment, repurchase, redemption or defeasance (other
than, in each case, (i) by a refinancing permitted by Section 7.2(f) or (ii) with Available Cash which has not been used to make Restricted Payments pursuant to Sections 7.6(d) or (f), Capital Expenditures pursuant to Section 7.7(c) or Investments pursuant to Sections 7.8(i), (l), (m) or (p)), or enter into any derivative or other transaction with any financial institution, commodities or stock exchange or clearinghouse (a "Derivatives Counterparty") obligating Holdings, the Borrower or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market value of the Senior Subordinated Notes, (b) amend, modify or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes (other than any such amendment, modification, waiver or other change which (x)(i) would extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or extend the date for payment of interest thereon or relax any covenant or other restriction applicable to Holdings, the Borrower or any of its Subsidiaries or (ii) does not otherwise adversely affect the Lenders and (y) does not involve the payment of a consent fee, other than a consent fee not to exceed 2.0% of the principal amount of Senior Subordinated Notes held by consenting holders in connection with consents solicited in connection with the prepayment of such Senior Subordinated Notes), (c) designate any Indebtedness (other than the Obligations) as "Designated Senior Indebtedness" for the purposes of the Senior Subordinated Note Indenture or (d) amend its certificate of incorporation, by-laws or other governing documents in any manner determined by the Administrative Agent to be adverse to the Lenders.
7.10 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than Holdings, the Borrower or any Subsidiary Guarantor) unless (1) such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of Holdings, the Borrower or such Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less favorable to Holdings, the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate or (2) such transaction is with a non-Guarantor Subsidiary and is otherwise permitted under this agreement and in the ordinary course of business of Holdings, the Borrower or such Subsidiary, as the case may be. Notwithstanding the foregoing, the Borrower and its Subsidiaries may (a) pay to the Sponsor and its Control Investment Affiliates the management fees pursuant to the Management Agreement approved by the board of directors of the Borrower in an aggregate amount not to exceed $1,500,000 in any fiscal year of the Borrower and (b) enter into and consummate the transactions listed on Schedule 7.10.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by Holdings, the Borrower or any of its Subsidiaries of real or personal property which has been or is to be sold or transferred by Holdings, the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Holdings, the Borrower or such Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of Holdings, the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the case of any guarantor, its obligations under the Guarantee and Collateral Agreement, other than (a) this Agreement and the other Loan Documents, (b) the Senior Subordinated Note Indenture and any agreements governing Indebtedness permitted by Sections 7.2(f) and (i), to the extent such agreements are no more restrictive than the Senior Subordinated Note Indenture, (c) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (d) any agreements governing Indebtedness of any Excluded Foreign Subsidiary permitted by Section 7.2(h) (in which case, any such prohibition or limitation shall only be effective against the assets of such Excluded Foreign Subsidiary and its Subsidiaries), (e) any agreements governing Indebtedness permitted by Section 7.2(g) (in which case any such prohibition shall only be effective against the assets permitted to be subject to Liens permitted by Section 7.3(k)), (f) customary provisions in joint venture agreements and similar agreements that restrict transfer of assets of, or equity interests in, joint ventures, (g) licenses or sublicenses by the Borrower and its Subsidiaries of Intellectual Property in the ordinary course of business (in which case any prohibition or limitation shall only be effective against the Intellectual Property subject thereto), (h) prohibitions and limitations in effect on the date hereof and listed on Schedule 7.13(h) and (i) provisions in leases that restrict the transfer of such lease by the lessee.
7.14 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay or subordinate any Indebtedness owed to, Holdings, the Borrower or any other Subsidiary, (b) make Investments in the Borrower or any other Subsidiary or (c) transfer any of its assets to the Borrower or any other Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents, (ii) any restrictions existing under the Senior Subordinated Note Indenture and any agreements governing Indebtedness permitted by Sections 7.2(f) and (i), to the extent such restrictions are no more restrictive than those in the Senior Subordinated Note Indenture, (iii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (iv) customary net worth provisions contained in real property leases entered into by any Loan Party so long as such net worth provisions could not reasonably be expected to impair materially the ability of the Loan Parties to meet their ongoing obligations under this Agreement or any of the other Loan Documents, (v) any restriction with respect to Excluded Foreign Subsidiaries in connection with Indebtedness permitted by Section 7.2(h) and (vi) with respect to clause (c) only, (i) agreements described in clauses (c)-(i) of Section 7.13, to the extent set forth in such clauses and (ii) restrictions with respect to the transfer of any asset contained in an agreement that has been entered into in connection with the disposition of such asset permitted hereunder.
7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its
Subsidiaries are engaged on the date of this Agreement (after giving affect to the Acquisition) or that are reasonably related thereto.
7.16 Limitation on Amendments to Acquisition Documentation(a). (a) Amend, supplement or otherwise modify (whether pursuant to a waiver granted by or to such Person or otherwise) or fail to enforce strictly the terms and conditions of the indemnities and licenses furnished to the Borrower or any of its Subsidiaries pursuant to the Acquisition Documentation such that after giving effect thereto such indemnities or licenses shall be materially less favorable to the interests of the Loan Parties or the Lenders with respect thereto or (b) otherwise amend, supplement or otherwise modify or fail to enforce the terms and conditions of the Acquisition Documentation except to the extent that any such amendment, supplement or modification or failure to enforce could not reasonably be expected to have a Material Adverse Effect.
7.17 Limitation on Activities of Holdings. In the case of Holdings, notwithstanding anything to the contrary in this Agreement or any other Loan Document, (a) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Borrower, (b) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations imposed by operation of law, (ii) pursuant to the Loan Documents to which it is a party, the Senior Subordinated Note Indenture, the Management Agreement and the Acquisition Agreement, (iii) obligations with respect to its Capital Stock (including obligations to underwriters and other professionals in connection with the issuance of such Capital Stock), (iv) Indebtedness expressly permitted by Section 7.2 and (v) Investments expressly permitted by Section 7.8, or (c) own, lease, manage or otherwise operate any properties or assets (including cash (other than cash received in connection with dividends made by the Borrower in accordance with Section 7.6 pending application in the manner contemplated by said Section) and Cash Equivalents) other than the ownership of shares of Capital Stock of the Borrower.
7.18 Limitation on Hedge Agreements. Enter into any Hedge Agreement other than Hedge Agreements entered into in the ordinary course of business, and not for speculative purposes, to protect against changes in interest rates, commodity prices or foreign exchange rates.
7.19 Limitation on Activities of New GNC With respect to New GNC, notwithstanding anything to the contrary in this Agreement or any other Loan Document, cause or permit New GNC to (a) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of General Nutrition Incorporated, (b) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (i) nonconsensual obligations imposed by operation of law or, (ii) pursuant to the Loan Documents to which it is a party and the Senior Subordinated Note Indenture.
7.20 Limitation on Indebtedness of Gustine Associates:
Except to the extent required by the terms of the limited partnership agreement
of Gustine Associates on the date hereof, and subject to any fiduciary
obligations under statutory or common law, consent to or otherwise permit
Gustine Associates to create, incur, assume or suffer to exist (i) any
Indebtedness other than the Indebtedness of Gustine Associates outstanding on the Closing Date and (ii) any Lien other than the Liens in existence on the Closing Date and Liens of the type described in Section 7.3(b) arising by operation of law.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any Loan Party shall fail to pay any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof or thereof; or
(b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; or
(c) Any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to Holdings and the Borrower only), Section 6.7(a) or Section 7, or in Section 5 of the Guarantee and Collateral Agreement; or
(d) Any Loan Party shall default in the observance or performance of any covenant or other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days following the earlier of (x) actual knowledge by a Responsible Officer of any Loan Party and (y) written notice thereof by the Administrative Agent or the Required Lenders; or
(e) Holdings, the Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) on the scheduled or original due date with respect thereto beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $10,000,000; or
(f) (i) Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries (other than a non-Guarantor Immaterial Subsidiary) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan, or any Lien in favor of the PBGC or a Plan shall arise on the assets of
the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is reasonably likely to result in the termination of
such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall be reasonably likely to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, or (vi) any other similar event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving for Holdings, the Borrower and its Subsidiaries taken as a whole a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or
(k) Any Change of Control shall occur; or
(l) The Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Revolving Credit Facility Lenders, the Administrative Agent may, or upon the request of the Majority Revolving Credit Facility Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving Credit Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents
required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. In the case of all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount in immediately available funds equal to the aggregate then undrawn and unexpired amount of such Letters of Credit (and the Borrower hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a continuing security interest in all amounts at any time on deposit in such cash collateral account to secure the undrawn and unexpired amount of such Letters of Credit and all other Obligations). If at any time the Administrative Agent determines that any funds held in such cash collateral account are subject to any right or claim of any Person other than the Administrative Agent and the Secured Parties or that the total amount of such funds is less than the aggregate undrawn and unexpired amount of outstanding Letters of Credit, the Borrower shall, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in such cash collateral account, an amount equal to the excess of (a) such aggregate undrawn and unexpired amount over (b) the total amount of funds, if any, then held in such cash collateral account that the Administrative Agent determines to be free and clear of any such right and claim. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto).
SECTION 9. THE AGENTS; THE ARRANGERS
9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Arranger, any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by any Arranger or the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Agents. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Loan Parties), independent accountants and
other experts selected by such Agent. The Agents may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 10.6 and all actions required by such
Section in connection with such transfer shall have been taken. Each Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders (or, if so specified by this Agreement,
all Lenders or any other instructing group of Lenders specified by this
Agreement) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the other Loan Documents in accordance
with a request of the Required Lenders (or, if so specified by this Agreement,
all Lenders or any other instructing group of Lenders specified by this
Agreement), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent shall have received notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent shall receive such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Arrangers, Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Arrangers, any of the Agents nor any of their respective officers, directors, employees, agents, attorneys and other advisors, partners, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Arranger or any Agent to any Lender. Each Lender represents to the Agents and the Arrangers that it has, independently and without reliance upon any Arranger, or any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans (and in the case of any Issuing Lender, to issue its Letters of Credit) hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Arranger, any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Arranger and no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of such Arranger or Agent or any of its officers, directors, employees, agents, attorneys and other advisors, partners, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each
Arranger and each Agent in its capacity as such (to the extent not reimbursed by
Holdings or the Borrower and without limiting the obligation of Holdings or the
Borrower to do so), ratably according to their respective Aggregate Exposure
Percentages in effect on the date on which indemnification is sought under this
Section (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages immediately prior
to such date), for, and to save each Arranger and each Agent harmless from and
against, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against such Arranger or such Agent in any way relating to or arising out of,
the Commitments, this Agreement, any of the other Loan Documents, the
Acquisition Documentation, or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by such Arranger or such Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits,
costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely and proximately from such Arranger's or such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
9.8 Arrangers and Agents in their Individual Capacities. Each Arranger and each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Arranger or such Agent were not an Arranger or an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Arranger and each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Arranger or an Agent, and the terms "Lender" and "Lenders" shall include each Arranger and Agent in their individual capacities.
9.9 Successor Agents. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 8(a) or Section 8(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans or issuers of Letters of Credit. If no successor agent has accepted appointment as Administrative Agent by the date that is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by any Arranger, any Agent or any Lender. After any retiring Agent's resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.
9.10 Authorization to Release Liens and Guarantees. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Section 10.15.
9.11 The Arrangers; the Syndication Agent. The Arrangers and the Syndication Agent, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement and the other Loan Documents.
9.12 Withholding Tax. (a) To the extent required by any applicable law, the Administrative Agent may withhold from any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the forms or other documentation required by Section 2.20(e) are not delivered to the Administrative Agent, then the Administrative Agent may withhold from any interest payment to any Lender not providing such forms or other documentation, a maximum amount of the applicable withholding tax.
(b) If the Internal Revenue Service or any authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective), such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, together with all expenses incurred, including legal expenses, allocated staff costs and any out of pocket expenses; provided that no Lender shall be liable for the payment of any portion of such amounts that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely and proximately from such Arranger's or such Agent's gross negligence or willful misconduct. Nothing in this Section 9.12 reduces or eliminates the Borrower's obligations under Section 2.20.
(c) If any Lender sells, assigns, grants a participation in, or otherwise transfers its rights under this Agreement, the purchaser, assignee, participant or transferee, as applicable, shall comply and be bound by the terms of Sections 2.20(e) and 9.12; provided that with respect to any Participant, as set forth in Section 10.6(b), such Participant shall only be required to comply with the requirements of Sections 2.20(e) and 9.12. if such Participant seeks to obtain the benefits of Section 2.20.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement nor
any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. The Required Lenders and each Loan Party party to the relevant
Loan Document may, or (with the written consent of the Required Lenders) the
Administrative Agent and each Loan Party party to the relevant Loan Document
may, from time to time, (a) enter into written amendments, supplements or
modifications hereto and to the other Loan Documents (including amendments and
restatements hereof or thereof) for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as may be specified in the instrument of waiver, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:
(i) forgive the principal amount or extend the final scheduled date of maturity of any Loan or Reimbursement Obligation, extend the scheduled date of any amortization payment in respect of any Term Loan, reduce the stated rate of any interest
or fee payable hereunder or extend the scheduled date of any payment thereof, increase the amount or extend the expiration date of any Commitment of any Lender, or permit any Interest Period with a duration longer than 6 months, in each case without the consent of each Lender directly affected thereby;
(ii) amend, modify or waive any provision of this
Section or reduce any percentage specified in the definition of
Required Lenders, consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement and the other
Loan Documents, release all or substantially all of the Collateral or
release all or substantially all of the Subsidiary Guarantors from
their guarantee obligations under the Guarantee and Collateral
Agreement, in each case without the consent of all Lenders;
(iii) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the written consent of all Lenders under such Facility;
(iv) amend, modify or waive any provision of
Section 9 or any other provision affecting the rights, duties and
obligations of any Arranger or any Agent without the consent of any
Arranger or Agent directly affected thereby;
(v) amend, modify or waive any provision of
Section 2.6 or 2.7 without the written consent of the Swing Line
Lender;
(vi) amend, modify or waive the pro rata provisions of Section 2.18 without the consent of each Lender directly affected thereby;
(vii) amend, modify or waive any provision of
Section 3 without the consent of the Issuing Lender;
(viii) impose restrictions on assignments and participations that are more restrictive than, or additional to, those set forth in Section 10.6 without the consent of all Lenders directly affected thereby; or
(ix) amend, modify or waive the provisions of
Section 2.12(d) to provide that Additional Extensions of Credit have a
preference to the Term Loans with respect to mandatory prepayments or
provide that any Term Loans have a preference to any other Term Loans
with respect to mandatory prepayment, in each case, without the consent
of each Term Loan Lender directly affected thereby.
Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Arrangers, the Agents and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders, the Arrangers and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section;
provided, that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
Notwithstanding the foregoing clauses (ii), (iii), (vi) and
(ix), this Agreement and any other Loan Document may be amended (or amended and
restated) with the written consent of the Required Lenders, the Administrative
Agent and each Loan Party party to each relevant Loan Document (x) to add one or
more additional credit facilities to this Agreement and to permit the extensions
of credit from time to time outstanding thereunder and the accrued interest and
fees in respect thereof (collectively, the "Additional Extensions of Credit") to
share ratably in the benefits of this Agreement and the other Loan Documents
with the Term Loans and Revolving Extensions of Credit and the accrued interest
and fees in respect thereof, and any Additional Extensions of Credit which do
not constitute an increase in the Revolving Credit Facility may share ratably in
the application of mandatory prepayments with other Term Loans and with
preference to Revolving Extensions of Credit and (y) to include appropriately
the Lenders holding such credit facilities in any determination of the Required
Lenders, Majority Facility Lenders, Term Loan Lenders and Majority Revolving
Facility Lenders.
10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of Holdings, the Borrower, the Arrangers, and the Agents, as follows and (b) in the case of the Lenders, as set forth in an administrative questionnaire delivered to the Administrative Agent or on Schedule I to the Lender Addendum to which such Lender is a party or, in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto:
Holdings: General Nutrition Centers Holding Company
10250 Constellation Boulevard, Suite 2900
Los Angeles, California 90067
Attention: Michael Weiner
Telecopy: (310) 843-1950
Telephone: (310) 843-1990
The Borrower: General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Attention: James Sander, Chief Legal
Officer
Telecopy: (412) 338-8900
Telephone: (412) 288-4619,
in each case with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
93
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300 South Grand Avenue, 34th Floor
Los Angeles, California 90071
Attention: David C. Reamer
Telecopy: (213) 621-5052
Telephone: (213) 687-5052
The Administrative Agent:
Lehman Commercial Paper Inc.
745 Seventh Avenue
New York, New York 10019
Attention: Francis Chang
Telecopy: (646) 758-3864
Telephone: (212) 526-5390
with a copy to:
Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Christopher R. Plaut
Telecopy: (212) 751-4864
Telephone: (212) 906-1200
The Syndication Agent: JPMorgan Chase Bank
1111 Fannin, 10th
Houston, Texas 77002
Attention: Sheila King
Telecopy: (713) 750-2782
Telephone: (713) 750-2242
with a copy to: Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Christopher R. Plaut
Telecopy: (212) 751-4864
Telephone: (212) 906-1200
The Arrangers: Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Attention: Diane Albanese
Telecopy: (212) 526-6643
Telephone: (212) 526-6590
J.P. Morgan Securities Inc.
270 Park Avenue
94
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New York, New York 10017
Attention: Teri Streusand
Telecopy: (212) 270-3279
Telephone: (212) 270-9803
with a copy to: Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Christopher R. Plaut
Telecopy: (212) 751-4864
Telephone: (212) 906-1200
Issuing Lender: As notified by such Issuing Lender to the
Administrative Agent and the Borrower
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provided that any notice, request or demand to or upon any Arranger, any Agent, the Issuing Lender or any Lender shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Arranger, any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations and warranties made herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse the Arrangers and the Agents for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Facilities (other than fees payable to syndicate members) and the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements and other charges of counsel to the Administrative Agent (which expenses shall be limited to one primary law firm and any other local and specialist law firms) and the charges of Intralinks, (b) if a Default or Event of Default has occurred and is continuing, to pay or reimburse each Lender, the Arrangers and the Agents for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, including, without limitation, the fees and disbursements of counsel (including the allocated fees and disbursements and other charges of in-house counsel) to each Lender and of counsel to the Agents (which expenses shall be limited to one set of primary, local and specialist counsel for
the Administrative Agent and one set of primary, local and specialist counsel for the Lenders), (c) to pay, indemnify, or reimburse each Lender, the Arrangers and the Agents for, and hold each Lender, the Arrangers and the Agents harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify or reimburse each Lender, each Arranger, each Agent, their respective affiliates, and their respective officers, directors, partners, trustees, employees, affiliates, shareholders, attorneys and other advisors, agents and controlling persons (each, an "Indemnitee") for, and hold each Indemnitee harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of Holdings, the Borrower any of its Subsidiaries or any of the Properties or the use by unauthorized persons of information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such persons and the fees and disbursements and other charges of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower hereunder (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by unauthorized persons of information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such persons or for any special, indirect, consequential or punitive damages in connection with the Facilities. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee, except to the extent such claim, demand, penalty, fine, liability, settlement, damage, cost or expense is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section shall be payable not later than 30 days after written demand therefor. Statements payable by the Borrower pursuant to this Section shall be submitted to the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a notice to the Administrative Agent. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of Holdings, the Borrower, the Lenders, the Arrangers, the Agents, all future holders of the Loans and their respective successors and assigns, except that neither Holdings nor the Borrower may assign or transfer any of their respective rights or obligations under this Agreement without the prior written consent of the Arrangers, the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower
or any other Person, in accordance with applicable law, at any time sell to one
or more banks, financial institutions, investment fund or other entities (each,
a "Participant") participating interests in any Loan owing to such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Agents shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. In no
event shall any Participant under any such participation have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would require the consent of all Lenders
pursuant to Section 10.1. The Borrower agrees that if amounts outstanding under
this Agreement and the Loans are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall, to the maximum extent permitted by applicable law, be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if such Participant
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.19, 2.20 and 2.21 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if such Participant were a Lender; provided that, in the case of Section 2.20,
such Participant shall have complied with the requirements of said Section and
Section 9.12, and provided, further, that no Participant shall be entitled to
receive any greater amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law and upon written notice to the Administrative Agent, at any time and from time to time assign (i) to any Lender or any affiliate, Related Fund or Control Investment Affiliate thereof or (ii) with the consent of the Borrower and the Administrative Agent and, in the case of any assignment of Revolving Credit Commitments, the written consent of the Swing Line Lender (which consents, in each case, shall not be unreasonably withheld or delayed) (provided that no such consent need be obtained by the Administrative Agent and its affiliates), to an additional bank, financial institution, investment fund or other entity (an "Assignee") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E (an "Assignment and Acceptance"), executed by such Assignee and such Assignor (and, where the consent of the Borrower, the Administrative Agent or the Swing Line Lender is required pursuant to the foregoing provisions, by the Borrower and such other Persons) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender or any affiliate thereof (including any Related Fund or Control Investment Affiliate)) shall be in an aggregate principal amount of less than $1,000,000 (with respect to Term Loans (treating multiple, simultaneous assignments by or to two or more related funds in a single assignment)) and $5,000,000 with respect to the Revolving Credit Facility (other than, in each case, in the case of an assignment of all of a Lender's interests under this Agreement), unless otherwise agreed by the Borrower and the Administrative Agent. Any such assignment need not be ratable as among the Facilities. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with Commitments and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto, except as to Section 2.19, 2.20, 2.21, 9.12 and 10.5 in respect of the period prior to such effective date). Notwithstanding any provision of this Section, the consent of the Borrower shall not be required for any assignment that occurs at any time when any Event of Default shall have occurred and be continuing. For purposes of the minimum assignment amounts set forth in this paragraph, multiple assignments by two or more Related Funds shall be aggregated.
(d) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, each Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked "canceled". The Register shall be available for inspection by the Borrower or any Lender (with respect to any entry relating to such Lender's Loans) at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 10.6(c), by each such other Person) together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (treating multiple, simultaneous assignments by or to two or more Related Funds as a single assignment) (except that no such registration and processing fee shall be payable in the case of an Assignee which is already a Lender or is an affiliate or Related Fund of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note and/or applicable Term Notes, as the case may be, of the assigning Lender) a new Revolving Credit Note and/or applicable Term Notes, as the case may be, to such Assignee in an amount equal to the Revolving Credit Commitment and/or applicable Term Loans, as the case may be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a Revolving Credit Commitment and/or Term Loans, as the case may be, upon request, a new Revolving Credit Note and/or Term Notes, as the case may be, to the order of the Assignor in an amount equal to the Revolving Credit Commitment and/or applicable Term Loans, as the case may be, retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby.
(f) For the avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests in Loans and Notes, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law and any Lender that is a fund that invests in bank loans may pledge all or a portion of its rights (but not its obligation to make Loans) hereunder to any trustee or holders of obligations owed, or securities issued by such fund as security for such obligations or securities or to any other representative of such holders.
(g) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary in this Section
10.6(g), any SPC may (A) with notice to, but without the prior written consent
of, the Borrower and the Administrative Agent and without paying any processing
fee therefor, assign all or a portion of its interests in any Loans to the
Granting Lender, or with the prior written consent of the Borrower and the
Administrative Agent (which consent shall not be unreasonably withheld) to any
financial institutions providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans, and (B)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC; provided that
non-public information with respect to the Borrower may be disclosed only with
the Borrower's consent which will not be unreasonably withheld. This paragraph
(g) may not be amended without the written consent of any SPC with Loans
outstanding at the time of such proposed amendment.
10.7 Adjustments; Set-off. (a) Except to the extent that this Agreement provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefited Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Obligations, such Benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Obligations, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to Holdings or the Borrower, any such notice being expressly waived by Holdings and the Borrower to the extent permitted by applicable law, upon any Event of Default under Section 8(a), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of Holdings or the Borrower, as the case may be. Each Lender agrees to notify promptly the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement or of a Lender Addendum by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of Holdings, the Borrower, the Agents, the Arrangers and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Arranger, any Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each of Holdings and the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York located in the county of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to Holdings or the Borrower, as the case may be at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
10.13 Acknowledgments. Each of Holdings and the Borrower
hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
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execution and delivery of this Agreement and the other Loan Documents;
(b) neither any Arranger, any Agent nor any Lender has any fiduciary relationship with or duty to Holdings or the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Arrangers, the Agents and the Lenders, on one hand, and Holdings and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Arrangers, the Agents and the Lenders or among Holdings, the Borrower and the Lenders.
10.14 Confidentiality. Each of the Arrangers, the Agents and the Lenders agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent any Arrangers, any Agent or any Lender from disclosing any such information (a) to any Arranger, any Agent, any other Lender or any affiliate of any thereof that agrees to comply with the provisions of this Section, (b) to any Participant or Assignee (each, a "Transferee") or prospective Transferee that agrees to comply with the provisions of this Section or substantially equivalent provisions, (c) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) to any financial institution that is a direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section), (e) upon the request or demand of any Governmental Authority having jurisdiction over it, (f) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (g) if requested or required to do so in connection with any litigation or similar proceeding, (h) that has been publicly disclosed other than in breach of this Section, (i) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or (j) in connection with the exercise of any remedy hereunder or under any other Loan Document. Notwithstanding anything to the contrary in the foregoing sentence or any other express or implied agreement, arrangement or understanding, the parties hereto hereby agree that, from the commencement of discussions with respect to the financing provided hereunder, any party hereto (and each of its employees, representatives, or agents) is permitted to disclose to any and all persons, without limitation of any kind, the tax structure and tax treatment of the transactions contemplated hereby, and any facts that may be relevant to the tax treatment and tax structure of the transactions contemplated hereby; provided, however, that no party (and no employee, representative, or other agent thereof) shall disclose any other information that is not relevant to understanding the tax treatment and tax structure of the transactions (including the identity of any party and any information that could lead another to determine the identity of any party, or
any other information to the extent that such disclosure could result in a violation of any federal or state securities law.
10.15 Release of Collateral and Guarantee Obligations.
(a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Borrower in connection with any Disposition of Property permitted by the Loan Documents, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in any Collateral being Disposed of in such Disposition, and to release any guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition, to the extent necessary to permit consummation of such Disposition in accordance with the Loan Documents; provided that the Borrower shall have delivered to the Administrative Agent, at least ten Business Days prior to the date of the proposed release (or such shorter period agreed to by the Administrative Agent), a written request for release identifying the relevant Collateral being Disposed of in such Disposition and the terms of such Disposition in reasonable detail, including the date thereof, the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with this Agreement and the other Loan Documents and that the proceeds of such Disposition will be applied in accordance with this Agreement and the other Loan Documents.
(b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than obligations in respect of any Specified Hedge Agreement) have been paid in full, all Commitments have terminated or expired and no Letter of Credit shall be outstanding, upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations provided for in any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Specified Hedge Agreements. Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made.
(c) For purposes of this Section 10.15, a Letter of Credit shall not be deemed outstanding if (i) the Loans, the Reimbursement Obligations and the other Obligations under the Loan Documents shall have been paid in full and the Commitments have been terminated and (ii) (A) the Borrower has (x) deposited with each Issuing Lender cash to be held by such Issuing Lender as cash collateral in an amount equal to 105% of the face amount of each Letter of Credit issued by such Issuing Lender to be available to such Issuing Lender to reimburse payments of drafts drawn under such Letter of Credit and pay any fees and expenses related thereto and (y) prepaid to each Issuing Lender the entire fees payable under Sections 2.9(a) and 3.3 with respect
to any Letters of Credit issued by such Issuing Lender for the full remaining
term of such Letters of Credit or (B) the Borrower has backed such Letter of
Credit, on terms and conditions reasonably acceptable to the Issuing Lender,
with another letter of credit from a financial institution reasonably acceptable
to the Issuing Lender. Upon termination of a Letter of Credit which has been
cash collateralized as provided in this Section, the unearned portion of such
prepaid fee attributable to such Letter of Credit shall be refunded to the
Borrower, together with the deposit described in the preceding clause (x) with
respect to such Letter of Credit to the extent not previously applied by the
applicable Issuing Lender in the manner described herein. Each Issuing Lender
hereby acknowledges and agrees that if a Letter of Credit has been cash
collateralized as provided in this Section, all obligations of the Lenders with
respect to such Letters of Credit shall have terminated, including the
obligations of the Lenders to purchase L/C Participations pursuant to Section
3.4 and the obligations of the Lenders to make Revolving Loans pursuant to
Section 2.4.
10.16 Accounting Changes. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then Holdings, the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating Holdings' and the Borrower's financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made. Until such time as such an amendment shall have been executed and delivered by Holdings and the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred. "Accounting Change" refers to any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.
10.17 Delivery of Lender Addenda. Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, Holdings, the Borrower and the Administrative Agent.
10.18 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE ARRANGERS, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.19 Subordination of Intercompany Indebtedness. Holdings and the Borrower agree that they will not, and will not permit any Loan Party to become obligated or otherwise liable for any intercompany Indebtedness (other than intercompany accounts receivable and payable in the ordinary course of business) that is owed to any Foreign Subsidiary of the Borrower, unless such Foreign Subsidiary agrees that (a) such Indebtedness is completely subordinated to the Obligations and subject in right of payment to the prior payment in full of the Obligations, and (b) if an Event of Default has occurred and is continuing, no payment on any such Indebtedness shall be made until the payment in full in cash of the Obligations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
GENERAL NUTRITION CENTERS
HOLDING COMPANY
By: /s/ Andrew Jhawar
-------------------------------------
Name: Andrew Jhawar
Title: Vice President and Treasurer
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GENERAL NUTRITION CENTERS, INC.
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary
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[signatures continued next page]
LEHMAN BROTHERS INC.,
as Arranger
By: /s/ Francis Chang
-------------------------------------
Name: Francis Chang
Title: Vice President
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J.P. MORGAN SECURITIES INC.,
as Arranger
By: /s/ Graham Conran
-------------------------------------
Name: Graham Conran
Title: Vice President
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LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: /s/ Francis Chang
-------------------------------------
Name: Francis Chang
Title: Vice President
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JPMORGAN CHASE BANK,
as Syndication Agent
By: /s/ Teri Streusand
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Name: Teri Streusand
Title: Vice President
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Annex A
PRICING GRID FOR REVOLVING CREDIT LOANS AND SWING LINE LOANS
Consolidated Leverage Applicable Margin Applicable Margin for
Ratio Eurodollar Loans Base Rate Loans
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> or = 3.00 to 1.00 3.00% 2.00%
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<3.00 to 1.00 and > or = 2.25
to 1.00 2.75% 1.75%
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<2.25 to 1.00 2.50% 1.50%
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Changes in the Applicable Margin with respect to Revolving Credit Loans and
Swing Line Loans resulting from changes in the Consolidated Leverage Ratio shall
become effective on the date (the "Adjustment Date") on which financial
statements are delivered to the Lenders pursuant to Section 6.1(a) (but in any
event not later than the 45th day after the end of each of the first three
quarterly periods of each fiscal year or the 90th day after the end of each
fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any financial statements
referred to above are not delivered within the time periods specified above,
then, until such financial statements are delivered, the Consolidated Leverage
Ratio as at the end of the fiscal period that would have been covered thereby
shall for the purposes of this definition be deemed to be greater than 3.00 to
1.00. Each determination of the Consolidated Leverage Ratio pursuant to this
Pricing Grid shall be made with respect to the period of four consecutive fiscal
quarters of the Borrower ending at the end of the period covered by the relevant
financial statements.
EXHIBIT 10.2
EXECUTION COPY
GUARANTEE AND COLLATERAL AGREEMENT
made by
GENERAL NUTRITION CENTERS HOLDING COMPANY
GENERAL NUTRITION CENTERS, INC.
and certain of its Subsidiaries
in favor of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
Dated as of December 5, 2003
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINED TERMS...................................................................... 2
1.1. Definitions........................................................................ 2
1.2. Other Definitional Provisions...................................................... 7
SECTION 2. GUARANTEE.......................................................................... 8
2.1. Guarantee.......................................................................... 8
2.2. Rights of Reimbursement, Contribution and Subrogation.............................. 9
2.3. Amendments, etc. with respect to the Borrower Obligations.......................... 10
2.4. Guarantee Absolute and Unconditional............................................... 11
2.5. Reinstatement...................................................................... 12
2.6. Payments........................................................................... 12
SECTION 3. GRANT OF SECURITY INTEREST; CONTINUING LIABILITY UNDER COLLATERAL................. 12
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................................... 14
4.1. Representations in Credit Agreement................................................ 14
4.2. Title; No Other Liens.............................................................. 14
4.3. Perfected First Priority Liens..................................................... 14
4.4. Name; Jurisdiction of Organization, etc............................................ 15
4.5. Inventory and Equipment............................................................ 15
4.6. Farm Products...................................................................... 15
4.7. Investment Property................................................................ 15
4.8. Receivables........................................................................ 16
4.9. Contracts.......................................................................... 17
4.10. Intellectual Property.............................................................. 17
4.11. Vehicles........................................................................... 19
4.12. Letter of Credit Rights............................................................ 19
4.13. Commercial Tort Claims............................................................. 19
SECTION 5. COVENANTS.......................................................................... 19
5.1. Covenants in Credit Agreement...................................................... 19
5.2. Delivery and Control of Instruments, Chattel Paper, Negotiable
Documents, Investment Property and Deposit Accounts................................ 19
5.3. Maintenance of Insurance........................................................... 20
5.4. Payment of Obligations............................................................. 21
5.5. Maintenance of Perfected Security Interest; Further Documentation.................. 21
5.6. Changes in Locations, Name, Jurisdiction of Incorporation, etc..................... 22
5.7. Notices. .......................................................................... 22
5.8. Investment Property................................................................ 22
5.9. Receivables........................................................................ 24
5.10. Intellectual Property.............................................................. 24
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PAGE
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5.11. Vehicles........................................................................... 26
SECTION 6. REMEDIAL PROVISIONS................................................................ 27
6.1. Certain Matters Relating to Receivables............................................ 27
6.2. Communications with Obligors; Grantors Remain Liable............................... 28
6.3. Pledged Securities................................................................. 28
6.4. Proceeds to be Turned Over To Administrative Agent................................. 29
6.5. Application of Proceeds............................................................ 29
6.6. Code and Other Remedies............................................................ 30
6.7. Registration Rights................................................................ 32
6.8. Waiver; Deficiency................................................................. 33
SECTION 7. THE ADMINISTRATIVE AGENT........................................................... 33
7.1. Administrative Agent's Appointment as Attorney-in-Fact, etc........................ 33
7.2. Duty of Administrative Agent....................................................... 34
7.3. Execution of Financing Statements.................................................. 35
7.4. Authority of Administrative Agent.................................................. 35
7.5. Appointment of Co-Collateral Agents................................................ 35
SECTION 8. MISCELLANEOUS...................................................................... 36
8.1. Amendments in Writing.............................................................. 36
8.2. Notices. .......................................................................... 36
8.3. No Waiver by Course of Conduct; Cumulative Remedies................................ 36
8.4. Enforcement Expenses; Indemnification.............................................. 36
8.5. Successors and Assigns............................................................. 37
8.6. Set-Off. .......................................................................... 37
8.7. Counterparts....................................................................... 37
8.8. Severability....................................................................... 37
8.9. Section Headings................................................................... 37
8.10. Integration........................................................................ 38
8.11. GOVERNING LAW...................................................................... 38
8.12. Submission to Jurisdiction; Waivers................................................ 38
8.13. Acknowledgments.................................................................... 38
8.14. Additional Grantors................................................................ 39
8.15. Releases........................................................................... 39
8.16. WAIVER OF JURY TRIAL............................................................... 39
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SCHEDULES
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Description of Pledged Investment Property
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Exact Legal Name, Location of Jurisdiction of Organization and
Chief Executive Office
Schedule 5 Location of Inventory and Equipment
Schedule 6 Copyrights, Patents, Trademarks, Intellectual Property Licenses
and Other Intellectual Property
EXHIBITS
Exhibit A Acknowledgment and Consent
Exhibit B-1 Intellectual Property Security Agreement
Exhibit B-2 After-Acquired Intellectual Property Security Agreement
Exhibit C Intercompany Subordinated Demand Promissory Note
Annex I Assumption Agreement
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EXECUTION COPY
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 5,
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2003, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of LEHMAN COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, the "Administrative Agent") for (i) the banks and other financial institutions or entities (the "Lenders") from time to time parties to the Credit Agreement, dated as of December 5, 2003 (as amended, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"), among GENERAL NUTRITION CENTERS HOLDING COMPANY, a Delaware corporation ("Holdings"), GENERAL NUTRITION CENTERS, INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), LEHMAN BROTHERS INC. and J.P. MORGAN SECURITIES INC., as joint lead arrangers and joint bookrunners (in such capacity, the "Arrangers"), JP MORGAN CHASE BANK, as syndication agent (in such capacity, the "Syndication Agent"), and the Administrative Agent, and (ii) the other Secured Parties (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce the Arrangers, the Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1. Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms which are defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Account Debtor, Authenticate, Certificated Security, Chattel Paper, Commodity Account, Commodity Contract, Commodity Intermediary, Documents, Electronic Chattel Paper, Entitlement Order, Equipment, Farm Products, Financial Asset, Fixtures, Goods, Instruments, Inventory, Letter of Credit Rights, Money, Payment Intangibles, Securities Account, Securities Intermediary, Security, Security Entitlement, Supporting Obligations, Tangible Chattel Paper and Uncertificated Security.
(b) The following terms shall have the following meanings:
"Agreed Unperfected Collateral": (a) deposit accounts holding
(i) cash deposits permitted by Section 7.3(d) of the Credit Agreement,
(ii) collection and disbursement accounts maintained as provided in
Section 5.12(b) and (c), (b) solely to the extent not required to be
perfected pursuant to Section 5.11, Vehicles, (c) Intellectual Property
owned by any Grantor which is registered in a country other than the
United States to the extent that perfection in such Intellectual
Property requires filing in such other country provided and (d) as of
any date of determination, any other Collateral which cannot be
perfected by the filing of a financing statement under the UCC as to
which the Administrative Agent has agreed in writing that it does not
at such time require the perfection of its security interest therein,
however, that it is understood and agreed that regardless of whether
constituting Agreed Unperfected Collateral, the Administrative Agent
shall have a valid security interest in the property described in (a),
(b), (c) and (d) above and such security interest shall be perfected to
the extent such property constitutes Proceeds of any other Collateral
and such Proceeds are perfected under Section 9-315 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.
"Agreement": this Guarantee and Collateral Agreement, as the same may be amended, supplemented, replaced or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the Obligations (as defined in the Credit Agreement).
"Collateral": as defined in Section 3.
"Collateral Account": any collateral deposit account established by the Administrative Agent to hold cash pending application to the Obligations.
"Copyright Licenses": any written agreement providing for the granting by or to any Grantor of any right in or to any Copyright, including, without limitation, those listed in Schedule 6.
"Copyrights": (i) all United States and foreign copyrights, whether or not the underlying works of authorship have been published, including but not limited to copyrights in software and databases, all Mask Works (as defined in 17 U.S.C. 901 of the U.S. Copyright Act) and all works of authorship and other intellectual property rights therein, all right, title and interest to make and exploit all derivative works based on or adopted from works covered by such copyrights, and all copyright registrations, copyright applications, mask works registrations and mask works applications, and any renewals or extensions thereof, including, without limitation, each registration and application identified in Schedule 6, (ii) the rights to print, publish and distribute any of the foregoing, (iii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iv) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto, and (v) all other rights of any kind whatsoever accruing thereunder or pertaining thereto.
"Deposit Account": (i) all "deposit accounts" as defined in Article 9 of the Uniform Commercial Code in effect in the state of New York on the date hereof, (ii) all other accounts maintained with any financial institution (other than Securities Accounts or Commodity Accounts) and (iii) shall include, without limitation, all of the accounts listed on Schedule 2 hereto under the heading "Deposit Accounts" (as such schedule may be amended from time to time) and all Collateral Accounts together, in each case, with all funds held therein and all certificates or instruments representing any of the foregoing.
"Excluded Assets": (i) any lease, license, contract, property
right or agreement to which any Grantor is a party or any of its rights
or interests or other General Intangibles arising thereunder if and
only for so long as the grant of a security interest hereunder (x) is
prohibited by any Requirement of Law of a Governmental Authority or (y)
shall constitute or result in a breach, termination or default under
any such lease, license, contract, property right or agreement (other
than to the extent that any such Requirement of Law or term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409
of the UCC of any relevant jurisdiction or any other applicable law or
principles of equity); provided, however, that such security interest
shall attach immediately to any portion of such lease, license,
contract, property rights or agreement that does not result in any of
the consequences specified in (i)(y) above, (ii) 35% of the total
outstanding Excluded Foreign Subsidiary Voting Stock issued by each
entity not organized under the laws of any jurisdiction within the
United States of America that is (or is treated for United States
federal tax purposes as) either (i) a corporation or (ii) any entity
owned directly or indirectly by another entity not organized under the
laws of any jurisdiction within the United States of America that is
(or is treated as) a corporation, owned by any Grantor and (iii)
account number S039839W0-00 DR 288 at Mellon Financial Markets, LLC for
so long as such account secures the letters of credit issued by Mellon
Bank, N.A. outstanding on the Closing Date.
"Excluded Foreign Subsidiary Voting Stock": the voting Capital Stock of any entity not organized under the laws of any jurisdiction within the United States of America that is (or is treated for United States federal tax purposes as) either (i) a corporation or (ii) any entity owned directly or indirectly by another entity not organized under the laws of any jurisdiction within the United States of America that is (or is treated as) a corporation.
"General Intangibles": all "general intangibles" as such term is defined in Section 9-102(a)(42) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, including, without limitation, with respect to any Grantor, all rights of such Grantor to receive any tax refunds, all Hedge Agreements and all contracts, agreements, instruments and indentures and all licenses, permits, concessions, franchises and authorizations issued by Governmental Authorities in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented, replaced or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect thereto, (iii) all rights of such Grantor to damages arising thereunder, and (iv) all rights of such Grantor to terminate and to perform, compel performance and to exercise all remedies thereunder.
"Governmental Authority": a federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.
"Guarantor Obligations": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement (including, without limitation,
Section 2) or any other Loan Document to which such Guarantor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to any Secured Party that are required to be paid by such
Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
"Guarantors": the collective reference to each Grantor other than the Borrower.
"Insurance": shall mean: (i) all insurance policies covering any or all of the Collateral (regardless of whether the Administrative Agent is the loss payee thereof) and (ii) any key man life insurance policies.
"Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets and the Trade Secret Licenses, and all rights to sue at law or
in equity for any past, present and future infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any Grantor to Holdings or any of its Subsidiaries, including, without limitation, the subordinated Intercompany Note in the form attached as Exhibit C (the "Subordinated Intercompany Note").
"Investment Property": the collective reference to (i) all "investment property" as such term is defined in Section 9-102(a)(49) of the Uniform Commercial Code in effect in the State of New York on the date hereof, (ii) security entitlements, in the case of any United States Treasury book-entry securities, as defined in 31 C.F.R. section 357.2, or, in the case of any United States federal agency book-entry securities, as defined in the corresponding United States federal regulations governing such book-entry securities, and (iii) whether or not constituting "investment property" as so defined, all Pledged Securities, all Pledged Security Entitlements and all Pledged Commodity Contracts.
"Issuers": the collective reference to each issuer of a Pledged Security.
"Material Contracts": Senior Subordinated Notes Documentation and any other contract, lease, license, indenture, agreement, commitment or other arrangement (other than the Credit Agreement and Security Documents), whether or not in writing, to which the Borrower or any Guarantor is a party with respect to which breaches, performances, nonperformances, cancellations or failures to review by any party thereto singly or in the aggregate could reasonably be expected to have a Material Adverse Effect.
"New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
"Patent License": all agreements, whether written or oral, providing for the granting by or to any Grantor of any right in or to a Patent, including, without limitation, any of the foregoing referred to in Schedule 6.
"Patents": (i) all United States and foreign patents, patent applications and patentable inventions, including, without limitation, each issued patent and patent application identified in Schedule 6, and all certificates of invention or similar property rights (ii) all inventions and improvements described and claimed therein, (iii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iv) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto, and (v) all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon and all other rights of any kind whatsoever accruing thereunder or pertaining thereto.
"Pledged Capital Stock": shall mean all shares or other equity interests constituting Capital Stock now owned or hereafter acquired by such Grantor, including, without limitation, all shares of Capital Stock described on Schedule 2 hereto (as such schedule may be amended from time to time), and the certificates, if any, representing such Capital Stock and any interest of such Grantor in the entries on the books of the issuer of such Capital Stock and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Capital Stock and any other warrant, right or option to acquire any of the foregoing.
"Pledged Commodity Contracts": all commodity contracts listed on Schedule 2 (as such Schedule may be amended from time to time) and all other commodity contracts to which any Grantor is party from time to time.
"Pledged Debt Securities": all debt securities now owned or hereafter acquired by any Grantor, including, without limitation, the debt securities listed on Schedule 2, (as such Schedule may be amended from time to time) together with any other certificates, options, rights or security entitlements of any nature whatsoever in respect of the debt securities of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect.
"Pledged Notes": all promissory notes now owned or hereafter acquired by any Grantor including, without limitation, those listed on Schedule 2 (as such Schedule may be amended from time to time) and all Intercompany Notes at any time issued to any Grantor.
"Pledged Securities": the collective reference to the Pledged Debt Securities, the Pledged Notes and the Pledged Capital Stock.
"Pledged Security Entitlements": all security entitlements with respect to the financial assets listed on Schedule 2 (as such Schedule may be amended from time to time) and all other security entitlements of any Grantor.
"Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.
"Receivable": all Accounts and any other right to payment for goods or other property sold, leased, licensed or otherwise disposed of or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper or classified as a Payment Intangible and whether or not it has been earned by performance. References herein to Receivables shall include any Supporting Obligation or collateral securing such Receivable.
"Secured Parties": collectively, the Arrangers, the Administrative Agent, the Syndication Agent, the Lenders and, with respect to any Specified Hedge Agreement, any Qualified Counterparty that has agreed to be bound by the provisions of Section 7.2
hereof as if it were a party hereto and by the provisions of Section 9 of the Credit Agreement as if it were a Lender party thereto; provided that no Qualified Counterparty shall have any rights in connection with the management or release of any Collateral or the obligations of any Guarantor under this Agreement.
"Securities Act": the Securities Act of 1933, as amended.
"Trademark License": any agreement, whether written or oral, providing for the granting by or to any Grantor of any right in or to any Trademark, including, without limitation, any of the foregoing referred to in Schedule 6.
"Trademarks": (i) all United States, state and foreign
trademarks, service marks, trade names, corporate names, company names,
business names, trade dress, trade styles, logos, or other indicia of
origin or source identification, Internet domain names, trademark and
service mark registrations, and applications for trademark or service
mark registrations and any renewals thereof, including, without
limitation, each registration and application identified in Schedule 6,
(ii) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations thereof, (iii)
all income, royalties, damages and other payments now and hereafter due
and/or payable with respect thereto, and (iv) all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together in
each case with the goodwill of the business connected with the use of,
and symbolized by, each of the above.
"Trade Secret License": any agreement, whether written or oral, providing for the granting by or to any Grantor of any right in or to any Trade Secret, including, without limitation, any of the foregoing referred to in Schedule 6.
"Trade Secrets": (i) all trade secrets and all confidential and proprietary information, including know-how, manufacturing and production processes and techniques, inventions, research and development information, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto, and (iv) all other rights of any kind whatsoever of any Grantor accruing thereunder or pertaining thereto.
"Vehicles": all cars, trucks, trailers, construction and earth moving equipment and other Equipment of any nature covered by a certificate of title law of any jurisdiction and all tires and other appurtenances to any of the foregoing.
1.2. Other Definitional Provisions. (a)The words "hereof", "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.
(d) The expressions "payment in full," "paid in full" and any other similar terms or phrases when used herein with respect to the Obligations shall mean the indefeasible payment in full, in immediately available funds, of all of the Obligations (excluding Obligations in respect of any Specified Hedge Agreements and contingent reimbursement and indemnification obligations in each case that are not due and payable at or prior to the time the Commitments have expired or have been terminated, the Loans and Reimbursement Obligations have been paid in full and all Letters of Credit have been discharged or cash collateralized or backed with other letters of credit in accordance with Section 10.15(c) of the Credit Agreement).
SECTION 2. GUARANTEE
2.1. Guarantee.
(a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) If and to the extent required in order for the Obligations
of any Guarantor to be enforceable under applicable federal, state and other
laws relating to the insolvency of debtors, the maximum liability of such
Guarantor hereunder shall be limited to the greatest amount which can lawfully
be guaranteed by such Guarantor under such laws, after giving effect to any
rights of contribution, reimbursement and subrogation arising under Section 2.2.
Each Guarantor acknowledges and agrees that, to the extent not prohibited by
applicable law, (i) such Guarantor (as opposed to its creditors, representatives
of creditors or bankruptcy trustee, including such Guarantor in its capacity as
debtor in possession exercising any powers of a bankruptcy trustee) has no
personal right under such laws to reduce, or request any judicial relief that
has the effect of reducing, the amount of its liability under this Agreement,
(ii) such Guarantor (as opposed to its creditors, representatives of creditors
or bankruptcy trustee, including such Guarantor in its capacity as debtor in
possession exercising any powers of a bankruptcy trustee) has no personal right
to enforce the limitation set forth in this Section 2.1(b) or to reduce, or
request judicial relief reducing, the amount of its liability under this
Agreement, and (iii) the limitation set forth in this Section 2.1(b) may be
enforced only to the extent required under such laws in order for the
obligations of such Guarantor under this Agreement to be enforceable under such
laws and only by or for the benefit of a creditor, representative of creditors
or bankruptcy trustee of such Guarantor or other Person entitled, under such
laws, to enforce the provisions thereof.
(c) Each Guarantor agrees that Borrower Obligations may at any time and from time to time be incurred or permitted in an amount exceeding the maximum liability of such Guarantor under Section 2.1(b) without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of any Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full force and effect until payment in full of the Obligations, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by any Secured Party from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations (other than Obligations in respect of any Specified Hedge Agreement) are paid in full, no Letter of Credit shall be outstanding (unless such Letter of Credit has been cash collateralized or backed with another letter of credit in accordance with Section 10.15(c) of the Credit Agreement) and the Commitments are terminated or have expired.
2.2. Rights of Reimbursement, Contribution and Subrogation. In case any payment is made on account of the Obligations by any Grantor or is received or collected on account of the Obligations from any Grantor or its property:
(a) If such payment is made by the Borrower or from its property, then, if and to the extent such payment is made on account of Obligations arising from or relating to a Loan made to the Borrower or a Letter of Credit issued for account of the Borrower, the Borrower shall not be entitled (A) to demand or enforce reimbursement or contribution in respect of such payment from any other Grantor or (B) to be subrogated to any claim, interest, right or remedy of any Secured Party against any other Person, including any other Grantor or its property.
(b) If such payment is made by a Guarantor or from its property, such Guarantor shall be entitled, subject to and upon payment in full of the Obligations, (A) to demand and enforce reimbursement for the full amount of such payment from the Borrower and (B) to demand and enforce contribution in respect of such payment from each other Guarantor which has not paid its fair share of such payment, as necessary to ensure that (after giving effect to any enforcement of reimbursement rights provided hereby) each Guarantor pays its fair share of the unreimbursed portion of such payment. For this purpose, the fair share of each Guarantor as to any unreimbursed payment shall be determined based on an equitable apportionment of such unreimbursed payment among all Guarantors based on the relative value of their assets and any other equitable considerations deemed appropriate by the court.
(c) If and whenever (after payment in full of the Obligations)
any right of reimbursement or contribution becomes enforceable by any Grantor
against any other Grantor under Sections 2.2(a) and 2.2(b), such Grantor shall
be entitled, subject to and upon payment in full of the Obligations, to be
subrogated (equally and ratably with all other Grantors entitled to
reimbursement or contribution from any other Grantor as set forth in this
Section 2.2) to any security interest that may then be held by the
Administrative Agent upon any Collateral granted
to it in this Agreement. Such right of subrogation shall be enforceable solely against the Grantors, and not against the Secured Parties, and neither the Administrative Agent nor any other Secured Party shall have any duty whatsoever to warrant, ensure or protect any such right of subrogation or to obtain, perfect, maintain, hold, enforce or retain any Collateral for any purpose related to any such right of subrogation. If subrogation is demanded by any Grantor, then (after payment in full of the Obligations) the Administrative Agent shall deliver to the Grantors making such demand, or to a representative of such Grantors or of the Grantors generally, an instrument satisfactory to the Administrative Agent transferring, on a quitclaim basis without any recourse, representation, warranty or obligation whatsoever, whatever security interest the Administrative Agent then may hold in whatever Collateral may then exist that was not previously released or disposed of by the Administrative Agent.
(d) All rights and claims arising under this Section 2.2 or based upon or relating to any other right of reimbursement, indemnification, contribution or subrogation that may at any time arise or exist in favor of any Grantor as to any payment on account of the Obligations made by it or received or collected from its property shall be fully subordinated in all respects to the prior payment in full of all of the Obligations. Until payment in full of the Obligations, no Grantor shall demand or receive any collateral security, payment or distribution whatsoever (whether in cash, property or securities or otherwise) on account of any such right or claim. If any such payment or distribution is made or becomes available to any Grantor in any bankruptcy case or receivership, insolvency or liquidation proceeding, such payment or distribution shall be delivered by the person making such payment or distribution directly to the Administrative Agent, for application to the payment of the Obligations. If any such payment or distribution is received by any Grantor, it shall be held by such Grantor in trust, as trustee of an express trust for the benefit of the Secured Parties, and shall forthwith be transferred and delivered by such Grantor to the Administrative Agent, in the exact form received and, if necessary, duly endorsed.
(e) The obligations of the Grantors under the Loan Documents, including their liability for the Obligations and the enforceability of the security interests granted thereby, are not contingent upon the validity, legality, enforceability, collectibility or sufficiency of any right of reimbursement, contribution or subrogation arising under this Section 2.2. The invalidity, insufficiency, unenforceability or uncollectibility of any such right shall not in any respect diminish, affect or impair any such obligation or any other claim, interest, right or remedy at any time held by any Secured Party against any Guarantor or its property. The Secured Parties make no representations or warranties in respect of any such right and shall have no duty to assure, protect, enforce or ensure any such right or otherwise relating to any such right.
(f) Each Grantor reserves any and all other rights of reimbursement, contribution or subrogation at any time available to it as against any other Grantor, but (i) the exercise and enforcement of such rights shall be subject to Section 2.2(d) and (ii) neither the Administrative Agent nor any other Secured Party shall ever have any duty or liability whatsoever in respect of any such right, except as provided in Section 2.2(c).
2.3. Amendments, etc. with respect to the Borrower Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by any Secured Party may be
rescinded by such Secured Party and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, increased, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Secured Party, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the requisite Lenders under the Credit Agreement or all Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Secured Party for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. No Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto.
2.4. Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by any Secured Party upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and performance without regard to (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance hereunder) which may at any time be available to or be asserted by the Borrower or any other Person against any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance other than the express written release of such Guarantor from this Agreement by the Administrative Agent pursuant to and to the extent set forth in Section 10.15(b) of the Credit Agreement. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, any Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by any Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any
other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Secured Party against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings.
2.5. Reinstatement. The guarantee contained in this
Section 2 shall continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the Borrower Obligations
is rescinded or must otherwise be restored or returned by any Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.6. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in Dollars in immediately available funds at the office of the Administrative Agent located at the Payment Office specified in the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST; CONTINUING LIABILITY UNDER COLLATERAL
(a) Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor's right, title and interest in and to all of its personal property, including, without limitation, the following property, in each case, wherever located and whether now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Deposit Accounts;
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) Insurance;
(ix) all Intellectual Property;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Letter of Credit Rights;
(xiii) all Money;
(xiv) all Vehicles;
(xv) all Goods not otherwise described above;
(xvi) any Collateral Account;
(xvii) all books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and other electronic storage media and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; and
(xviii) to the extent not otherwise included, all other property of the Grantor and all Proceeds, products, accessions, rents and profits of any and all of the foregoing and all collateral security, Supporting Obligations and guarantees given by any Person with respect to any of the foregoing.
Notwithstanding anything to the contrary in this Agreement, none of the Excluded Assets shall constitute Collateral.
(b) Notwithstanding anything herein to the contrary, (i) each Grantor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Administrative Agent or any Secured Party, (ii) each Grantor shall remain liable under and each of the agreements included in the Collateral, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Administrative Agent nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Administrative Agent nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral and (iii) the exercise by the Administrative Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Arrangers, the Administrative Agent, the Syndication Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby represents and warrants to the Secured Parties that:
4.1. Representations in Credit Agreement. In the case of each Guarantor, the representations and warranties set forth in Section 4 of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct, in all material respects, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, and the Secured Parties shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Borrower's or Holdings' knowledge shall, for the purposes of this Section 4.l, be deemed to be a reference to such Guarantor's knowledge.
4.2. Title; No Other Liens. Such Grantor owns each item of the Collateral free and clear of any and all Liens or claims, including, without limitation, liens arising as a result of such Grantor becoming bound (as a result of merger or otherwise) as Grantor under a security agreement entered into by another Person except for Permitted Liens. No financing statement, mortgage or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, pursuant to this Agreement or as are permitted by the Credit Agreement.
4.3. Perfected First Priority Liens. The security
interests granted pursuant to this Agreement constitute valid security interests
in all of the Collateral in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof and, other then
with respect to Agreed Unperfected Collateral, upon completion of the filings
and other actions specified on Schedule 3 (all of which, in the case of all
filings and other documents referred to on said Schedule, have been delivered to
the Administrative Agent in duly completed and duly executed form, as
applicable, and may be filed by the Administrative Agent at any time) and
payment of all filing fees, will be perfected and are prior to all other Liens
on the Collateral except for Permitted Liens. Without limiting the foregoing,
each Grantor has taken all actions necessary, including without limitation those
specified in Section 5.2 to: (i) establish the Administrative Agent's "control"
(within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of
the Investment Property constituting Certificated Securities, Uncertificated
Securities, Securities Accounts, Securities Entitlements or Commodity Accounts
(each as defined in the UCC), (ii) establish the Administrative Agent's
"control" (within the meaning of Section 9-104 of the UCC) over all Deposit
Accounts (except Deposit Accounts constituting Agreed Unperfected Collateral),
(iii) establish the Administrative Agent's "control" (within the meaning of
Section 9-107 of the UCC) over all Letter of Credit Rights, (iv) establish the
Administrative Agent's control (within the meaning of Section 9-105 of the UCC)
over all Electronic Chattel Paper and (v) establish the Administrative Agent's
"control" (within the
meaning of Section 16 of the Uniform Electronic Transaction Act as in effect in the applicable jurisdiction "UETA") over all "transferable records" (as defined in UETA).
4.4. Name; Jurisdiction of Organization, etc. On the date hereof, such Grantor's exact legal name (as indicated on the public record of such Grantor's jurisdiction of formation or organization), jurisdiction of organization, organizational i.d. number, if any, and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 4. Each Grantor is organized solely under the law of the jurisdiction so specified and has not filed any certificates of domestication, transfer or continuance in any other jurisdiction. Except as otherwise indicated on Schedule 4, the jurisdiction of each such Grantor's organization of formation is required to maintain a public record showing the Grantor to have been organized or formed. Except in connection with the Restructuring and the Acquisition or as specified on Schedule 4, it has not changed its name, jurisdiction of organization, chief executive office or sole place of business or its corporate structure in any way (e.g. by merger, consolidation, change in corporate form or otherwise) within the past five years and has not within the last five years become bound (whether as a result of merger or otherwise) as Grantor under a security agreement entered into by another Person, which has not heretofore been terminated.
4.5. Inventory and Equipment.(a) (a) On the date hereof, the Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5. Within the five years preceding execution of this agreement, such Grantor has not changed the location of any warehouses or distribution centers or the location of any of its material Equipment and Inventory except (i) in connection with the opening, closing or relocation of stores in the ordinary course of business or (ii) as disclosed on Schedule 5;
(b) any Inventory now or hereafter produced by any Grantor included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended; and
(c) None of the Inventory or Equipment with a fair market value in excess of $500,000 is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or is otherwise in the possession of any bailee or warehouseman, other than such Inventory as to which the Administrative Agent has been provided with written notice thereof pursuant to Section 5.7(a) and as to which such Grantor has complied with its obligations under Section 6.13 of the Credit Agreement.
4.6. Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm Products.
4.7. Investment Property. (a) Schedule 2 hereto (as such schedule may be amended from time to time) sets forth under the heading "Pledged Capital Stock" all of the Pledged Capital Stock owned by any Grantor and such Pledged Capital Stock constitutes the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule. Schedule 2 hereto (as such schedule may be amended from time to time) sets forth under the heading "Pledged Debt Securities" or "Pledged Notes" all of the Pledged Debt Securities and Pledged Notes owned by any Grantor and, to the Grantors'
knowledge, all of such Pledged Debt Securities and Pledged Notes (i) are the legal, valid and binding obligation of the issuers thereof enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and other similar laws relating to or affecting creditors' rights generally and general equitable principals (whether considered in a proceeding in equity or at law) and (ii) are not in default, except for defaults which individually or in the aggregate would not have a material adverse effect on the value of the Pledged Debt Securities and Pledged Notes, taken as a whole; and such Pledged Debt Securities and Pledged Notes constitute all of the issued and outstanding inter-company indebtedness evidenced by an instrument or certificated security of the respective issuers thereof owing to such Grantor. Schedule 2 hereto (as such schedule may be amended from time to time) sets forth under the headings "Securities Accounts," "Commodities Accounts," and "Deposit Accounts" respectively, all of the Securities Accounts, Commodities Accounts and Deposit Accounts (other than Deposit Accounts constituting Agreed Unperfected Collateral) in which each Grantor (other than Holdings) has an interest. Each Grantor is the sole entitlement holder or customer of each such account, and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Administrative Agent pursuant hereto) having "control" (within the meanings of Sections 8-106, 9-106 and 9-104 of the UCC) over, or any other interest in, any such Securities Account, Commodity Account or Deposit Account or any securities, commodities or other property credited thereto;
(b) The shares of Pledged Capital Stock pledged by such Grantor hereunder constitute all of the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor or, in the case of Excluded Foreign Subsidiary Voting Stock, if less, 65% of the outstanding Excluded Foreign Subsidiary Voting Stock of each relevant Issuer.
(c) All the shares of the Pledged Capital Stock have been duly and validly issued and are fully paid and nonassessable.
(d) None of the Pledged Capital Stock consisting of partnership interests or limited liability company interests are or represent interests in issuers that are: (a) registered as investment companies, (b) are dealt in or traded on securities exchanges or markets or (c) have opted for their interests to be treated as securities under the UCC.
(e) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property and Deposit Accounts pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except Permitted Liens and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Capital Stock.
(f) Each Issuer that is not a Grantor hereunder has executed and delivered to the Administrative Agent an Acknowledgment and Agreement, in substantially the form of Exhibit A, to the pledge of the Pledged Securities pursuant to this Agreement.
4.8. Receivables. (a) No amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Tangible Chattel Paper which has not been delivered to the Administrative Agent or constitutes Electronic Chattel Paper that
has not been subjected to the control (within the meaning of Section 9-105 of the New York UCC) of the Administrative Agent.
(b) None of the obligors in excess of $10,000,000 in the aggregate on any Receivables is a Governmental Authority.
(c) To such Grantor's knowledge, each Receivable is and will be (i) the legal, valid and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied obligation of such Account Debtor and (ii) enforceable in accordance with its terms.
(d) The amounts represented by such Grantor to the Secured Parties from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate in all material respects.
4.9. Contracts. Each Material Contract is in full force and effect and constitutes a valid and legally enforceable obligation of the Grantor party thereto and (to the best of such Grantor's knowledge) each other party thereto, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
4.10. Intellectual Property. (a) Schedule 6 lists (i) all issued patents and pending patent applications, all registered copyrights and pending copyright applications, and all Trademarks owned by such Grantor in its own name on the date hereof, and (ii) all material Patent Licenses, Copyright Licenses, and Trademark Licenses. Except as set forth in Schedule 6, as of the date hereof such Grantor is the exclusive owner of the entire and unencumbered right, title and interest in and to all of the material Intellectual Property owned by such Grantor, and is otherwise entitled to use all such Intellectual Property, without limitation, subject only to Permitted Liens and to the terms of the licensing or franchise agreements referred to in paragraph (c) below.
(b) On the date hereof, to such Grantor's knowledge, all material Intellectual Property owned by such Grantor is valid, subsisting, unexpired and enforceable, and has not been abandoned and, to such Grantor's knowledge, neither the operation of such Grantor's business as currently conducted nor the use of any Intellectual Property by such Grantor in connection therewith conflicts with, infringes upon, misappropriates, dilutes, misuses or otherwise violates the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6: (i) no material Intellectual Property owned by such Grantor is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor, and (ii) to such Grantor's knowledge, as of the date hereof there are no other agreements, obligations, orders or judgments which affect the use of any material Intellectual Property owned by such Grantor.
(d) To such Grantor's knowledge, no holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity or enforceability of, or such Grantor's rights in, any Intellectual Property owned by such Grantor in
any respect that could reasonably be expected to have a material adverse effect on the value of such Intellectual Property.
(e) Except as set forth on Schedule 6, no action or proceeding
is pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any material
Intellectual Property owned by such Grantor or such Grantor's ownership interest
therein, (ii) alleging that any services provided by, processes used by, or
products manufactured or sold by such Grantor infringe any patent, trademark,
copyright, or any other right of any third party or (iii) alleging that any
material Intellectual Property owned by such Grantor is being licensed,
sublicensed or used in violation of any patent, trademark, copyright or any
other right of any third party which, if adversely determined, would have a
material adverse effect on the value of any Intellectual Property owned by such
Grantor. To the knowledge of such Grantor, no Person is engaging in any activity
that infringes upon the Intellectual Property owned by such Grantor or upon the
rights of such Grantor therein. Except as set forth in Schedule 6 hereto, such
Grantor has not granted any license, release, covenant not to sue, non-assertion
assurance, or other right to any person with respect to any part of the material
Intellectual Property owned by such Grantor. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the material Intellectual Property owned by such Grantor
or used by such Grantor in the operation of its business.
(f) With respect to each material Copyright License, Trademark License and Patent License to which such Grantor is a party: (i) such license is valid and binding and in full force and effect in all material respects; (ii) such license will not cease to be valid and binding and in full force and effect in all material respects on terms identical to those currently in effect as a result of the rights and interests granted herein, nor will the grant of such rights and interests constitute a breach or default under such license or otherwise give the licensor or licensee a right to terminate such license; (iii) such Grantor has not received any notice of termination or cancellation under such license; (iv) such Grantor has not received any notice of a breach or default under such license, which breach or default has not been cured; (v) such Grantor has not granted to any other third party any rights, adverse or otherwise, under such license; and (vi) such Grantor is not in breach or default in any material respect, and no event has occurred that, with notice or lapse of time, would constitute such a breach or default or permit termination, modification or acceleration under such license.
(g) Except as set forth in Schedule 6, such Grantor has performed all acts, has made all necessary filings and recordations, and has paid all required fees and taxes to adequately protect and maintain each and every item of material Intellectual Property owned by such Grantor in full force and effect and to protect and maintain the registrations and applications for registration thereof.
(h) Such Grantor has taken reasonable measures to protect the confidentiality of its material Trade Secrets in accordance with industry standards to protect rights of like importance.
(i) Such Grantor has taken all steps to use consistent standards of quality in the manufacture, distribution and sale of all products sold and provision of all services provided
under or in connection with any item of material Intellectual Property owned by such Grantor and has taken all steps necessary to ensure that all licensed users of any kind of material Intellectual Property owned by such Grantor use such consistent standards of quality.
4.11. Vehicles. As of the Closing Date, the aggregate book value of all Vehicles owned by all Grantors is less than $1,000,000.
4.12. Letter of Credit Rights. As of the Closing Date, no Grantor is a beneficiary or assignee under any letter of credit.
4.13. Commercial Tort Claims. As of the Closing Date, no Grantor has any commercial tort claims.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Secured Parties that, from and after the date of this Agreement until the Obligations (other than Obligations in respect of any Specified Hedge Agreement) shall have been paid in full, no Letter of Credit shall be outstanding (unless such Letter of Credit has been cash collateralized or backed with another letter of credit in accordance with Section 10.15(c) of the Credit Agreement) and the Commitments shall have terminated or expired:
5.1. Covenants in Credit Agreement. Each Subsidiary Guarantor agrees to be bound by the covenants contained in the Credit Agreement and in furtherance thereof, shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default occurs.
5.2. Delivery and Control of Instruments, Chattel Paper, Negotiable Documents, Investment Property and Deposit Accounts. (a) If any of the Collateral is or shall become evidenced or represented by any Instrument, Certificated Security, Negotiable Document or Tangible Chattel Paper, such Instrument (other than checks received in the ordinary course of business and Pledged Notes issued in connection with the extension of trade credit by a Grantor in the ordinary course of business), Certificated Security, Negotiable Documents or Tangible Chattel Paper shall be promptly delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement.
(b) If any of the Collateral is or shall become "Electronic Chattel Paper" such Grantor shall take all reasonable and necessary steps to establish the Administrative Agent's "control" (within the meaning of Section 9-105 of the New York UCC) over such Electronic Chattel Paper.
(c) If any of the Collateral is or shall become evidenced or represented by an Uncertificated Security, such Grantor shall cause the Issuer thereof either (i) to register the Administrative Agent as the registered owner of such Uncertificated Security, upon original issue or registration of transfer or (ii) to agree in writing with such Grantor and the Administrative Agent that such Issuer will comply with instructions with respect to such Uncertificated Security originated by the Administrative Agent without further consent of such
Grantor, such agreement to be in form and substance reasonably satisfactory to the Administrative Agent.
(d) Each Grantor (other than Holdings) shall maintain Securities Entitlements, Securities Accounts and Deposit Accounts (except Deposit Accounts constituting Agreed Unperfected Collateral) only with financial institutions that have agreed to comply with entitlement orders and instructions issued or originated by the Administrative Agent without further consent of such Grantor, such agreement to be in form and substance reasonably satisfactory to the Administrative Agent.
(e) If any of the Collateral is or shall become evidenced or represented by a Commodity Contract, such Grantor shall cause the Commodity Intermediary with respect to such Commodity Contract to agree in writing with such Grantor and the Administrative Agent that such Commodity Intermediary will apply any value distributed on account of such Commodity Contract as directed by the Administrative Agent without further consent of such Grantor, such agreement to be in form and substance reasonably satisfactory to the Administrative Agent.
(f) In addition to and not in lieu of the foregoing, if any Issuer of any Investment Related Property is organized under the law of, or has its chief executive office in, a jurisdiction outside of the United States, each Grantor shall take such additional actions, including, without limitation, causing the issuer to register the pledge on its books and records, as may be necessary or advisable or as may be reasonably requested by the Administrative Agent, under the laws of such jurisdiction to insure the validity, perfection and priority of the security interest of the Administrative Agent.
5.3. Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable insurance companies, insurance on
all its property (including, without limitation, all Inventory, Equipment and
Vehicles) as required by Section 6.5 of the Credit Agreement; and furnish to the
Administrative Agent with copies for each Secured Party, upon written request,
full information as to the insurance carried; provided that in any event, and
without limiting the requirements of Section 6.5 of the Credit Agreement, such
Grantor will maintain to the extent obtainable on commercially reasonable terms,
(i) property and casualty insurance on all real and personal property on an all
risks basis (including the perils of flood and quake and loss by fire, explosion
and theft), covering the repair or replacement cost of all such property and
consequential loss coverage for business interruption and extra expense (which
shall include construction expenses and such other business interruption
expenses as are otherwise generally available to similar businesses), and (ii)
public liability insurance. All such insurance with respect to such Grantor
shall be provided by insurers or reinsurers which (x) in the case of United
States insurers and reinsurers, have an A.M. Best policyholders rating of not
less than A- with respect to primary insurance and B+ with respect to excess
insurance and (y) in the case of non-United States insurers or reinsurers, the
providers of at least 80% of such insurance have either an ISI policyholders
rating of not less than A, an A.M. Best policyholders rating of not less than A-
or a surplus of not less than $500,000,000 with respect to primary insurance,
and an ISI policyholders rating of not less than BBB with respect to excess
insurance, or, if the relevant insurance is not available from such insurers,
such other insurers as the Administrative Agent may approve in writing. All
insurance shall (i) provide that no cancellation, material reduction in amount
or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of written notice thereof, (ii) if reasonably requested by the Administrative Agent, include a breach of warranty clause and (iii) be reasonably satisfactory in all other respects to the Administrative Agent.
(b) Such Grantor will deliver to the Administrative Agent on behalf of the Secured Parties, (i) on the Closing Date, a certificate dated such date showing the amount and types of insurance coverage as of such date, (ii) upon request of any Secured Party from time to time, full information as to the insurance carried, (iii) promptly following receipt of notice from any insurer, a copy of any notice of cancellation or material change in coverage from that existing on the Closing Date, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by such Grantor, and (v) promptly after such information is available to such Grantor, full information as to any claim for an amount in excess of $5,000,000 with respect to any property and casualty insurance policy maintained by such Grantor. Each Secured Party shall be named as additional insured on all such liability insurance policies of such Grantor and the Administrative Agent shall be named as loss payee on all property and casualty insurance policies of such Grantor.
(c) The Borrower shall deliver to the Secured Parties a report of a reputable insurance broker with respect to such insurance substantially concurrently with the delivery by the Borrower to the Administrative Agent of its audited financial statements for each fiscal year and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request.
5.4. Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and such proceedings could not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein.
5.5. Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement on the Collateral as a perfected security interest having at least the priority described in Section 4.3 until the Collateral is released from such security interest pursuant to the terms of Section 10.15 of the Credit Agreement or by operation of law and shall defend such security interest against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Secured Parties from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral of such Grantor as the Administrative Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly authorize, execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts (except Deposit Accounts constituting Agreed Unperfected Collateral) and any other relevant Collateral, taking any actions necessary to enable the Administrative Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto, including without limitation, executing and delivering and causing the relevant depositary bank or securities intermediary to execute and deliver a Control Agreement in form and substance reasonably satisfactory to the Administrative Agent.
5.6. Changes in Locations, Name, Jurisdiction of
Incorporation, etc. Such Grantor will not (i) without limiting or expanding the
prohibitions on mergers involving the Grantors contained in the Credit
Agreement, change its legal name, jurisdiction of organization or the location
of its chief executive office or sole place of business from that referred to in
Section 4.4; or (ii) change its legal name, identity or structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading except, in each case,
unless such Grantor has provided 15 days' prior written notice to the
Administrative Agent and delivered to the Administrative Agent duly authorized
and, where required, executed copies of all additional financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein.
5.7. Notices. Such Grantor will advise the Secured Parties promptly, in reasonable detail, of:
(a) (i) any commercial tort claims that it may acquire after the Closing Date, (ii) if it becomes the beneficiary or assignee under any letter of credit, (iii) if any of the Inventory or Equipment with a fair market value in excess of $500,000 is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or is otherwise in the possession of any bailee or warehouseman or (iv) if it becomes aware that more than 10% of the Pledged Debt Securities and Pledged Notes are in default;
(b) any Lien (other than any Permitted Lien) on any of the Collateral which would materially adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and
(c) the occurrence of any event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby.
5.8. Investment Property. (a) If such Grantor shall become entitled to receive or shall receive any stock or other ownership certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of or other ownership interests in the Pledged Capital Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Secured Parties, hold the same in trust for the Secured Parties and deliver the same forthwith to the Administrative Agent in the exact form received, duly endorsed by such Grantor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer shall be paid over to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Grantor, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, such Grantor will not (i) vote to enable, or take any other action to
permit, any Issuer to issue any Capital Stock or to issue any other securities
convertible into or granting the right to purchase or exchange for any Capital
Stock of any Issuer (except as expressly permitted by the Credit Agreement),
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, any of the Investment Property or Proceeds thereof or
any interest therein (except, in each case, pursuant to a transaction not
prohibited by the Credit Agreement), (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Investment Property or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement and Permitted Liens (iv) enter
into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the
Investment Property or Proceeds thereof or any interest therein (except as
expressly permitted by the Credit Agreement) or (v) without the prior written
consent of the Administrative Agent, cause or permit any Issuer of any Pledged
Capital Stock consisting of partnership interests or limited liability company
interests which are not securities (for purposes of the UCC) on the date hereof
to elect or otherwise take any action to cause such Pledged Capital Stock to be
treated as securities for purposes of the UCC; provided, however,
notwithstanding the foregoing, if any issuer of any Pledged Capital Stock
consisting of partnership interests or limited liability company interests takes
any such action in violation of the foregoing in this clause (v), such Grantor
shall promptly notify the Administrative Agent in writing of any such election
or action and, in such event, shall take all steps necessary or advisable to
establish the Administrative Agent's "control" thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it. In addition, each Grantor which is either an Issuer or an owner of any Pledged Security hereby consents to the grant by each other Grantor of the security interest hereunder in favor of the Administrative Agent and to the transfer of any Pledged Security to the Administrative Agent or its nominee following an Event of Default and to the substitution of the Administrative Agent or its nominee as a partner, member or shareholder of the Issuer of the related Pledged Security.
5.9. Receivables. (a) Other than in the ordinary course of business consistent with its past practice and so long as no Event of Default shall have occurred and be continuing, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables.
5.10. Intellectual Property. (a) With respect to each material Trademark owned by such Grantor, such Grantor (either itself or through licensees) will (i) continue to use such Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use consistent with Section 5.10(i) below, (ii) maintain the quality of products and services offered under such Trademark and take all necessary steps to ensure that all licensed users of such Trademark maintain such quality at a level at least substantially consistent with such quality as of the date hereof, (iii) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Secured Parties, shall obtain a perfected security interest in such mark pursuant to this Agreement and the Intellectual Property Security Agreement, and (iv) not (and not permit any licensee or sublicense thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way, other than acts taken in the ordinary course of such Grantor's business, consistent with past practice.
(b) Such Grantor will not (and will not permit any licensee or sublicensee thereof to) do any act, or omit to do any act, whereby any material Patent owned by such Grantor may become forfeited, abandoned or dedicated to the public.
(c) Such Grantor will not (and will require all licensees and sublicensees thereof not to) do any act or knowingly omit to do any act whereby any material Copyrights may
become invalidated or otherwise dedicated to the public. Such Grantor will not (and will require that all licensees and sublicensees thereof will not) do any act whereby any material Copyrights may fall into the public domain.
(d) Such Grantor will not (and will require all licensees and sublicensees thereof not to) do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person.
(e) Such Grantor will use commercially reasonable efforts to use (and will use commercially reasonable efforts to require all licensees and sublicensees thereof to use) proper statutory notice in connection with the use of each material Patent, Trademark and Copyright owned by such Grantor.
(f) Such Grantor will notify the Secured Parties immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, or the validity of, any material Intellectual Property or such Grantor's right to register the same or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Administrative Agent in accordance with Section 6.2(b) of the Credit Agreement. Upon request of the Administrative Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Administrative Agent may reasonably request to evidence the Secured Parties' security interest in any Copyright, Patent, Trademark or other Intellectual Property of such Grantor and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.
(h) Unless such Grantor can demonstrate to the Administrative Agent's reasonable satisfaction that the economic benefit to such Grantor of not taking such reasonable and necessary steps exceeds the economic benefit to such Grantor of taking such reasonable and necessary steps, such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of material Intellectual Property owned by such Grantor, including, without limitation, the payment of all required fees and taxes, the filing of applications for renewal or extension, affidavits of use and incontestability, and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings.
(i) Such Grantor (either itself or through licensees) will not, without the prior written consent of the Administrative Agent, discontinue use of or otherwise abandon any Intellectual Property owned by such Grantor, or abandon any application or any right to file an application for letters patent, trademark, or copyright, unless such Grantor shall have previously determined that such use or the pursuit or maintenance of such Intellectual Property is no longer desirable in the conduct of such Grantor's business and that the loss thereof could not reasonably be expected to have a Material Adverse Effect.
(j) In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Administrative Agent after it learns thereof and institute proceedings with respect to such infringement, misappropriation or dilution, and/or seek injunctive relief where appropriate and/or recover damages for such infringement, misappropriation or dilution.
(k) Such Grantor agrees to execute an Intellectual Property Security Agreement with respect to its Intellectual Property in substantially the form of Exhibit B-1 in order to record the security interest granted herein to the Administrative Agent for the ratable benefit of the Secured Parties with the United States Patent and Trademark Office, the United States Copyright Office, and any other applicable Governmental Authority.
(l) Such Grantor agrees that, should it obtain an ownership
interest in any item of intellectual property which is not now a part of the
Intellectual Property Collateral (the "After-Acquired Intellectual Property"),
(i) the provisions of Section 3 shall automatically apply thereto and (ii) any
such After-Acquired Intellectual Property, and in the case of trademarks, the
goodwill of the business connected therewith or symbolized thereby, shall
automatically become part of the Intellectual Property Collateral. At such time
as the Borrower provides the Administrative Agent with notice of any newly
acquired, created or developed registered Intellectual Property owned by such
Grantor pursuant to Section 6.2(b) of the Credit Agreement, such Grantor agrees
to execute an After-Acquired Intellectual Property Security Agreement with
respect to its After-Acquired Intellectual Property in substantially the form of
Exhibit B-2 in order to record the security interest granted herein to the
Administrative Agent for the ratable benefit of the Secured Parties with the
United States Patent and Trademark Office, the United States Copyright Office,
and any other applicable Governmental Authority.
(m) Such Grantor shall take all steps reasonably necessary to protect the secrecy of all material Trade Secrets, including, without limitation, entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents.
5.11. Vehicles. At any time after the fair market value of all Vehicles owned by the Grantors exceeds $10,000,000 in the aggregate, the Borrower shall promptly so notify the Administrative Agent and, upon the request of the Administrative Agent, the Borrower shall promptly deliver to the Administrative Agent, with respect to each such Vehicle, all applications for certificates of title or ownership indicating the Administrative Agent's first priority security interest in the Vehicle covered by such certificate and any other necessary documentation shall
be filed in each office in each jurisdiction which the Administrative Agent shall deem advisable to perfect its security interests in the Vehicles.
5.12. Cash and Bank Deposits. With respect to the Borrower and the Subsidiary Guarantors only, (a) except as provided in Sections 5.12(b) and (c), deposit all checks and other payment remittances received by it, and keep all of its cash (except store cash and cash deposits permitted by Sections 7.2(d), (n) and (o) of the Credit Agreement) and bank deposits, only in Deposit Accounts that are, at all times, subject to agreements which establish the Administrative Agent's "control" (within the meaning of Section 9-104 of the UCC) over such deposit accounts (each such subject deposit account, a "Controlled Account");
(b) Promptly deposit all cash and checks received from store sales to a Controlled Account or to a collection account which automatically clears good funds on deposit (net of any minimum balance maintained in the ordinary course of business not to exceed $15,000,000 in the aggregate for all such collection accounts) to a Controlled Account when the store sales linked to such collection account exceed $1,500; and
(c) Maintain its disbursement accounts so that deposits therein are made only from Controlled Accounts and only as and when checks are presented for payment from such accounts.
SECTION 6. REMEDIAL PROVISIONS
6.1. Certain Matters Relating to Receivables. (a) If a Default or Event of Default has occurred and is continuing, the Administrative Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications. At any time and from time to time, upon the Administrative Agent's reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to collect such Grantor's Receivables; provided, however, that the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly endorsed by such Grantor to the Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Secured Parties only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Secured Parties, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.
(c) If an Event of Default has occurred and is continuing, at the Administrative Agent's reasonable request, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts.
6.2. Communications with Obligors; Grantors Remain Liable.
(a) The Administrative Agent in its own name or in the name of others may at any
time after an Event of Default has occurred and is continuing communicate with
obligors under the Receivables to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Receivables.
(b) The Administrative Agent may at any time after an Event of Default has occurred and is continuing require any Grantor to notify the Account Debtor or counterparty on any Receivable of the security interest of the Administrative Agent therein. In addition, after the occurrence and during the continuance of an Event of Default, the Administrative Agent may require any Grantor to notify the Account Debtor or counterparty to make all payments under the Receivables directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. No Secured Party shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by any Secured Party of any payment relating thereto, nor shall any Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.
6.3. Pledged Securities. (a) Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Grantor of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Capital Stock and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all voting and corporate rights with respect to the Pledged Securities; provided, however, that no vote shall be cast or corporate or other ownership right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing: (i) all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Administrative Agent who shall thereupon have the sole right, but shall be under no obligation, to exercise or refrain from exercising such voting and other consensual rights and (ii) the Administrative Agent shall have the right, without notice to any Grantor, to transfer all or any portion of the Investment Property to its name or the name of its nominee or agent. In addition, the Administrative Agent shall have the right at any time, without notice to any Grantor, to exchange any certificates or instruments representing any Investment Related Property for certificates or instruments of smaller or larger denominations. In order to permit the Administrative Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Administrative Agent all proxies, dividend payment orders and other instruments as the Administrative Agent may from time to time reasonably request and EACH Grantor acknowledges that the Administrative Agent may utilize the power of attorney set forth herein.
(c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Administrative Agent.
6.4. Proceeds to be Turned Over To Administrative Agent. In addition to the rights of the Secured Parties specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, Cash Equivalents, checks and other near-cash items shall be held by such Grantor in trust for the Secured Parties, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly endorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor in trust for the Secured Parties) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5.
6.5. Application of Proceeds. At such intervals as may be agreed upon by the Borrower and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may, notwithstanding the provisions of Section 2.12 of the Credit Agreement, apply all or any part of the net Proceeds (after deducting fees and expenses as provided in Section 6.6) constituting Collateral realized through the exercise by the Administrative Agent of its remedies hereunder, whether or not held in any Collateral Account, and any proceeds of the guarantee set forth in Section 2, in payment of the Obligations in the following order:
First, to the Administrative Agent, to pay incurred and unpaid fees and expenses of the Secured Parties under the Loan Documents;
Second, to the Administrative Agent, for application by it towards payment of amounts then due and owing and remaining unpaid in respect of the Obligations, pro rata among the Secured Parties according to the amounts of the Obligations then due and owing and remaining unpaid to the Secured Parties;
Third, to the Administrative Agent, for application by it towards prepayment of the Obligations, pro rata among the Lenders according to the amounts of the Obligations then held by the Lenders; and
Fourth, any balance of such Proceeds remaining after the Obligations shall have been paid in full, no Letters of Credit shall be outstanding (unless such Letter of Credit has been cash collateralized or backed with another letter of credit in accordance with Section 10.15(c) of the Credit Agreement) and the Commitments shall have terminated or expired shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same.
6.6. Code and Other Remedies. (a) If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC (whether or not the New York UCC applies to the affected Collateral) or its rights under any other applicable law or in equity. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, license, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, it being understood that a Secured Party will be subject to the commercially reasonable requirements under the UCC with respect to any disposition of Collateral. Each Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.
The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Administrative Agent may sell the Collateral without giving any warranties as to the Collateral. The Administrative Agent may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely effect the commercial reasonableness of any sale of the Collateral. Each Grantor agrees that it would not be commercially unreasonable for the Administrative Agent to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Each Grantor hereby waives any claims against the Administrative Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Administrative Agent accepts the first offer received and does not offer such Collateral to more than one offeree. Each Grantor further agrees, at the Administrative Agent's request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Grantor's premises or elsewhere. Subject to any applicable landlord consents, the Administrative Agent shall have the right to enter onto the property where any Collateral is located and take possession thereof with or without judicial process.
(b) The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a) of the New York UCC, need the Administrative Agent account for the surplus, if any, to any Grantor. If the Administrative Agent sells any of the Collateral upon credit, the Grantor will be credited only with payments actually made by the purchaser and received by the Administrative Agent and applied to indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Administrative Agent may resell the Collateral and the Grantor shall be credited with proceeds of the sale. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against any Secured Party arising out of the exercise by them of any rights hereunder.
(c) In the event of any Disposition of any of the Intellectual Property, the goodwill of the business connected with and symbolized by any Trademarks subject to such Disposition shall be included, and the applicable Grantor shall supply the Administrative Agent or its designee with such Grantor's know-how and expertise, and with documents and things embodying the same, relating to the manufacture, distribution, advertising and sale of products or the provision of services relating to any Intellectual Property subject to such Disposition, and such Grantor's customer lists and other records and documents relating to such Intellectual Property and to the manufacture, distribution, advertising and sale of such products and services.
6.7. Registration Rights. (a) If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged Capital
Stock or the Pledged Debt Securities pursuant to Section 6.6, and if in the
opinion of the Administrative Agent it is necessary to have the Pledged Capital
Stock or the Pledged Debt Securities, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant Grantor will
cause the Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Administrative Agent, necessary to register the Pledged Capital
Stock or the Pledged Debt Securities, or that portion thereof to be sold, under
the provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Capital Stock or the Pledged Debt Securities, or that portion
thereof to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary, all
in conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto. Each Grantor agrees to cause such
Issuer to comply with the provisions of the securities or "Blue Sky" laws of any
and all jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Capital Stock or the Pledged Debt Securities, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Capital Stock or the Pledged Debt Securities for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Capital Stock or the Pledged Debt Securities pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Secured Parties, that the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing under the Credit Agreement or a defense of payment.
6.8. Waiver; Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by any Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1. Administrative Agent's Appointment as Attorney-in-Fact, etc. (a) Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Secured Parties' security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Secured Parties' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary
notwithstanding, the Administrative Agent agrees that, except as provided in
Section 7.1(b), it will not exercise any rights under the power of attorney
provided for in this Section 7.1(a) unless an Event of Default shall have
occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement; provided, however, that unless and Event of Default has occurred and is continuing or time is of the essence, the Administrative Agent shall not exercise this power without first making demand on the Grantor and the Grantor failing to immediately comply therewith.
(c) The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Revolving Credit Loans that are Base Rate Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
7.2. Duty of Administrative Agent. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, nor any other Secured Party nor any of their respective
officers, directors, partners, employees, agents, attorneys and other advisors, attorneys-in-fact or affiliates shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Secured Parties hereunder are solely to protect the Secured Parties' interests in the Collateral and shall not impose any duty upon any Secured Party to exercise any such powers. The Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, partners, employees, agents, attorneys and other advisors, attorneys-in-fact or affiliates shall be responsible to any Grantor for any act or failure to act hereunder, except to the extent that any such act or failure to act is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly from their own gross negligence or willful misconduct.
7.3. Execution of Financing Statements. Each Grantor acknowledges that pursuant to Section 9-509(b) of the New York UCC and any other applicable law, the Administrative Agent is authorized to file or record financing or continuation statements, and amendments thereto, and other filing or recording documents or instruments with respect to the Collateral in such form and in such offices as the Administrative Agent reasonably determines appropriate to perfect or maintain the perfection of the security interests of the Administrative Agent under this Agreement. Each Grantor agrees that such financing statements may describe the collateral in the same manner as described in the Security documents or as "all assets" or "all personal property" of the undersigned, whether now owned or hereafter existing or acquired by the undersigned or such other description as the Administrative Agent, in its sole judgment, determines is necessary or advisable. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.
7.4. Authority of Administrative Agent. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the other Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
7.5. Appointment of Co-Collateral Agents. At any time or from time to time, in order to comply with any Requirement of Law, the Administrative Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and which may be specified in the instrument of appointment (which may, in the discretion of the Administrative Agent, include provisions for indemnification and similar protections of such co-agent or separate agent).
SECTION 8. MISCELLANEOUS
8.1. Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 10.1 of the Credit Agreement.
8.2. Notices. All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder shall be effected in the manner provided for in Section 10.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1.
8.3. No Waiver by Course of Conduct; Cumulative Remedies.
No Secured Party shall by any act (except by a written instrument pursuant to
Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any Default or Event of
Default. No failure to exercise, nor any delay in exercising, on the part of any
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which such Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4. Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay or reimburse each Secured Party for all its costs and expenses incurred in collecting against such Grantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Grantor is a party, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Secured Party and of counsel to the Administrative Agent to the extent the Borrower would be required to do so pursuant to Section 10.5 of the Credit Agreement.
(b) Each Grantor agrees to pay, and to save each Secured Party harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement, except to the extent such liabilities are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of such Secured Party.
(c) Each Grantor agrees to pay, and to save the Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 10.5 of the Credit Agreement.
(d) The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.
(e) Each Grantor agrees that the provisions of Section 2.20 of the Credit Agreement are hereby incorporated herein by reference, mutatis mutandis, and each Secured Party shall be entitled to rely on each of them as if they were fully set forth herein.
8.5. Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Secured Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent.
8.6. Set-Off. Each Grantor hereby irrevocably authorizes each Secured Party at any time and from time to time, while an Event of Default pursuant to Section 8(a) of the Credit Agreement shall have occurred and be continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Secured Party to or for the credit or the account of such Grantor, or any part thereof in such amounts as such Secured Party may elect, against and on account of the obligations and liabilities of such Grantor to such Secured Party hereunder and claims of every nature and description of such Secured Party against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as such Secured Party may elect, whether or not any Secured Party has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Each Secured Party shall notify such Grantor promptly of any such set-off and the application made by such Secured Party of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Secured Party under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Secured Party may have.
8.7. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
8.8. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
8.9. Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
8.10. Integration. This Agreement and the other Loan Documents represent the agreement of the Grantors, the Administrative Agent and the other Secured Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Secured Party relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.
8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12. Submission to Jurisdiction; Waivers. Each Grantor hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
8.13. Acknowledgments. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(b) no Secured Party has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Secured Parties.
8.14. Additional Grantors. Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to Section 6.10 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.
8.15. Releases. (a) At such time as the Loans, the Reimbursement Obligations and the other Obligations (other than Obligations in respect of any Specified Hedge Agreement) shall have been paid in full, the Commitments have been terminated or expired and no Letters of Credit shall be outstanding (unless such Letters of Credit have been cash collateralized or backed with another letter of credit in accordance with Section 10.15(c) of the Credit Agreement), the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder (including all guarantee obligations) shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be Disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Administrative Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Borrower, a Subsidiary Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Subsidiary Guarantor shall be Disposed of in a transaction permitted by the Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least ten Business Days prior to the date of the proposed release (or such shorter period as the Administrative Agent may agree to), a written request for release identifying the relevant Subsidiary Guarantor and the terms of the Disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents and that the Proceeds of such Disposition will be applied in accordance therewith.
(c) Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement originally filed in connection herewith without the prior written consent of the Administrative Agent subject to such Grantor's rights under Section 9-509(d)(2) of the New York UCC.
8.16. WAIVER OF JURY TRIAL. EACH GRANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
(signature pages follow)
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written.
GENERAL NUTRITION CENTERS HOLDING COMPANY
By: /s/ Andrew Jhawar
-------------------------------------
Name: Andrew Jhawar
Title: Vice President and Treasurer
|
GENERAL NUTRITION CENTERS, INC.
GENERAL NUTRITION INCORPORATED
GENERAL NUTRITION CORPORATION
NUTRICIA MANUFACTURING USA, INC.
GNC FRANCHISING, INC.
GENERAL NUTRITION INTERNATIONAL, INC.
GENERAL NUTRITION INVESTMENT COMPANY
GENERAL NUTRITION SYSTEMS, INC.
GENERAL NUTRITION DISTRIBUTION COMPANY
GNC, LIMITED
GNC (CANADA) HOLDING COMPANY
INFORMED NUTRITION, INC.
GENERAL NUTRITION GOVERNMENT SERVICES,
INC.
GN INVESTMENT, INC.
GENERAL NUTRITION SALES CORPORATION
GNC US DELAWARE, INC.
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary for each of the
above named Credit Parties
|
GENERAL NUTRITION DISTRIBUTION, L.P.
By: General Nutrition Incorporated, its
general partner
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary
|
GENERAL NUTRITION COMPANIES, INC.
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary
|
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: /s/ Francis Chang
-------------------------------------
Name: Francis Chang
Title: Vice President
|
EXHIBIT 10.3
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of December 5, 2003 (as amended, supplemented, replaced or otherwise modified from time to time, the "Intellectual Property Security Agreement"), is made by each of the signatories hereto (collectively, the "Grantors") in favor of Lehman Commercial Paper Inc., as administrative agent (in such capacity, the "Administrative Agent") for the Secured Parties (as defined in the Credit Agreement referred to below).
WHEREAS, General Nutrition Centers Holding Company, a Delaware corporation, and General Nutrition Centers, Inc., a Delaware corporation, have entered into a Credit Agreement, dated as of December 5, 2003 (as amended, supplemented, replaced or otherwise modified from time to time, the "Credit Agreement"), with the banks and other financial institutions and entities from time to time party thereto, Lehman Commercial Paper, Inc., as administrative agent, Lehman Brothers, Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and joint book runners and JPMorgan Chase Bank as syndication agent. Capitalized terms used and not defined herein have the meanings given such terms in the Credit Agreement.
WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered that certain Guarantee and Collateral Agreement, dated as of December 5, 2003, in favor of the Administrative Agent (as amended, supplemented, replaced or otherwise modified from time to time, the "Guarantee and Collateral Agreement").
WHEREAS, under the terms of the Guarantee and Collateral Agreement, the Grantors have assigned and transferred to the Administrative Agent, and granted to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of the Grantor's right, title, and interest in and to certain Property, including, without limitation, certain Intellectual Property of the Grantors, and have agreed as a condition thereof to execute this Intellectual Property Security Agreement with respect to certain of its Intellectual Property in order to record the security interests granted therein with the United States Patent and Trademark Office, the United States Copyright Office, and any other applicable Governmental Authorities.
NOW, THEREFORE, in consideration of the premises and to induce the Arrangers (as defined in the Guarantee and Collateral Agreement), the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, the Grantors hereby agree with the Administrative Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and transfers to the Administrative Agent, and grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of such Grantor's right, title and interest in and to the following (the "Intellectual Property Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations:
(a) (i) all United States, state and foreign trademarks,
service marks, trade names, corporate names, company names, business names,
trade dress, trade styles, logos, or other indicia of origin or source
identification, Internet domain names, trademark and service mark registrations,
and applications for trademark or service mark registrations and any new
renewals thereof, including, without limitation, each registration and
application identified in Schedule 1, (ii) the right to sue or otherwise recover
for any and all past, present and future infringements and misappropriations
thereof, (iii) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection therewith,
and damages and payments for past, present or future infringements thereof), and
(iv) all other rights of any kind whatsoever of such Grantor accruing thereunder
or pertaining thereto, together in each case with the goodwill of the business
connected with the use of, and symbolized by, each of the above (collectively,
the "Trademarks");
(b) (i) all United States and foreign patents, patent applications and patentable inventions, including, without limitation, each issued patent and patent application identified in Schedule 1, and all certificates of invention or similar property rights (ii) all inventions and improvements described and claimed therein, (iii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iv) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto and (v) all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Patents");
(c) (i) all United States and foreign copyrights, whether or not the underlying works of authorship have been published, including but not limited to copyrights in software and databases, all Mask Works (as defined in 17 U.S.C. 901 of the Copyright Act), and all works of authorship and other intellectual property rights therein, all right, title and interest to make and exploit all derivative works based on or adopted from works covered by such copyrights, and all copyright registrations and copyright applications, mask works registrations and mask works applications, and any renewals or extensions thereof, including, without limitation, each registration and application identified in Schedule 1, (ii) the rights to print, publish and distribute any of the foregoing, (iv) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iv) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto and (v) all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto ("Copyrights");
(d) (i) all trade secrets and all confidential and proprietary information, including know-how, manufacturing and production processes and techniques, inventions, research and development information, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto and (iv) all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Trade Secrets"); and
(e) (i) all Trademark Licenses (as defined in the Guarantee and Collateral Agreement), Trade Secret Licenses (as defined in the Guaranty and Collateral Agreement), Patent Licenses (as defined in the Guaranty and Collateral Agreement), and Copyright Licenses (as defined in the Guaranty and Collateral Agreement), in each case, to the extent Grantor is not the granting party, including, without limitation, any of the foregoing identified in Schedule 1, and (ii) all rights to sue at law or in equity for any past, present and future infringement or impairment thereof, including the right to receive all proceeds and damages therefrom.
SECTION 2. Excluded Assets. Notwithstanding anything to the contrary in this Intellectual Property Security Agreement, none of the Excluded Assets (as defined in the Guarantee and Collateral Agreement) shall constitute Intellectual Property Collateral.
SECTION 3. Recordation. Each Grantor authorizes and requests that the Register of Copyrights, the Commissioner of Patents and Trademarks and any other applicable government officer record this Intellectual Property Security Agreement.
SECTION 4. Execution in Counterparts. This Intellectual Property Security Agreement may be executed in any number of counterparts (including by telecopy), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 5. Governing Law. This Intellectual Property Security Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
SECTION 6. Conflict Provision. This Intellectual Property Security Agreement has been entered into in conjunction with the provisions of the Guarantee and Collateral Agreement and the Credit Agreement. The rights and remedies of each party hereto with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Guarantee and Collateral Agreement and the Credit Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Intellectual Property Security Agreement are in conflict with the Guarantee and Collateral Agreement or the Credit Agreement, the provisions of the Guarantee and Collateral Agreement or the Credit Agreement shall govern.
IN WITNESS WHEREOF, each of the undersigned has caused this Intellectual Property Security Agreement to be duly executed and delivered as of the date first above written.
[NAME OF GRANTOR]
By: _____________________________________
Name:
Title:
EXHIBIT 10.4
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (this "Management Agreement"), dated as of December 5, 2003, is made by and among General Nutrition Centers, Inc., a Delaware corporation ("Centers"), General Nutrition Centers Holding Company, a Delaware corporation ("Holdings" and, together with Centers, the "Companies"), and Apollo Management V, L.P., a Delaware limited partnership (the "Manager").
WHEREAS, the Companies have obtained and desire to continue to obtain from the Manager, and the Manager has provided and desires to continue to provide to the Companies, certain investment banking, management, consulting and financial planning services on an ongoing basis and certain financial advisory and investment banking services in connection with major financial transactions that may be undertaken by the Companies or their subsidiaries from time to time in the future;
WHEREAS, the Companies have recently consummated the acquisition of the General Nutrition Companies business (the "Acquisition") pursuant to the Purchase Agreement, dated as of October 16, 2003, by and among Apollo GNC Holding, Inc., Numico USA, Inc. and Royal Numico N.V. (the "Purchase Agreement");
WHEREAS, this Management Agreement has been approved by the each of the Companies' board of directors; and
WHEREAS, this Management Agreement has been approved by holders of a majority of each of the Companies' common stock;
NOW, THEREFORE, in consideration of their mutual promises made herein, and for other good and valuable consideration, receipt of which is hereby acknowledged by each party, the parties, intending to be legally bound, hereby agree as follows:
1. Retention of Services
1.1 Investment Banking Services. Subject to the terms and conditions hereof, the Companies hereby retain the Manager, and the Manager hereby agrees to be retained by the Companies, to provide investment banking services to the Companies. The scope of these services shall be as reasonably requested by the Companies and agreed to by the Manager from time to time.
1.2 General Services. Subject to the terms and conditions hereof, the Companies hereby retain the Manager, and the Manager hereby agrees to be retained by the Companies, to provide management, consulting and financial planning services to the Companies on an ongoing basis in connection with the operation and growth of the Companies and their subsidiaries in the ordinary course of their businesses during the term of this Management Agreement (the "General Services"). The scope of the General Services shall be such as reasonably requested by the Companies and agreed to by the Manager from time to time.
1.3 Major Transaction Services. Subject to the terms and conditions hereof, the Companies hereby retain the Manager, and the Manager hereby agrees to be retained by the Companies, to provide financial advisory and investment banking services to the Companies in connection with major financial transactions that may be undertaken by the Companies or their subsidiaries from time to time in the future ("Major Transaction Services" and, together with the General Services, the "Services"). The scope of the Major Transaction Services shall be such as reasonably requested by the Companies and agreed to by the Manager from time to time.
2. Compensation.
2.1 General Services Fee. In consideration of the General Services, the Companies shall pay the Manager an annual fee payable in cash equal to $1,500,000 (the "Annual Fee"). The Annual Fee shall be payable by the Companies in equal monthly installments in advance, on the first business day of each month commencing on the first such day following the date hereof, without regard to the amount of services actually performed by Manager.
2.2 Major Transaction Services Fee. In consideration of any Major Transaction Services provided by the Manager from time to time, the Companies shall pay the Manager normal and customary fees for services of like kind as agreed by the Manager and the Companies, taking into consideration all relevant factors, including but not limited to, the complexity of the subject transaction, the time devoted to providing such services and the value of the Manager's financial advisory and/or investment banking expertise and relationships within the business and financial community.
2.3 Structuring and Transition Services Fee. In connection with the services provided to the Companies in connection with the transactions contemplated by, and pursuant to the terms of, the Purchase Agreement, and the provision of critical transition services by Manager for the four-week period following the consummation of the Acquisition (the "Transition Period"), the Companies agree to pay to the Manager a structuring and transition services fee of $7,500,000, plus reimbursement of out-of-pocket expenses incurred and to be incurred by the Manager in connection with the services provided in connection with the Acquisition and the transition services. The structuring and transition services fee and all out-of-pocket expenses to be paid pursuant to this Section 2.3 shall be earned following the completion of Manager's provision of services during the Transition Period. The structuring and transition services fee shall be paid by the Companies on the third business day following the end of the Transition Period, provided that Manager shall not have materially breached its obligation to perform the transition services, or at any such later date as the Manager shall request, and, if so requested by the Manager, out-of-pocket expenses shall be paid in advance of the payment of the structuring and transition services fee.
2.4 Expenses. In addition to the fees to be paid to the Manager under Sections 2.1, 2.2 and 2.3 hereof, the Companies shall pay to, or on behalf of, the Manager, promptly as billed, an amount equal to all out-of-pocket expenses incurred by the Manager in connection with the Services rendered hereunder. Such expenses shall include, among other things, fees and disbursements of counsel, travel expenses, word processing charges, messenger and duplicating services, telephone and facsimile expenses and other customary expenditures.
3. Term.
3.1 Termination. This Management Agreement shall terminate on the tenth anniversary of this Management Agreement.
3.2 Survival of Certain Obligations. Notwithstanding any other provision hereof, the obligations of the Companies to pay amounts due with respect to periods prior to the termination hereof pursuant to Section 2 hereof and the provisions of Sections 4 and 5 hereof shall survive any termination of this Management Agreement.
4. Decisions/Authority of Advisor.
4.1 Limitation on the Managers' Liability. The Companies reserve the right to make all decisions with regard to any matter upon which the Manager has rendered its advice and consultation, and there shall be no liability of the Manager for any such advice accepted by the Companies pursuant to the provisions of this
Management Agreement.
4.2 Independent Contractor. The Manager shall act solely as an independent contractor and shall have complete charge of its respective personnel engaged in the performance of the Services. As an independent contractor, the Manager shall have authority only to act as an advisor to the Companies and shall have no authority to enter into any agreement or to make any representation, commitment or warranty binding upon the Companies or to obtain or incur any right, obligation or liability on behalf of the Companies. Nothing contained in this Management Agreement shall constitute the Manager or any of its partners or members or any of their affiliates, investment managers, investment advisors or partners a partner of or joint venturer with the Companies.
5. Indemnification.
5.1 Indemnification/Reimbursement of Expenses. The Companies shall
(i) indemnify the Manager and its partners and members and any of its
affiliates, investment managers, investment advisors and their respective
affiliates, and the partners, directors, officers, employees, agents and
controlling persons of the Manager and its partners and its affiliates
(collectively, the "Indemnified Parties"), to the fullest extent permitted by
law, from and against any and all losses, claims, damages and liabilities, joint
or several, to which any Indemnified Party may become subject, directly or
indirectly caused by, related to or arising out of the Services or any other
advice or services contemplated by this Management Agreement or the engagement
of the Manager pursuant to, and the performance by the Manager of the Services
contemplated by, this Management Agreement, and (ii) promptly reimburse each
Indemnified Party for all costs and expenses (including reasonable and
documented attorneys' fees and expenses), as incurred, in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action or proceeding is
initiated or brought by or on behalf of the Companies and whether or not
resulting in any liability.
5.2 Limited Liability. The Companies shall not be liable under the indemnification contained in Section 5.1 hereof to the extent that such loss, claim, damage, liability, cost or expense is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the Manager's willful misconduct or gross negligence. The Companies further agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Companies, holders of their securities or their creditors related to or arising out of the engagement of the Manager pursuant to, or the performance by the Manager of the Services contemplated by, this Management Agreement.
6. Miscellaneous.
6.1 Assignment. None of the parties hereto shall assign this Management Agreement or the rights and obligations hereunder, in whole or in part, without the prior written consent of the other party; provided, however, that, without obtaining such consent, the Manager may assign this Management Agreement or its rights and obligations hereunder to (i) any of its partners or members or their affiliates or any person who controls the Manager; or (ii) any investment fund, investment account or investment entity whose investment manager, investment advisor or partner, or any principal or beneficial owner of any of the foregoing, is any person identified in clause (i) above. Subject to the foregoing, this Management Agreement will be binding upon and inure solely to the benefit of the parties hereto and their respective successors and assigns, and no other person shall acquire or have any right hereunder or by virtue hereof.
6.2 Governing Law. This Management Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware without regard to principles of conflict of laws.
6.3 Joint and Several Obligations. The obligations of the Companies under this Management Agreement are the joint and several obligations of Centers and Holdings.
6.4 Severability. If any term, provision, covenant or restriction of this Management Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any such terms, provisions, covenants and restrictions which may be hereafter declared invalid, illegal, void or unenforceable.
6.5 Entire Agreement. This Management Agreement contains the entire agreement between the parties with respect to the subject matter of this Management Agreement and supersedes all written or verbal representations, warranties, commitments and other understandings with respect to the subject matter of this Management Agreement prior to the date of this Management Agreement.
6.6 Further Assurances. Each party hereto agrees to use all reasonable efforts to obtain all consents and approvals and to do all other things necessary to consummate the transactions contemplated by this Management Agreement. The
parties agree to take such further action and to deliver or cause to be delivered any additional agreements or instruments as any of them may reasonably request for the purpose of carrying out this Management Agreement and the agreements and transactions contemplated hereby.
6.7 Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Management Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by a court of competent jurisdiction, shall be entitled to recover reasonable and documented attorneys' fees in addition to any other available remedy.
6.8 Headings. The headings in this Management Agreement are for convenience and reference only and shall not limit or otherwise affect the meaning hereof.
6.9 Amendment and Waiver. This Management Agreement may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, provided that the same are in writing and signed by each of the parties hereto.
6.10 Counterparts. This Management Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Management Services Agreement on the date first appearing above.
GENERAL NUTRITION CENTERS
HOLDING COMPANIES
By: /s/ James Sander
--------------------------------------
Name: James Sander
Title: Senior Vice President, Law,
Chief Legal Officer
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GENERAL NUTRITION CENTERS, INC.
By:/s/ James Sander
---------------------------------------
Name: James Sander
Title: Senior Vice President, Law,
Chief Legal Officer
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APOLLO MANAGEMENT V, L.P.
By: AIF V Management, Inc.,
its General Partner
By: /s/ Andrew Jhawar
--------------------------------------
Name: Andrew Jhawar
Title: Vice President
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EXHIBIT 10.5
ALLSTATE LIFE INSURANCE COMPANY
LOAN NO. 121709
RECORDING REQUESTED
WHEN RECORDED MAIL TO:
Virginia M. Duffy, Esquire
801 Old York Road, Suite 301
Jenkintown, PA 19046-1611
215-885-7540
MORTGAGE, ASSIGNMENT OF LEASES, RENTS AND
CONTRACTS, SECURITY AGREEMENT AND FIXTURE FILING
(Fee and Leasehold)
FROM
GUSTINE SIXTH AVENUE ASSOCIATES, LTD.
AS MORTGAGOR
TO ALLSTATE LIFE INSURANCE COMPANY
AS MORTGAGEE
Premises: 300 Sixth Avenue
Pittsburgh, PA
The address of the within-named Mortgagee is:
3075 Sanders Road, Suite G5C Northbrook, Illinois 60062 Attn: Commercial Mortgage Loan Servicing Manager
/s/ V. M. Duffy ------------------------ On Behalf of Mortgagee |
TABLE OF CONTENTS
ARTICLE HEADING PAGE
------- ------- ----
I COVENANTS OF MORTGAGOR
1.01 Performance of Obligations Secured 5
1.02 Insurance 5
1.03 Condemnation 7
1.04 Damage to Property 8
1.05 Escrow Fund for Condemnation and Insurance Proceeds 10
1.06 Taxes, Liens and other Items 11
1.07 Assignment of Leases, Contracts, Rents and Profits 12
1.08 Acceleration Upon Sale or Encumbrance 16
1.09 Preservation and Maintenance of Property 16
1.10 Offset Certificates 17
1.11 Intentionally Deleted 17
1.12 Protection of Security; Costs and Expenses 17
1.13 Mortgagor's Covenants Respecting Collateral 18
1.14 Covenants Regarding Financial Statements 19
1.15 Environmental Covenants 21
1.16 Covenants Relating to Subordinate Liens 22
1.17 Covenants Regarding Ground Lease 23
II EVENTS OF DEFAULT
2.01 Monetary and Performance Defaults 28
2.02 Bankruptcy, Insolvency, Dissolution 28
2.03 Misrepresentation 29
2.04 Default under Subordinate Loans 29
2.05 Default under Ground Lease 29
III REMEDIES
3.01 Acceleration 29
3.02 Entry 29
3.03 Judicial Action 32
3.04 Foreclosure 32
3.05 Right to Remedy Defaults 33
3.06 Mortgagee's Remedies Respecting Collateral 33
3.07 Proceeds of Sales 33
3.08 Condemnation and Insurance Proceeds 34
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ARTICLE HEADING PAGE
------- ------- ----
3.09 Waiver of Marshalling, Rights of Redemption, Homestead and Valuation 34
3.10 Remedies Cumulative 34
3.11 Nonrecourse 35
3.12 Evasion of Prepayment Premium 35
IV MISCELLANEOUS
4.01 Severability 36
4.02 Certain Charges and Brokerage Fees 36
4.03 Notices 36
4.04 Mortgagor Not Released 37
4.05 Inspection 38
4.06 Release 38
4.07 Statute of Limitations 38
4.08 Interpretation 38
4.09 Captions 39
4.10 Consent 39
4.11 Delegation to Subagents 39
4.12 Successors and Assigns 39
4.13 Governing Law 39
4.14 Intentionally Deleted 39
4.15 Changes in Taxation 39
4.16 Maximum Interest Rate 40
4.17 Time of Essence 40
4.18 Reproduction of Documents 40
4.19 No Oral Modifications 40
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EXHIBITS
Exhibit A - Legal Description of Fee Estate Land Exhibit B - Legal Description of Leasehold Estate Land
MORTGAGE, ASSIGNMENT OF LEASES, RENTS AND
CONTRACTS, SECURITY AGREEMENT AND FIXTURE FILING
(Fee and Leasehold)
THIS MORTGAGE, ASSIGNMENT OF LEASES, RENTS AND CONTRACTS, SECURITY
AGREEMENT AND FIXTURE FILING is made as of this 23rd day of March, 1999, from
GUSTINE SIXTH AVENUE ASSOCIATES, LTD., whose mailing address is c/o The Gustine
Company, 2100 Wharton Street, Suite 700, Pittsburgh, PA 15203 (herein
"Mortgagor"), in favor of ALLSTATE LIFE INSURANCE COMPANY, a corporation, whose
mailing address is Allstate Plaza South, Suite G5C, 3075 Sanders Road,
Northbrook, Illinois, 60062 (herein "Mortgagee").
In consideration of the indebtedness herein recited and as security for payment and performance of obligations set forth below, Mortgagor has granted, conveyed, bargained, sold, aliened, released, confirmed, transferred, pledged, warranted, and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, release, confirm, transfer, pledge, warrant, and mortgage unto Mortgagee, its successors and assigns, all that certain land described on Exhibit A attached to and made a part hereof (the "Fee Estate Land"), together with
(1) All of Mortgagor's right, title and interest in, to and under a certain Indenture of Lease dated October 14, 1902 between the Trustees of the First Presbyterian Church of Pittsburgh, as lessor, and Henry W. Oliver, as lessee, which is recorded in the Office for the Recorder of Deeds in and for Allegheny County, Pennsylvania (the "Recording Office"), in Deed Book Volume 1318 at page 357, as amended and supplemented by Agreement dated April 13, 1903 and recorded in the Recording Office in Deed Book Volume 1318 at page 361; Agreement dated July 18, 1940 and recorded in the Recording Office in Deed Book Volume 2669 at page 14; Agreement dated December 27, 1951 and recorded in the Recording Office in Deed Book Volume 3165 at page 132; and Agreement dated January 20, 1954 and recorded in the Recording Office in Deed Book Volume 3976 at page 22; and
(2) All of Mortgagor's right, title and interest in and to the leasehold estate created by the aforesaid Indenture of Lease in and to the parcel of land described in the aforesaid Indenture of Lease and as described on Exhibit B attached hereto and hereby made a part hereof (the "Leasehold Estate Land") (which interest in the aforesaid Indenture of Lease and the leasehold estate and term created thereby are separately and collectively referred to in this Mortgage as the "Ground Lease"); and the appurtenances and all the estate and rights of Mortgagor of, in and to the Property under and by virtue of the Ground Lease and the Fee Estate Land (the Leasehold Estate Land and the Fee Estate Land being sometimes collectively referred to in this Mortgage as the "Land").
TOGETHER with all of Mortgagor's right, title and interest now owned or hereafter acquired in all renewals, extensions and amendments of the Ground Lease; all credits and
deposits thereunder, if any; all purchase and other options, privileges and rights of Mortgagor, as tenant under the Ground Lease; and in case Mortgagor acquires, whether by exercise of any present or future option, or by any other manner, the fee title or any other estate, title or interest in the Leasehold Estate Land or any portion thereof or improvements thereon covered by the Ground Lease, this Mortgage shall attach to and cover and be a lien upon the fee title or other estate so acquired, and such fee title or other estate shall, without further assignment, mortgage or conveyance, become and be subject to the lien of and covered by this Mortgage.
ALSO TOGETHER with all of Mortgagor's now existing or hereafter acquired estate, right, title and interest in, to and under all buildings, structures, improvements and fixtures now existing or hereafter erected on the Land and all right, title and interest, if any, of Mortgagor in and to the streets and roads, opened or proposed, abutting the Land to the center lines thereof, and strips within or adjoining the Land, the air space and right to use said air space above the Land, all rights of ingress and egress on or within the Land, all easements, rights and appurtenances thereto or used in connection with the Land, including, without limitation, air lateral support, alley and drainage rights, all revenues, income, rents, cash or security deposits, advance rental deposits, profits, royalties, and other benefits thereof or arising from the use or enjoyment of all or any portion thereof (subject however to the rights and authorities given herein to Mortgagor to collect and apply such revenues, and other benefits), all interests in and rights, royalties and profits in connection with all minerals, oil and gas and other hydrocarbon substances thereon or therein, and water stock, all options to purchase or lease, all development or other rights relating to the Land or the operation thereof, or used in connection therewith, including all Mortgagor's right, title and interest in all fixtures, attachments, partitions, machinery, equipment, building materials, appliances and goods of every nature whatever now or hereafter located on, or attached to, the Land, all of which, including replacements and additions thereto, shall, to the fullest extent permitted by law and for the purposes of this Mortgage, be deemed to be real property and, whether affixed or annexed thereto or not, be deemed conclusively to be real property; and Mortgagor agrees to execute and deliver, from time to time, such further instruments and documents as may be required by Mortgagee to confirm the legal operation and effect of this Mortgage on any of the foregoing. All of the foregoing property described in this paragraph (the "Improvements") together with the Ground Lease, the Fee Estate Land and all appurtenances thereto, shall be hereinafter referred to as the "Property".
MORTGAGOR FURTHER GRANTS to Mortgagee a security interest in all of Mortgagor's now existing or hereafter acquired right, title and interest in the following:
(A) All equipment, fixtures, inventory, goods, instruments, appliances, furnishings, machinery, tools, raw materials, component parts, work in progress and materials, and all other tangible personal property of whatsoever kind, used or consumed in the improvement, use or enjoyment of the Property now or any time hereafter owned or acquired by Mortgagor, wherever located and all products thereof whether in possession of Mortgagor or whether located on the Property or elsewhere;
(B) To the extent such general intangibles are assignable, all general intangibles relating to design, development, operation, management and use of the Property, including, but not limited to, (1) all names under which or by which the Property may at any time be owned and operated or any variant thereof, and all goodwill in any way relating to the Property and all service marks and logotypes used in connection therewith, (2) all permits, licenses, authorizations, variances, land use entitlements, approvals, consents, clearances, and rights obtained from governmental agencies issued or obtained in connection with the Property, (3) all permits, licenses, approvals, consents, authorizations, franchises and agreements issued or obtained in connection with the construction, use, occupation or operation of the Property, (4) all materials prepared for filing or filed with any governmental agency, and (5) the books and records of Mortgagor relating to construction, or operation of the Property;
(C) All shares of stock or partnership interest or other evidence of ownership of any part of the Property that is owned by Mortgagor in common with others, and all documents or rights of membership in any owners' or members' association or similar group having responsibility for managing or operating any part of the Property provided, however, that the foregoing shall not include any ownership interests in the Mortgagor;
(D) All accounts, deposit accounts, tax and insurance escrows held pursuant to this Mortgage, accounts receivable, instruments, documents, documents of title, general intangibles, rights to payment of every kind, all of Mortgagor's rights, direct or indirect, under or pursuant to any and all construction, development, financing, guaranty, indemnity, maintenance, management, service, supply and warranty agreements, commitments, contracts, subcontracts, insurance policies, licenses and bonds now or anytime hereafter arising from construction on the Land or the use or enjoyment of the Property to the extent such are assignable;
(E) All condemnation proceeds (including payments in lieu thereof) and insurance proceeds related to the Property;
Together with all additions to, substitutions for and the products of all of the above, and all proceeds therefrom, whether cash proceeds or noncash proceeds, and including insurance and condemnation proceeds, received when any such properly (or the proceeds thereof) is sold, exchanged, leased, licensed, or otherwise disposed of, whether voluntarily or involuntarily. Such proceeds shall include any of the foregoing specifically described property of Mortgagor acquired with cash proceeds. Together with, and without limiting the above items, all Goods, Accounts, Documents, Instruments, Money, Chattel Paper and General Intangibles arising from or used in connection with the Property, as those terms are defined in the Uniform Commercial Code from time to time in effect in the state in which the Property is located. (All of the foregoing including such products and proceeds thereof, are collectively referred to as "Collateral".)
The personal property in which Mortgagee has a security interest includes goods which are or shall become fixtures on the Property. This Mortgage is intended to serve as a fixture filing pursuant to the terms of the applicable provisions of the Uniform Commercial Code of the
state in which the Property is located. This filing is to be recorded in the real estate records of the appropriate city, town or county in which the Property is located. In that regard, the following information is provided:
Names of Debtor: Gustine Sixth Avenue Associates, Ltd., a
Pennsylvania limited partnership
Address of Debtor: See section 4.03 hereof
Name of Secured Party: Allstate Life Insurance Company, an Illinois
insurance corporation
Address of Secured Party: See section 4.03 hereof.
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Mortgagor warrants and agrees that there is no financing statement covering the foregoing Collateral, the Property, or any part thereof, on file in any public office.
TO HAVE AND TO HOLD the Property and the Collateral hereby conveyed or mentioned and intended so to be, unto Mortgagee, its successors and assigns, forever subject to and for the purposes and uses herein set forth. This Mortgage secures:
(A) The repayment of the indebtedness evidenced by that certain Mortgage Note ("Note") of even date herewith with a maturity date of April 1, 2014 executed by Mortgagor and payable to the order of Mortgagee, in the principal sum of Seventeen Million Nine Hundred Thousand Dollars ($ 17,900,000) with interest thereon, as provided therein and all late charges, loan fees, commitment fees, Prepayment Premiums (as described in the Note), and all extensions, renewals, modifications, amendments and replacements thereof;
(B) The payment of all other sums which may be advanced by or otherwise be due to Mortgagee under any provision of this Mortgage or under any other instrument or document referred to in clause (C) below, with interest thereon at the rate provided herein or therein;
(C) The performance of each and every covenant and agreement of Mortgagor contained (1) herein, in the Note, or in any note evidencing a Future Advance (as hereinafter defined), and (2) in the obligations of Mortgagor upon any and all pledge or other security agreements, loan agreements, disbursement agreements, supplemental agreements (the foregoing shall not include the Commitment Letter between Mortgagor and Mortgagee), assignments (both present and collateral) and all instruments of indebtedness or security now or hereafter executed by Mortgagor in connection with any indebtedness referred to in clauses (A), (B) or (D) of this section [including but not limited to the Assignment of Leases and Rents] or for the purpose of supplementing or amending this Mortgage or any instrument secured hereby (all of the foregoing in this clause (C), as the same may be amended, modified or supplemented from
time to time, being referred to hereinafter as "Related Agreements") and all costs and expenses, including reasonable attorneys' fees with respect to all such documents, including, without limitation, the negotiation and drafting of any loan settlement or workout agreement; and
(D) The repayment of any other loans or advances, with interest thereon, hereafter made to Mortgagor (or any successor in interest to Mortgagor as the owner of the Property or any part thereof) by Mortgagee when the promissory note evidencing the loan or advance specifically states that said note is secured by this Mortgage, together with all extensions, renewals, modifications, amendments and replacements thereof (herein and in the Related Agreements "Future Advance").
PROVIDED ALWAYS, and this instrument is upon the express condition that, if Mortgagor pays to Mortgagee the principal sum mentioned in the Note, the interest thereon and all other sums payable by Mortgagor to Mortgagee as are secured hereby, in accordance with the provisions of the Note and this Mortgage, at the times and in the manner specified, without deduction, fraud or delay, and Mortgagor performs and complies with all the agreements, conditions, covenants, provisions and stipulations contained herein, in the Note and in the Related Agreements, then this Mortgage and the estate hereby granted shall cease and become void.
ARTICLE I
COVENANTS OF MORTGAGOR
To protect the security of this Mortgage, Mortgagor covenants and agrees as follows:
1.01. Performance of Obligations Secured. Mortgagor shall promptly pay when due the principal of and interest on the indebtedness evidenced by the Note, the principal of and interest on any Future Advance, any Prepayment Premium and late charges provided for in the Note or in any note evidencing a Future Advance, and shall further perform fully and in a timely manner all other obligations of Mortgagor contained herein or in the Note or in any note evidencing a Future Advance or in any of the Related Agreements.
1.02. Insurance. For all times during the period there remains any indebtedness under the Note, or any and all other indebtedness (including without limitation Future Advances) secured by this Mortgage, Mortgagor shall keep the Property insured against all risks or hazards as Mortgagee may require. Such insurance shall be in policy form, amount and coverage satisfactory to Mortgagee, including, but not limited to:
(A) Fire and extended coverage property damage insurance, including, but not limited to all risk insurance, in an amount equal to the full replacement value of the Improvements, without coinsurance deducting for depreciation, containing a waiver of subrogation clause and a deductible amount acceptable to Mortgagee;
(B) Public liability insurance, in such form, amount and deductible satisfactory to Mortgagee, and naming Mortgagee c/o Mortgagee's servicing agent, if any, as additional insured covering Mortgagee's interest in the Property;
(C) Business interruption or rent loss insurance endorsement in an amount at least equal to one hundred percent (100%) of the sum of: annual debt service on the Note, the annual debt service on any other financing permitted by Mortgagee, ground rents, if any, and operating expenses, including, without limitation, real estate taxes and assessments and insurance, for the Property;
(D) Flood insurance required by and obtainable through the National Flood Insurance Program sufficient to cover any damage which may be anticipated in the event of flood unless Mortgagor has provided Mortgagee evidence satisfactory to Mortgagee that no portion of the Property is located within the boundaries of the one hundred (100) year flood plain;
(E) "Dram shop" insurance if alcoholic beverages are sold on the Property;
(F) Boiler and machinery insurance when risks covered thereby are present and Mortgagee requires such insurance; and
(G) Earthquake insurance if Mortgagee requires such insurance.
The insurance coverages described in subsections (A), (C), (D), (F) and (G) above shall name Mortgagee c/o Mortgagee's servicing agent, if any, under a standard noncontributory mortgagee clause or otherwise directly insure Mortgagee's interest in the Property. All losses under said insurance shall be payable to Mortgagee in the manner provided in sections 1.04 and 1.05 hereof.
All policies of insurance required under this section 1.02 shall be with a company or companies with a policy rating of A and financial rating of at least Class X in the most current edition of Best's Insurance Reports and authorized to do business in the state in which the Property is located. All policies of insurance shall provide that they will not be cancelled or modified without thirty (30) days' prior written notice to Mortgagee. True copies of the above mentioned insurance policies or evidence of such insurance (in the form of Accord Form 27) satisfactory to Mortgagee shall be delivered to and held by Mortgagee. True copies of all renewal and replacement policies or evidences of such insurance forms (Accord Form 27) thereof shall be delivered to Mortgagee at least thirty (30) days before the expiration of the expiring policies. If any renewal or replacement policy is not obtained as required herein, Mortgagee is authorized to obtain the same in Mortgagor's name and at Mortgagor's expense. Mortgagee shall not by the fact of failing to obtain any insurance, incur any liability for or with respect to the amount of insurance carried, the form or legal sufficiency of insurance contracts, solvency of insurance companies, or payment or defense of lawsuits, and Mortgagor hereby expressly assumes full responsibility therefor and all liability, if any, with respect thereto.
1.03. Condemnation.
(A) Immediately upon obtaining knowledge of the
commencement or threat of any action in connection with (1) any condemnation,
(2) any other taking of the Property or any part thereof by any public authority
or private entity having the power of eminent domain, or (3) any conveyance in
lieu of such condemnation or taking of the Property or any part thereof
("Condemnation"), Mortgagor shall notify Mortgagee in writing but in no event
later than ten (10) days after Mortgagor obtains knowledge of the commencement
of or threat of a Condemnation. Mortgagee shall have the right, but not the
obligation, to participate in any proceedings relating to any Condemnation and
may, in its sole discretion, consent or withhold its consent to any settlement,
adjustment, or compromise of any claims arising from the Condemnation and no
such settlement, adjustment or compromise shall be final or binding upon
Mortgagee without Mortgagee's prior consent.
(B) If all or part of the Property is taken by Condemnation and Mortgagee in its reasonable judgment determines that the remainder of the Property, if any, cannot be operated as an economically viable entity at substantially the same level of operations as immediately prior to such Condemnation, then all proceeds of the Condemnation ("Condemnation Proceeds") shall be paid over to Mortgagee and shall be applied first toward reimbursement of the costs and expenses (including reasonable attorneys' fees) of Mortgagee, if any, in connection with the recovery of such Condemnation Proceeds, and then, in the sole and absolute discretion of Mortgagee and without regard to the adequacy of its security under this Mortgage, shall be applied against all amounts due herein or under the Note and any remaining Condemnation Proceeds shall be released to the Mortgagor. Partial prepayment of the Note under this section 1.03(B) shall not be subject to the Prepayment Premium; however, such partial prepayment shall not entitle Mortgagor to prepay the portion of the Note remaining unpaid after application of the Condemnation Proceeds. Prepayment of the balance shall continue to be subject to the terms and conditions of the Note, including the No-Prepayment Period and the Prepayment Premium described therein.
(C) If less than all of the Property is taken by Condemnation and Mortgagee in its reasonable judgment determines that the remainder of the Property can be operated as an economically viable entity at substantially the same level of operations as immediately prior to such Condemnation, then Mortgagor shall diligently restore the Property to a condition and use as close as possible to its condition immediately prior to the Condemnation and all Condemnation Proceeds shall be made available to Mortgagor for such restoration. If the estimated cost of restoration, as reasonably determined by Mortgagee, is equal to or less than Fifty Thousand and 00/100 Dollars ($50,000), all Condemnation Proceeds shall be released directly to Mortgagor for restoration of the Property. If the estimated cost of restoration exceeds Fifty Thousand and 00/100 Dollars ($50,000), all Condemnation Proceeds shall be deposited into an escrow fund in accordance with section 1.05 below. Mortgagee shall have the right to obtain an opinion of an independent contractor or engineer satisfactory to Mortgagee, at Mortgagor's expense, to estimate the cost to restore the remaining portion of the Property. If the amount of
the Condemnation Proceeds is not sufficient to restore the Property based on the opinion of an independent contractor or engineer, subject to revision as restorations are made, Mortgagor shall be obligated to pay the difference toward the restoration of the Property.
(D) If an Event of Default exists at any time from the time of a Condemnation through the completion of restoration and payment of any Condemnation Proceeds, the use of the Condemnation Proceeds shall be governed by the remedies set forth in Article III below. If an event has occurred which with notice, the passage of time, or both, could become an Event of Default, then, the Condemnation Proceeds shall be held by Mortgagee or in the Escrow Fund (as defined below), as applicable, pending cure of such event.
1.04. Damage to Property.
(A) Promptly upon obtaining knowledge of any damage to
the Property or any part thereof with an estimated cost of restoration in excess
of Five Thousand and 00/100 Dollars ($5,000), but in no event later than five
(5) days after Mortgagor obtains such knowledge, Mortgagor shall notify
Mortgagee of such damage in writing. Mortgagor shall diligently restore the
Property to the same condition that existed immediately prior to the damage
whether or not insurance proceeds are sufficient for such restoration. All
proceeds of any insurance on the Property ("Insurance Proceeds") received by
Mortgagor shall be applied to such restoration. Mortgagee shall have the right
to obtain an opinion of an independent contractor or engineer satisfactory to
Mortgagee, at Mortgagor's expense, to estimate the cost to restore the Property
to its original condition, which opinion may be revised as restorations are
made. If the amount of the insurance proceeds is not sufficient to restore the
Property based on an independent contractor's or engineer's opinion, subject to
revision as restorations are made, Mortgagor shall be obligated to pay the
difference toward the restoration of the Property.
(B) If the estimated cost of restoration is equal to or less than Fifty Thousand and 00/100 Dollars ($50,000), Mortgagor shall promptly settle and adjust any claims under the insurance policies which insure against such risks and, upon receipt of the Insurance Proceeds, Mortgagee shall deliver such to Mortgagor for use in restoration of the Property.
(C) If the estimated cost of restoration is greater than Fifty Thousand and 00/100 Dollars ($50,000), Mortgagee shall have the right, but not the obligation, to participate in the settlement of the insurance claims and may, in its sole discretion, consent or withhold its consent to any settlement, adjustment, or compromise of such insurance claims and no such settlement, adjustment, or compromise shall be final or binding upon Mortgagee without its prior consent. Upon settlement of insurance claims, and if Mortgagor can demonstrate to the reasonable satisfaction of Mortgagee that the projected ratio of Net Operating Income, as defined below, to annual debt service due under the Note and any other notes secured by the Property ("Debt Coverage Ratio") will be at least one hundred five percent (105%) for the twelve (12) months immediately following reconstruction of the Property, the insurance proceeds shall be deposited into an escrow fund in accordance with section 1.05 below.
As used in this Mortgage, "Net Operating Income" shall mean:
(i) all gross receipts received or anticipated (as may be applicable) from tenants in the Property and paying rent under bona fide leases in effect during the applicable twelve (12) month period, calculated on a cash basis which reflects only the income actually received during the previous twelve (12) month period as of the date of such calculation, and any income anticipated to be received during the following twelve (12) month period based on leases in effect as of the date of calculation, for such time as those leases are contracted to remain in effect without expiration by their terms or optional termination by the tenant (unless the tenant has waived its termination rights in writing or the term of the lease has been extended in writing), including without limitation all amounts to be received from tenants as payment of operating expenses but not including refundable deposits, lease termination payments, excess tenant improvement and leasing commission payments included as additional rent, principal or interest payments received by Mortgagor on loans to tenants and fees and reimbursements for work performed for tenants by Mortgagor, less:
(ii) all amounts, calculated on a cash basis, for the operation or maintenance of the Property for the applicable twelve (12) month period, including ground rents, the cost of property management (which shall be no less than four percent (4%) of gross collections), maintenance, cleaning, security, landscaping, parking maintenance and utilities, and other costs and expenses approved in writing by Mortgagee and amounts reasonably estimated by Mortgagee for the payment of real estate taxes and assessments and other taxes related to the operation of the Property, insurance premiums, necessary repairs and future replacements of equipment; payments under the Note shall not be included in Net Operating Income.
(D) If in the reasonable judgment of Mortgagee the conditions of paragraph 1.04(C) cannot be satisfied, then at any time from and after the occurrence of the damage, upon written notice to Mortgagor, Mortgagee may declare the entire balance of the Note and/or any Future Advances then outstanding and accrued and unpaid interest thereon, and all other sums or payments required thereunder or under this Mortgage, without any Prepayment Premium, to be immediately due and payable, and all insurance proceeds shall be applied by Mortgagee first to the reimbursement of any costs or expenses incurred by Mortgagee in connection with the damage or the determination to be made hereunder, and then to the payment of the indebtedness secured by this Mortgage in such order as Mortgagee may determine in its sole discretion.
(E) If an Event of Default exists at any time from the time of damage through the completion of restoration and the final release of any insurance proceeds to Mortgagor, the use of the insurance proceeds shall be governed by the remedies set forth in Article III below. If an event has occurred which with notice, the passage of time, or both, could become an Event of Default, then the Insurance Proceeds shall be held by Mortgagee or in the
Escrow Fund, as applicable, pending cure of such event prior to the expiration of any applicable cure or grace period.
1.05. Escrow Fund for Condemnation and Insurance Proceeds.
(A) In the circumstances indicated above in subsections 1.03(C) and 1.04(C), all Condemnation Proceeds and Insurance Proceeds shall be deposited in an interest bearing escrow fund ("Escrow Fund"). The escrow agent and the form of the escrow agreement shall be reasonably satisfactory to Mortgagee and Mortgagor. The costs and fees of such escrow agent shall be paid by Mortgagor. If the amount of the Proceeds is not sufficient to restore the Property based on an independent contractor's or engineer's opinion obtained by Mortgagee at Mortgagor's expense, subject to revision as restorations are made, Mortgagor shall be obligated to deposit in the Escrow Fund the difference between the contractor's or engineer's estimate and the amount of the Proceeds or deliver to the escrow agent an irrevocable, unconditional letter of credit issued in the amount of such difference in a form and by a financial institution acceptable to Mortgagee or other cash equivalent acceptable to Mortgagee. The Mortgagor's funds, if necessary, and the Proceeds shall be deposited into the Escrow Fund and shall not be released by the escrow agent unless used to restore the Property to its original condition and unless a disbursement agent satisfactory to Mortgagee and Mortgagor approves such disbursements from time to time. The escrow agreement shall provide that the escrow agent shall only disburse funds to Mortgagor so long as the restoration work is being diligently performed by Mortgagor and only after (1) Mortgagee has approved the plans and specifications for the restoration of the Property; (2) Mortgagor has executed a contract acceptable to Mortgagee with a general contractor acceptable to Mortgagee for the restoration of the Property; (3) the general contractor has submitted lien waivers and/or releases, executed by the general contractor and all subcontractors and suppliers which may be partial to the extent of partial payments and which, in the case of releases, may be contingent upon payment if the escrow agent makes payment directly to such contractor, subcontractor or supplier; (4) Mortgagor has furnished Mortgagee with an endorsement to its title policy showing no additional exceptions; and (5) Mortgagor has submitted such other documents and information as may be requested by Mortgagee to determine that the work to be paid for has been performed in accordance with the plans and specifications approved by Mortgagee. If any requisition for payment of work performed is for an amount which would result in the remaining balance of the Escrow Fund to be insufficient to complete the remainder of the restoration, Mortgagor shall advance the requisite amount in cash to the Escrow Fund immediately upon written request from the disbursement agent or Mortgagee.
(B) Any Condemnation Proceeds and any interest thereon remaining in the Escrow Fund after payment of the costs to complete the restoration of the Property pursuant to the approved plans and specifications and the costs of the escrow agent shall be paid first, to Mortgagor to the extent of any funds of Mortgagor's contributed to the restoration pursuant to paragraph 1.05, provided there is no Event of Default or an event which with notice, the passage of time, or both, could become an Event of Default, and thereafter at Mortgagee's option, any remaining Condemnation Proceeds may be applied to the partial payment or prepayment of the
Note without payment of any Prepayment Premium or may be returned to the Mortgagor. If an Event of Default exists, the use of the Condemnation Proceeds shall be governed by Article III below. If, however, an event exists which with notice, the passage of time, or both, could become an Event of Default, the remaining balance in the Escrow Fund shall be held by the escrow agent pending cure of the event prior to the expiration of any applicable cure or grace period.
(C) Any Insurance Proceeds and any interest thereon remaining in the Escrow Fund after payment of the costs to complete the restoration of the Property pursuant to the approved plans and specifications and the costs of the escrow agent, provided there is no Event of Default or an event which with notice, the passage of time, or both, could become an Event of Default, shall be paid first, to Mortgagor to the extent of any funds of Mortgagor's contributed to the restoration pursuant to paragraph 1.05, and thereafter, any remaining Insurance Proceeds shall be held in the escrow as additional collateral security for the Note, provided there is no Event of Default or an event which with notice, the passage of time, or both, could become an Event of Default. The entire amount remaining in such escrow shall be paid to Mortgagee upon maturity of the Note for application to the indebtedness secured by this Mortgage. If an Event of Default exists at any time from the time of completion of restoration and the final application of any Insurance Proceeds, the use of the Insurance Proceeds shall be governed by Article III below.
1.06. Taxes, Liens and other Items.
(A) Mortgagor shall pay any and all taxes, bonds, assessments, fees, liens, charges, fines, impositions and any accrued interest or penalty thereon, and any and all other items which are attributable to or affect the Property by making payment prior to delinquency directly to the payee thereof and promptly furnish copies of paid receipts for these to Mortgagee. Mortgagor shall promptly discharge or bond any lien or encumbrance on the Property whether said lien or encumbrance has or may attain priority over this Mortgage or not. This Mortgage shall be the sole encumbrance on the Property and, if with the consent of Mortgagee it is not the sole encumbrance, then it shall be prior to any and all other liens or encumbrances on the Property. Provided that the priority of this Mortgage is not in any way affected, Mortgagor may in good faith protest the payment of any tax or lien which it believes is unwarranted or excessive and may defer payment of such tax pending conclusion of such contest if legally permitted to do so and provided Mortgagee's security is not jeopardized in Mortgagee's sole opinion.
(B) As further security for the payment of the Note and the payment of real estate taxes, regular or special assessments and insurance premiums, Mortgagor shall be required to deposit one-twelfth (1/12) of the annual amounts of such items as estimated by Mortgagee, with each monthly payment on the Note, so that Mortgagee will hold a sufficient amount to pay all such charges not less than thirty (30) days prior to the date on which such items become due and payable. Mortgagee shall be furnished evidence to allow it to estimate such amounts, including paid receipts or annual insurance premium statements, assessment notices and tax
receipts. All funds so deposited shall, until applied to the payment of the
aforesaid items, as hereinafter provided, be held by Mortgagee without interest
(except to the extent required under applicable law) and may be commingled with
other funds of Mortgagee. All funds so deposited shall be applied to the payment
of the aforesaid items only upon the satisfaction of the following conditions:
(1) no Event of Default or event, which with notice or the passage of time or
both could become an Event of Default, shall have occurred; (2) Mortgagee shall
have sufficient funds to pay the full amounts of such items (which funds may
include amounts paid solely for such purpose by Mortgagor in addition to the
escrowed funds); and (3) Mortgagor shall have furnished Mortgagee with prior
written notification that such items are due and with the bills and invoices
therefor in sufficient time to pay the same before any penalty or interest
attaches and before policies of insurance lapse, as the case may be, and shall
have deposited any additional funds as Mortgagee may determine as necessary to
pay such items.
(C) Mortgagee expressly disclaims any obligation to pay
the aforesaid items unless and until Mortgagor complies with all of the
provisions set forth in subsections 1.06(A) and (B). Mortgagor hereby pledges
any and all monies now or hereafter deposited pursuant to subsection 1.06(B) as
additional security for the Note and Related Agreements. If any Event of Default
shall have occurred, or if the Note shall be accelerated as herein provided, all
funds so deposited may, at Mortgagee's option, be applied as determined solely
by Mortgagee or to cure said Event of Default or as provided in this section
1.06. In no event shall Mortgagor claim any credit against the principal and
interest due hereunder for any payment or deposit for any of the aforesaid
items.
1.07. Assignment of Leases, Contracts, Rents and Profits.
(A) Mortgagor hereby absolutely, presently and unconditionally grants, assigns, transfers, conveys and sets over to Mortgagee all of Mortgagor's right, title and interest in and to the following whether arising under the Leases, by statute, at law, in equity, or in any other way:
(1) All of the leases of the Property which are in effect on the date hereof, and entered into or in effect from time to time after the date hereof, including, without limitation, all amendments, extensions, replacements, modifications and renewals thereof and all subleases, concession agreements, any ground leases or ground subleases and all other agreements affecting the same (the "Leases") and all guaranties thereunder;
(2) All of the rents, income, profits, revenue, judgments, condemnation awards, Insurance Proceeds, unearned insurance premiums and any other fees or sums payable to Mortgagor or any other person as landlord and other benefits and rights of the Property arising from the use, occupancy, operation or management of all or any portion thereof or from all the Leases, and any proceeds, deposits or security deposits relating thereto, including, without limitation, any award to Mortgagor made hereafter in any court involving any of the tenants under the Leases in any bankruptcy, insolvency, or
reorganization proceeding in any state or federal court, and Mortgagor's right to appear in any action and/or to collect any such award or payment, and all payments by any tenant in lieu of rent (collectively, "Rents and Profits"); and
(3) All contracts, agreements, management, operating and maintenance agreements, warranties, licenses, permits, guaranties and sales contracts relating to the Property and the Collateral entered into by, or inuring to the benefit of, Mortgagor (the "Contracts").
(B) Notwithstanding the provisions of subsection 1.07(A), prior to the occurrence of any Event of Default hereunder, Mortgagee shall not exercise any of the rights or powers conferred upon Mortgagee by this section 1.07, and, subject to subsection 1.07(F), Mortgagor shall have a license to manage the Property; to collect, receive and use all Rents and Profits in accordance with the terms of the Leases; to let the Property and to take all actions which a reasonable and prudent landlord would take in enforcing the provisions of the Leases and Contracts; provided, however, that all amounts so collected shall be applied toward operating expenses, real estate taxes and insurance relating to the Property, capital repair items necessary to the operation of the Property, and the payment of sums due and owing under the Note, and this Mortgage prior to any other expenditure or distribution by Mortgagor. From and after the occurrence of an Event of Default (whether or not Mortgagee shall have exercised Mortgagee's option to declare the Note immediately due and payable), such license shall be automatically revoked without any action required by Mortgagee. Any amounts received by Mortgagor or its agents in the performance of any acts prohibited by the terms of this Mortgage, including but not limited to any amounts received in connection with any cancellation, modification or amendment of any of the Leases prohibited by the terms of this Mortgage and any amounts received by Mortgagor as rents, income, issues or profits from the Property from and after an Event of Default under this Mortgage, the Note, or any of the other Related Agreements, shall be held by Mortgagor as trustee for Mortgagee and all such amounts shall be accounted for to Mortgagee and shall not be commingled with other funds of the Mortgagor. Any person acquiring or receiving all or any portion of such trust funds shall acquire or receive the same in trust for Mortgagee as if such person had actual or constructive notice that such funds were impressed with a trust in accordance herewith.
(C) Upon the occurrence of an Event of Default, the Mortgagee shall have the right but not the obligation to perform as landlord under the Leases and as a party under the Contracts. The assignment of Rents and Profits set forth herein constitutes an irrevocable direction and authorization of all tenants under the Leases to pay all Rents and Profits to Mortgagee upon demand and without further consent or other action by Mortgagor. Mortgagor irrevocably appoints Mortgagee its true and lawful attorney, at the option of Mortgagee at any time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, either in the name of Mortgagor or in the name of Mortgagee, for all such Rents and Profits and apply the same to the indebtedness secured by this Mortgage.
(D) Neither the foregoing assignment of Rents and Profits, Leases and Contracts to Mortgagee nor the exercise by Mortgagee of any of its rights or remedies under Article III shall be deemed to make Mortgagee a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property, unless Mortgagee, in person or by agent, assumes actual possession thereof. Nor shall appointment of a receiver for the Property by any court at the request of Mortgagee or by agreement with Mortgagor, or the entering into possession of the Property by such receiver, be deemed to make Mortgagee a "mortgagee-in-possession" or otherwise liable in any manner with respect to the Property.
(E) In the event Mortgagee collects and receives any Rents and Profits under this section 1.07 pursuant to any Monetary or Performance Default as defined in section 2.01 hereof, such collection or receipt shall in no way constitute a curing of the Monetary or Performance Default.
(F) Mortgagor shall not, without the prior written
consent of Mortgagee which consent shall not be unreasonably withheld or
delayed, (1) enter into, or consent to or permit the assignment or subletting
of, any leases except that Mortgagee's prior written approval shall not be
required with respect to Leases demising no more than 10,000 rentable square
feet of the Property which provide for a term of ten (10) years or less and a
rental rate, including rental concessions, at least equal to that charged for
comparable properties within the Property's submarket area, have been negotiated
at arm's length, and do not contain material modifications to the form of lease
previously approved by Mortgagee; (2) modify, extend, cancel, consent to any
surrender or in any way alter the terms of any Leases or take any action under
or with respect to any such Leases which would materially decrease either the
obligations of the tenant thereunder or the rights or remedies of the landlord
or otherwise fail to perform the landlord's obligations under the Leases; (3)
alter, modify, change or terminate the terms of any guaranties of the Leases;
(4) create or permit any lien or encumbrance which, upon foreclosure, would be
superior to any such Leases or in any other manner impair Mortgagee's rights and
interest with respect to the Rents and Profits, (5) pledge, transfer, mortgage
or otherwise encumber or assign the Leases, the Contracts or the Rents and
Profits; or (6) collect rents more than thirty (30) days prior to their due
date. Any lease submitted for Mortgagee's consent shall, at Mortgagee's option,
be accompanied by a Subordination, Nondisturbance and Attornment Agreement in
Mortgagee's then current form.
(G) Mortgagor shall promptly give notice to Mortgagee of any default under any of the Leases meeting the criteria of a lease for which Mortgagee's consent would have been required pursuant to paragraph 1.07(F) regardless of whether such leases were executed before or after the date of this Mortgage, together with a complete copy of any notices delivered to or by the tenant as a result of such default. Mortgagee shall have the right, but not the obligation, to cure any default of Mortgagor under any of the Leases and all amounts disbursed in connection with said cure shall be deemed to be indebtedness secured hereby.
(H) Mortgagee shall have the right to approve any lease forms used by Mortgagor for lease of space in the Property.
(I) Mortgagor hereby represents, warrants and agrees that:
(1) Mortgagor has the right, power and capacity to make this assignment and that no person, firm or corporation or other entity other than Mortgagor has or will have any right, title or interest in or to the Leases or the Rents and Profits.
(2) Mortgagor shall, at its sole cost and expense, perform and discharge all of the obligations and undertakings of the landlord under the Leases. Mortgagor shall enforce the performance of each obligation of the tenants under the Leases and will appear in and prosecute or defend any action connected with the Leases or the obligations of the tenants thereunder.
(J) Mortgagee shall not be obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability under the Leases or under or by reason of this assignment. Mortgagor shall and does hereby agree to indemnify Mortgagee for and to defend and hold Mortgagee harmless from any and all liability, loss or damage which Mortgagee may or might incur under the Leases or under or by reason of this assignment, and from any and all claims whatsoever which may be asserted against Mortgagee by reason of any alleged obligations or undertakings on Mortgagee's part to perform or discharge any of the terms, covenants or agreements contained in the Leases. Should Mortgagee incur any liability, loss or damage under the Leases or under or by reason of this assignment, or in the defense of any of such claims or demands, the amount thereof, including costs, expenses and attorneys' fees, shall be secured by this Mortgage; and Mortgagor shall reimburse Mortgagee therefor immediately upon demand, and upon failure of Mortgagor to do so, Mortgagee may declare all sums so secured to be immediately due and payable.
(K) Mortgagee may take or release other security, may release any party primarily or secondarily liable for any indebtedness secured hereby, may grant extensions, renewals or indulgences with respect to such indebtedness, and may apply any other security therefor held by it to the satisfaction of such indebtedness, without prejudice to any of its rights hereunder.
(L) Nothing herein contained and no act done or omitted by Mortgagee pursuant to the powers and rights granted it herein shall be deemed to be a waiver by Mortgagee of its other rights and remedies under the Note and this Mortgage, and this assignment is made and accepted without prejudice to any of the other rights and remedies possessed by Mortgagee under the terms thereof. The right of Mortgagee to collect said indebtedness and to enforce any other security therefor held by it may be exercised by Mortgagee either prior to, simultaneously with, or subsequent to any action taken by it hereunder. It is the intent of both Mortgagor and Mortgagee that this assignment be supplementary to, and not in substitution or derogation of, any
other provision contained in this Mortgage giving Mortgagee any interest in or rights with respect to the Leases or Rents and Profits.
(M) Neither this assignment nor pursuit of any remedy hereunder by Mortgagee shall cause or constitute a merger of the interests of the tenant and the Mortgagor under any of the Leases such that any of the Leases hereby assigned are no longer valid and binding legal obligations of the parties executing the same.
(N) Mortgagor agrees, from time to time, to execute and deliver, upon demand, all assignments and any and all other writings as Mortgagee may reasonably deem necessary or desirable to carry out the purpose and intent hereof, or to enable Mortgagee to enforce any right or rights hereunder.
1.08. Acceleration Upon Sale or Encumbrance. If (A) the Property or any part thereof, or any interest in the Property or in Mortgagor is sold or conveyed; (B) title to the Property or any interest therein is divested; (C) the Property or any ownership interest in the Mortgagor is further encumbered; (D) any lease giving the tenant any option to purchase the Property or any part thereof is entered into; or (E) the ownership of shares of the Mortgagor or any corporate partner of Mortgagor or the general partnership interests in any partnership which is a general partner of the Mortgagor is encumbered, transferred or changed, without the prior written consent of Mortgagee, then Mortgagee shall have the right, at its option, to declare the indebtedness secured by this Mortgage, irrespective of the maturity date specified in the Note, immediately due and payable. Except as expressly consented to in writing by Mortgagee, Mortgagor shall not permit any additional encumbrances on the Property.
1.09. Preservation and Maintenance of Property. Mortgagor shall hire competent and responsive property managers who shall be reasonably acceptable to Mortgagee. Mortgagor or its property manager, if applicable shall keep the Property and every part thereof in good condition and repair, in accordance with sound property management practices and shall promptly and faithfully comply with and obey all laws, ordinances, rules, regulations, requirements and orders of every duly constituted governmental authority or agent having jurisdiction with respect to the Property. Mortgagor shall not permit or commit any waste, impairment, or deterioration of the Property, nor commit, suffer or permit any act upon or use of the Property in violation of law or applicable order of any governmental authority, whether now existing or hereafter enacted, or in violation of any covenants, conditions or restrictions affecting the Property or bring or keep any article in the Property or cause or permit any condition to exist thereon which would be prohibited by or invalidate the insurance coverage required to be maintained hereunder. Mortgagor shall not make any material structural changes or alterations to the Property nor remove or demolish the Improvements or any portion thereof without the prior written consent of Mortgagee. Mortgagor shall promptly restore any portion of the Property which may be damaged or destroyed. Mortgagor shall promptly bond or discharge any mechanics' liens against the Property.
Unless required by applicable law or unless Mortgagee has otherwise first agreed in writing. Mortgagor shall not make or allow any changes which will adversely affect the value of the Property to be made in the nature of the occupancy or use of the Property or any part thereof for which the Property or such part was intended at the time this Mortgage was delivered. Mortgagor shall not initiate or acquiesce in any change which will adversely affect the value of the Property in any zoning or other land use classification now or hereafter in effect and affecting the Property or any part thereof without in each case obtaining Mortgagee's prior written consent thereto.
1.10. Offset Certificates. Mortgagor, within three (3) days upon request in person or within ten (10) days upon request by mail, shall furnish a written statement duly acknowledged and notarized, of all amounts due on any indebtedness secured hereby or secured by any of the Related Agreements, whether for principal or interest on the Note or otherwise, and stating whether any offsets or defenses exist against the indebtedness secured hereby and covering such other matters with respect to any such indebtedness as Mortgagee may reasonably require.
1.11. Intentionally Deleted.
1.12. Protection of Security; Costs and Expenses. Mortgagor and its property manager, if applicable, shall appear in and defend any action or proceeding purporting to affect the security of this Mortgage or any additional or other security for the obligations secured hereby, or the rights or powers of the Mortgagee, and shall pay all costs and expenses actually incurred, including, without limitation, cost of evidence of title and actual attorneys' fees, in any such action or proceeding in which Mortgagee may appear, and in any suit brought by Mortgagee to foreclose this Mortgage or to enforce or establish any other rights or remedies of Mortgagee hereunder or under any other security for the obligations secured hereby. If Mortgagor fails to perform any of the covenants or agreements contained in this Mortgage, or if any action or proceeding is commenced which affects Mortgagee's interest in the Property or any part thereof, including, eminent domain, code enforcement, or proceedings of any nature whatsoever under any federal or state law, whether now existing or hereafter enacted or amended, relating to bankruptcy, insolvency, arrangement, reorganization or other form of debtor relief, or to a decedent, then Mortgagee may, but without obligation to do so and without notice to or demand upon Mortgagor, perform such covenant or agreement and compromise any encumbrance, charge or lien which in the judgment of Mortgagee appears to be prior or superior hereto. Mortgagor shall further pay all expenses of Mortgagee actually incurred (including reasonable and actual fees and disbursements of counsel) incident to the protection or enforcement of the rights of Mortgagee hereunder, and enforcement or collection of payment of the Note or any Future Advance whether by judicial or nonjudicial proceedings, or in connection with any bankruptcy, insolvency, arrangement, reorganization or other debtor relief proceeding of Mortgagor, or otherwise. Any amounts disbursed by Mortgagee pursuant to this section or section 1.11 shall be additional indebtedness of Mortgagor secured by this Mortgage and each of the Related Agreements as of the date of disbursement and shall bear interest at the Default Rate set forth in the Note, from demand until paid. All such amounts shall be payable by Mortgagor immediately
upon demand. Nothing contained in this section shall be construed to require Mortgagee to incur any expense, make any appearance, or take any other action.
1.13. Mortgagor's Covenants Respecting Collateral.
(A) Mortgagor shall execute and deliver financing and continuation statements covering the Collateral from time to time and in such form as Mortgagee may require to perfect and continue the perfection of Mortgagee's security interest with respect to such property, and Mortgagor shall pay all reasonable costs and expenses of any record searches for financing statements Mortgagee may require.
(B) Without the prior written consent of Mortgagee, Mortgagor shall not create or suffer to be created any other security interest in the Collateral, including replacements and additions thereto.
(C) Without the prior written consent of Mortgagee or except in the ordinary course of business, Mortgagor shall not sell, transfer or encumber any of the Collateral, or remove any of the Collateral from the Property unless Mortgagor shall promptly substitute and replace the property removed with similar property of at least equivalent value on which Mortgagee shall have a continuing security interest ranking at least equal in priority to Mortgagee's security interest in the property removed.
(D) Mortgagor shall (1) upon reasonable notice (unless an
emergency or Event of Default exists) permit Mortgagee and its representatives
to enter upon the Property to inspect the Collateral and Mortgagor's books and
records relating to the Collateral and make extracts therefrom and to arrange
for verification of the amount of Collateral, under procedures acceptable to
Mortgagee, directly with Mortgagor's debtors or otherwise at Mortgagor's
expense; (2) promptly notify Mortgagee of any attachment or other legal process
levied against any of the Collateral and any information received by Mortgagor
relative to the Collateral, Mortgagor's debtors or other persons obligated in
connection therewith, which may in any way affect the value of the Collateral or
the rights and remedies of Mortgagee in respect thereto; (3) reimburse Mortgagee
upon demand for any and all costs actually incurred, including, without
limitation, reasonable and actual attorneys' and accountants' fees, and other
expenses incurred in collecting any sums payable by Mortgagor under any
obligation secured hereby, or in the checking, handling and collection of the
Collateral and the preparation and enforcement of any agreement relating
thereto; (4) notify Mortgagee of each location at which the Collateral is or
will be kept, other than for temporary processing, storage or similar purposes,
and of any removal thereof to a new location, including, without limitation,
each office of Mortgagor at which records relating to the Collateral are kept;
(5) provide, maintain and deliver to Mortgagee originals or certified copies of
the policies of insurance and certificates of insurance insuring the Collateral
against loss or damage by such risks and in such amounts, form and by such
companies as Mortgagee may require and with loss payable to Mortgagee, and in
the event Mortgagee takes possession of the Collateral, the insurance policy or
policies and any unearned or returned premium thereon
shall at the option of Mortgagee become the sole property of Mortgagee; and (6) do all acts necessary to maintain, preserve and protect all Collateral, keep all Collateral in good condition and repair and prevent any waste or unusual or unreasonable depreciation thereof.
(E) Until Mortgagee exercises its right to collect proceeds of the Collateral pursuant hereto, Mortgagor will collect with diligence any and all proceeds of the Collateral. If an Event of Default exists, any proceeds received by Mortgagor shall be held in trust for Mortgagee, and Mortgagor shall keep all such collections separate and apart from all other funds and property so as to be capable of identification as the property of Mortgagee and shall deliver to Mortgagee such collections at such time as Mortgagee may request in the identical form received, properly endorsed or assigned when required to enable Mortgagee to complete collection thereof.
(F) Mortgagee shall have all of the rights and remedies granted to a secured party under the Uniform Commercial Code of the state in which the Collateral is located, as well as all other rights and remedies available at law or in equity. During the continuance of any Event of Default hereunder or under the Note, Mortgagee shall have the right to take possession of all or any part of the Collateral, to receive directly or through its agent(s) collections of proceeds of the Collateral (including notification of the persons obligated to make payments to Mortgagor in respect of the Collateral), to release persons liable on the Collateral and compromise disputes in connection therewith, to exercise all rights, powers and remedies which Mortgagor would have, but for the security agreement contained herein, to all of the Collateral and proceeds thereof, and to do all other acts and things and execute all documents in the name of Mortgagor or otherwise, deemed by Mortgagee as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder; and
(G) After any Event of Default hereunder or under the Note, Mortgagor shall, at the request of Mortgagee, assemble and deliver the Collateral and books and records pertaining to the Property at a place designated by Mortgagee, and Mortgagee may, with reasonable notice to Mortgagor (unless an emergency or Event of Default exists), enter onto the Property and take possession of the Collateral. It is agreed that public or private sales, for cash or on credit to a wholesaler or retailer or investor, or user of collateral of the types subject to the security agreement, or public auction, are all commercially reasonable since differences in the sales prices generally realized in the different kinds of sales are ordinarily offset by the differences in the costs and credit risks of such sales. The proceeds of any sale of the Collateral shall be applied first to the expenses of Mortgagee actually incurred in retaking, holding, preparing for sale, or selling the Collateral or similar matters, including reasonable and actual attorneys' fees, and then, as Mortgagee shall solely determine.
1.14. Covenants Regarding Financial Statements.
(A) Mortgagor shall keep true books of record and account in which full, true and correct entries in accordance with sound accounting practice and principles applied on a
consistent basis from year to year shall be made of all dealings or transactions with respect to the Property.
(B) (1) Mortgagor shall deliver to Mortgagee:
(A) Within sixty (60) days after the last day of each fiscal year of the Mortgagor during the term of the Note, unaudited annual financial reports prepared on an accrual basis, including balance sheets, income statements and cash flow statements covering the operation of the Property, the financial condition of Mortgagor, Mortgagor's general partners(s), shareholder(s), member(s) and such principals of the Mortgagor as Mortgagee may from time to time designate, for the previous fiscal year, all certified to Mortgagee to be complete, correct and accurate by the individual, managing general partner, manager or chief financial officer of the party whom the report concerns; and
(B) If available, within thirty (30)
days after receipt by Mortgagor, original annual audit reports of an
independent certified public accountant prepared in accordance with
generally accepted accounting principles containing an unqualified
opinion, including balance sheets, income statements and cash flow
statements covering the operation of the Property and the financial
condition of the Mortgagor, Mortgagor's general partner(s),
shareholder(s), member(s) and such principals of the Mortgagor as
Mortgagee may from time to time designate, for the previous fiscal
year;
(2) At the request of Mortgagee from time to time (but no more often than once in each fiscal quarter of the Mortgagor during the term of the Note), Mortgagor shall also deliver to Mortgagee unaudited financial reports prepared on an accrual basis, including balance sheets, income statements and cash flow statements covering the operation of the Property and the financial condition of the Mortgagor, [Mortgagor's general partner(s), shareholder(s), member(s)] and such principals of the Mortgagor as Mortgagee may from time to time request, for the previous fiscal quarter, a portfolio analysis report covering the operation of all properties of which Mortgagor or any of Mortgagor's general partners, shareholder(s), member(s) or principals designated by Mortgagee is the owner or a general partner of the owner, setting out a cash flow statement (including debt service payments) for each such property, and a current rent roll of the Property, all certified to Mortgagee to be complete, correct and accurate by the individual, managing [general partner] [member] or chief financial officer of the party whom the report concerns.
(3) All reports shall include, without limitation, balance sheets and statements of income and of partner's equity, if applicable, setting forth in each case in comparative form the figures for the previous fiscal quarter or year, as the case may be. The interim quarterly reports shall also include a breakdown of all categories of revenues and expenses, and any supporting schedules and data requested by Mortgagee. Each set of annual or
quarterly financial reports or quarterly rent rolls delivered to Mortgagee pursuant to this section 1.14 shall also be accompanied by a certificate of the chief financial officer or the managing [general partner] [member] of Mortgagor, stating whether any condition or event exists or has existed during the period covered by the annual or quarterly reports which then constituted or now constitutes an Event of Default under the Note or this Mortgage, and if any such condition or event then existed or now exists, specifying its nature and period of existence and what Mortgagor did or proposes to do with respect to such condition or event.
(C) In the event such statements are not in a form reasonably acceptable to Mortgagee or Mortgagor fails to furnish such statements and reports, then Mortgagee shall have the immediate and absolute right to audit the respective books and records of the Property and Mortgagor at the expense of Mortgagor.
1.15. Environmental Covenants. Mortgagor covenants: (A) that no Hazardous Materials (as defined below) shall be installed, used, generated, manufactured, treated, handled, refined, produced, processed, stored or disposed of, in, on or under the Property; (B) that no activity shall be undertaken on the Property which would cause (1) the Property to become a hazardous waste treatment, storage or disposal facility under any Hazardous Material Law (as defined below), (2) a release or threatened release of Hazardous Material from the Property in violation of any Hazardous Material Law, or (3) the discharge of Hazardous Material into any watercourse, body of surface or subsurface water or wetland, or the discharge into the atmosphere of any Hazardous Material which would require a permit under any Hazardous Material Law and for which no such permit has been issued; (C) that no activity shall be undertaken or permitted to be undertaken, by the Mortgagor on the Property which would result in a violation under any Hazardous Material Law, and (D) to obtain and deliver to Mortgagee, within a reasonable time following completion of actions required by an appropriate governmental agency, certifications of engineers or other professionals reasonably acceptable to Mortgagee, in form and substance satisfactory to Mortgagee, certifying that all necessary and required actions to clean up, remove, contain, prevent and eliminate all releases or threats of release of Hazardous Materials on or about the Property to the levels required by the appropriate governmental agencies have been taken and, to the knowledge of such professional, the Property is then in compliance with applicable Hazardous Material Laws as then in effect and applicable to such actions. For purposes of this Mortgage, "Hazardous Materials" means and includes asbestos or any substance containing asbestos, polychlorinated biphenyls, any explosives, radioactive materials, chemicals known or suspected to cause cancer or reproductive toxicity, pollutants, effluents, contaminants, emissions, infectious wastes, any petroleum or petroleum-derived waste or product or related materials and any items defined as hazardous, special or toxic materials, substances or waste under any Hazardous Material Law, or any material which shall be removed from the Property pursuant to any administrative order or enforcement proceeding or in order to place the Property in a condition that is suitable for ordinary use. "Hazardous Material Laws" collectively means and includes any present and future local, state, federal or international law or treaty relating to public health, safety or the environment including without limitation, the Resource Conservation and Recovery Act, as amended ("RCRA"), 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, as amended 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the Uranium Mill Tailings Radiation Control Act, 42 U.S.C. Section 7901 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 655 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., the National Environmental Policy Act, 42 U.S.C. Section 4321 et seq., the Noise Control Act, 42 U.S.C. Section 4901 et seq., and the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq., and the amendments, regulations, orders, decrees, permits, licenses or deed restrictions now or hereafter promulgated thereunder.
1.16 Covenants Relating to Subordinate Liens.
(A) Mortgagor shall have no right to permit the holder of any subordinate mortgage or other subordinate lien, whether or not consented to by Mortgagee, to terminate any lease of all or a portion of the Property whether or not such lease is subordinate (whether by law or the terms of such lease or a separate agreement) to the lien of this Mortgage without first obtaining the prior written consent of Mortgagee. The holder of any subordinate mortgage or other subordinate lien shall have no such right, whether by foreclosure of its mortgage or lien or otherwise, to terminate any such lease, whether or not permitted to do so by Mortgagor or as a matter of law, and any such attempt to terminate any such lease shall be ineffective and void without first obtaining the prior written consent of Mortgagee.
(B) No mortgage, lien or other encumbrance of any type, whether voluntary or involuntary, shall be permitted to be filed or entered against the Property without the prior written consent of Mortgagee. If any such mortgage, lien or other encumbrance is filed or entered, Mortgagor shall have it removed of record within fifteen (15) days after it is filed or entered by either paying it, having it bonded in a manner which removes it of record or otherwise having it removed of record. By placing a mortgage, lien or other encumbrance of any type, whether voluntary or involuntary, against the Property the holder thereof shall be deemed to have agreed, without any further act or documentation being required, that its mortgage, lien, or other encumbrance shall be subordinated in lien to any future amendments, consolidations or extensions to this Mortgage (including, without limitation, amendments which increase the interest rate on the Note, provide for Future Advances secured by this Mortgage or provide for the release of portions of the Property with or without consideration).
(C) The holder of any subordinate mortgage, lien or other encumbrance, whether or not consented to by Mortgagee, expressly agrees by acceptance of such subordinate mortgage, lien or other encumbrance that it waives and relinquishes any rights which it may have, whether under a legal theory of marshalling of assets or any other theory at law or in equity, to restrain Mortgagee from, or recover damages from Mortgagee as a result of, Mortgagee's exercising its various remedies hereunder and under any other documents or instruments
evidencing or securing the indebtedness secured hereby, in such order and with such timing as Mortgagee shall deem appropriate in its sole and absolute discretion.
(D) The holder of any subordinate mortgage, lien or other encumbrance, whether or not consented to by Mortgagee, expressly agrees by acceptance of such subordinate mortgage, lien or other encumbrance that Mortgagee may, at any time or from time to time, renew, extend or increase the amount of this Mortgage, or alter or modify the terms of this Mortgage or the Note in any way, or waive any of the terms, covenants or conditions hereof or of the Note in whole or in part and may release any portion of the Mortgaged Property or any other security, and grant such extensions and indulgences in relation to the indebtedness secured hereby as the Mortgagee may determine, without the consent of any junior lienor or encumbrancer and without any obligation to give notice of any kind thereto and without in any manner affecting the priority or the lien hereof on all or any part of the Mortgaged Property.
1.17 Covenants Regarding Ground Lease.
(A) Any default under the Ground Lease shall be an Event of Default under this Mortgage. The occurrence of any event which, with the giving of notice or the lapse of time, would constitute a default or breach of condition under the Ground Lease or which would entitle the landlord under the Ground Lease to deprive Mortgagor of the estate or interest vested in Mortgagor by the Ground Lease shall, for the purposes of this Mortgage, be treated as a default under the Ground Lease.
(B) Mortgagor shall pay or cause to be paid, not later than the date upon which the same become due and payable by Mortgagor pursuant to the provisions of the Ground Lease (1) all base rent, additional rent, rent increases and adjustments to rent and other payments required to be paid by the lessee under the Ground Lease and (2) all real estate taxes, assessments, water and sewer rates and charges, and all other governmental levies and charges of every kind whatsoever, general and special, ordinary and extraordinary, unforeseen as well as foreseen, which shall be assessed, levied, confirmed, imposed, or become a lien upon or against the Property, or which shall become payable with respect thereto (collectively the "Impositions"), provided that nothing contained herein shall imit the right of Mortgagee to require that deposits be made into an escrow for real estate taxes, regular or special assessments, and insurance premiums pursuant to paragraph 1.04 of this Mortgage. Within ten days after demand by Mortgagee, Mortgagor shall deliver to Mortgagee a copy of the official receipt evidencing such payment or other proof of payment of such rent and Impositions satisfactory to Mortgagee, and failure of Mortgagor to deliver to Mortgagee the receipts or to submit other proof satisfactory to Mortgagee shall constitute a default under this Mortgage. Mortgagee will accept as proof of payment of rent payable under the Ground Lease a certification executed by an officer or general partner of Mortgagor to the effect that such rent has been paid. To the extent that the Ground Lease or this Mortgage shall grant to Mortgagor the privilege to postpone or defer the payment of any Impositions, the failure of Mortgagor to pay the same shall not constitute a default under this Mortgage so long as Mortgagor shall faithfully comply with all of the terms, covenants and
conditions under the Ground Lease and this Mortgage with respect to the exercise of such privilege.
(C) Mortgagor shall promptly perform and observe all of the terms, covenants and conditions required to be performed and observed by Mortgagor under the Ground Lease within the stated opportunity to cure periods provided in the Ground Lease or such lesser opportunity to cure periods as are provided in the default provisions of this Mortgage, and shall do all things necessary to preserve and to keep unimpaired Mortgagor's rights under the Ground Lease.
(D) If Mortgagor shall fail to pay any base rent or additional rent or adjusted rent required under the Ground Lease or any Impositions, or to make any other payment required to be paid by Mortgagor under the Ground Lease at the time and in the manner provided in the Ground Lease, or if Mortgagor shall fail to perform or observe any other term, covenant or condition required to be performed or observed by Mortgagor under the Ground Lease, then, without limiting the generality of any other provision of this Mortgage and without releasing Mortgagor from any of its obligations under this Mortgage, Mortgagee shall have the right, but not the obligation, to pay base rent or additional rent and/or any Impositions, or other payment, and may take such action as may be appropriate to cause such other term, covenant or condition to be promptly performed or observed on behalf of Mortgagor, to the end that Mortgagor's rights, under the Ground Lease shall be kept unimpaired from default, and Mortgagor shall permit Mortgagee to enter upon the Property with or without notice and to do anything which Mortgagee shall deem necessary or prudent for such purpose.
If Mortgagee shall make any payment or take action in accordance with the preceding paragraph, Mortgagee, within thirty (30) days thereafter, shall give to Mortgagor written notice of the making of any such payment or the taking of any such action. All moneys expended by Mortgagee in connection therewith including, but not limited to, legal expenses, together with interest thereon at the Contract Rate (as defined in the Note) plus 5% per annum compounded monthly from the date of each such expenditure, shall be paid by Mortgagor to Mortgagee upon demand by Mortgagee, and shall be secured by this Mortgage. Mortgagee shall have, in addition to any other right or remedy of Mortgagee, the same rights and remedies in the event of nonpayment of any such sums by Mortgagor as in the case of a default by Mortgagor in the payment of the Note. If, pursuant to the Ground Lease, the lessor thereunder shall deliver to Mortgagee a duplicate copy of any notice given by lessor to Mortgagor, such notice shall constitute full protection to Mortgagee for any action taken or omitted to be taken by Mortgagee, in good faith, in reliance thereon.
(E) Mortgagor shall (1) promptly notify Mortgagee in writing of any default by Mortgagor under the Ground Lease or of the receipt by Mortgagor of any notice (other than notices customarily sent on a regular periodic basis) from the lessor under the Ground Lease, including without limitation any notice claiming any default by Mortgagor in the performance or observance of any of the terms, covenants, or conditions to be performed or observed by
Mortgagor under the Ground Lease; (2) promptly notify Mortgagee in writing of the receipt by Mortgagor of any notice from the lessor under the Ground Lease of termination of the Ground Lease pursuant to the provisions of the Ground Lease; and (3) promptly cause a copy of each such notice received by Mortgagor to be delivered to Mortgagee.
(F) If the Ground Lease provides for arbitration, Mortgagor shall promptly notify Mortgagee in writing of any request made by either party to the Ground Lease for arbitration proceedings pursuant to the Ground Lease and of the institution of any arbitration proceedings, as well as of all proceedings thereunder, and shall promptly deliver to Mortgagee a copy of the determination of the arbitrators in each such arbitration proceeding. Mortgagee shall have the right to participate in such arbitration proceedings in association with Mortgagor or on its own behalf as an interested party.
(G) Mortgagor shall not, without the prior written consent of Mortgagee, consent to any agreement which releases the Mortgagor from any of its obligations under the Ground Lease, exercise any option to purchase the Property contained in the Ground Lease, or consent to or permit any waiver, modification or cancellation of any provision of the Ground Lease, the surrender or termination of the Ground Lease, or the subordination of the Ground Lease to any mortgage of the fee interest of the lessor of the Property. The entire interest of Mortgagor as tenant under the Ground Lease has been mortgaged and assigned to Mortgagee, so that no such modification, amendment, release, cancellation, surrender, termination or subordination shall be of any force or effect whatsoever unless Mortgagee shall have given its prior written consent thereto.
(H) If at any time Mortgagor, or any party claiming by, through or under Mortgagor, and/or any trustee in bankruptcy, shall have the right to assume or reject the Ground Lease pursuant to Section 365(a) of the Bankruptcy Reform Act of 1978 or any successor statute, then Mortgagee shall have (and is hereby granted) the exclusive right to exercise such right to assume or reject. In the event that the foregoing grant is held to be unenforceable by a court of competent jurisdiction, then and in such case Mortgagor hereby covenants and agrees that Mortgagor, any party claiming by, through or under Mortgagor, and/or any trustee in bankruptcy shall not exercise any rights to assume or reject the Ground Lease without having first obtained the prior written consent of Mortgagee.
(I) Mortgagor, irrevocably, hereby designates, makes, constitutes and appoints Mortgagee (and all persons designated by Mortgagee) as Mortgagor's true and lawful attorney and agent-in-fact, with power upon the occurrence of an Event of Default under this Mortgage or default under the Ground Lease, without notice to Mortgagor and at such time or times thereafter as Mortgagee, at its sole election, may determine, in the name of Mortgagor, Mortgagee or in both names: (i) to exercise all of the Mortgagor's rights, interests and remedies in and under the Ground Lease; (ii) to acquire the land and other property subject to the Ground Lease in the manner provided for in the Ground Lease; (iii) to initiate such legal proceedings and to settle, adjust or compromise any legal proceedings deemed necessary by Mortgagee in its sole
discretion in order to enforce the provisions of the Ground Lease or prevent the
termination thereof; (iv) to commence or institute arbitration proceedings, or
to participate in any arbitration proceedings commenced or instituted, pursuant
to the Ground Lease, if any; (v) to approve all arbitration determinations,
awards or findings made pursuant to the provisions of the Ground Lease, if any;
(vi) to do any and all things necessary, in Mortgagee's sole opinion, to
preserve and keep unimpaired Mortgagee's rights under this Mortgage and/or the
Ground Lease; and (vii) to do all acts and things necessary, in Mortgagee's sole
discretion, to carry out any or all of the foregoing.
(J) Mortgagor shall execute and deliver, on request of Mortgagee, such instruments as Mortgagee may deem useful or required to permit Mortgagee to cure any default under the Ground Lease or to permit Mortgagee to take such other action as Mortgagee considers desirable to cure or remedy the matter in default and preserve the interest of Mortgagee in the Property.
(K) If the Ground Lease shall be terminated prior to the natural expiration of its term due to default by Mortgagor, and if Mortgagee shall acquire from the lessor under the Ground Lease a new ground lease, Mortgagor shall have no right, title, or interest in or to such new ground lease or the leasehold estate created thereby.
(L) Mortgagor shall not sell, transfer or assign the Ground Lease or any portion of Mortgagor's interest therein without the prior written consent of Mortgagee and the Ground Lessor first had and obtained.
(M) In case of a sale in foreclosure, any such sale may be made subject to the requirement that the purchaser shall assume the performance of all of the terms, covenants, and conditions of the Ground Lease by instrument in writing to be delivered to the lessor under the Ground Lease. Any such sale shall also be made subject to all of the provisions of the Ground Lease and to any curable default or defaults then existing thereunder.
(N) The generality of the provisions of sections in this Mortgage relating to the Ground Lease shall not be limited by other provisions of this Mortgage setting forth particular obligations of Mortgagor which are also required of the Mortgagor as the lessee under the Ground Lease.
(O) The improvements on the Property shall not be demolished without the prior written consent of Mortgagee. Mortgagor further covenants that it will not make, authorize, or permit to be made any material alterations to the buildings without the prior written approval of the Ground Lessor, if required under the Ground Lease, and that all such permitted material alterations, if any, shall be performed by Mortgagor in the manner set forth in the Ground Lease, and subject to the further condition that no structural alteration shall be undertaken without the prior written consent of Mortgagee consistent with the terms of this Mortgage; and any bond, for the completion or payment of any such material alteration, furnished to or for the benefit of the
lessor under the Ground Lease shall also name Mortgagee as a party for whose benefit such bond is issued, or a similar bond shall be furnished to and for the benefit of Mortgagee.
(P) In the event that Mortgagor acquires the fee interest in the Property subject to the Ground Lease, whether by exercise of any purchase option contained in the Ground Lease or otherwise, so long as any of Mortgagor's obligations to Mortgagee remain unpaid, the fee title to and the leasehold estate in the Property, or any portion thereof, shall not merge, but shall always be kept separate and distinct, notwithstanding the union of such estates either in the landlord or the tenant under the Ground Lease or in a third party, by purchase or otherwise. Mortgagor shall not agree to any merger of the leasehold and fee without the prior written consent of Mortgagee. The lien of this Mortgage, securing payment of the Note and performance of the obligations under this Mortgage, shall not merge, and shall always remain a separate and distinct mortgage lien, notwithstanding the fact that such mortgage lien may from time to time be held by the same party that holds the tenant's interest in the Ground Lease or by any entity controlled by, controlling or under common control with such party; provided, however, that the holder of this Mortgage may at any time, by a suitable instrument, duly executed by Mortgagee and filed of public record, elect to effect a merger of such liens upon the Mortgaged Property. If at any time Mortgagee shall acquire all or any part of the fee estate, such acquisition shall not cause a merger with Mortgagee's interest as holder of this Mortgage; provided, however, that Mortgagee may at any time, by suitable instrument duly executed by Mortgagee and filed of public record, elect to effect a merger of such interests in the Mortgaged Property.
(Q) Mortgagor shall not exercise any election available to Mortgagor under the Ground Lease with respect to the application of proceeds of insurance and condemnation without first having obtained the prior written consent thereof by Mortgagee.
(R) If this Mortgage is still of public record on the date which is thirty (30) days prior to the last date on which the tenant under the Ground Lease has a right to extend the term of the Ground Lease and Mortgagor has not given Mortgagee written evidence of Mortgagor's proper exercise of such extension option, Mortgagee may (but shall not be obligated to) at any time thereafter exercise such extension option on behalf of Mortgagor, and Mortgagor hereby grants Mortgagee a power of attorney to exercise such extension option, which power of attorney is irrevocable and coupled with an interest.
(S) Nothing contained in this Section 1.17 is intended to limit or impair any rights which may be granted to Mortgagee under the terms of the Ground Lease.
ARTICLE II
EVENTS OF DEFAULT
Each of the following shall constitute an event of default ("Event of Default") hereunder:
2.01. Monetary and Performance Defaults.
(A) Failure to make any payment due under the Note or any note evidencing a Future Advance, other than the final payment and Prepayment Premium, or to make any payment due under this Mortgage to Mortgagee or any other party, including without limitation, payment of escrow deposits, real estate taxes, insurance premiums and ground rents, if any, on or before the fifth day of the month in which such payment is due; or
(B) Failure to make the final payment or the Prepayment Premium due under the Note or any note evidencing a Future Advance when such payment is due whether at maturity, by reason of acceleration, as part of a prepayment or otherwise (the defaults in (A) and (B) hereinafter "Monetary Default"); or
(C) Breach or default in the performance of any of the covenants or agreements of Mortgagor contained herein or in any Related Agreement ("Performance Default"), if such Performance Default shall continue for fifteen (15) days or more after written notice to Mortgagor from Mortgagee specifying the nature of the Performance Default; provided, however, that if such Performance Default is of a nature that it cannot be cured within the fifteen (15) day period, then Mortgagor shall not be in default if it commences good faith efforts to cure the Performance Default within the fifteen (15) day period, demonstrates continuous diligent efforts to cure the Performance Default in a manner satisfactory to Mortgagee and, within a reasonable period, not to exceed one hundred eighty (180) days after the date of the original written notice of the Performance Default, completes the cure of such Performance Default.
2.02. Bankruptcy, Insolvency, Dissolution.
(A) Any court of competent jurisdiction shall sign an order (1) adjudicating Mortgagor, or any person, partnership or corporation holding an ownership interest in Mortgagor or in any partnership comprising Mortgagor, or any guarantor (which term when used in this Mortgage shall mean guarantor of payment of the indebtedness) bankrupt or insolvent, (2) appointing a receiver, trustee or liquidator of the Property or of a substantial part of the property of Mortgagor, or any person, partnership or corporation holding an ownership interest in Mortgagor, or in any partnership comprising Mortgagor, or any guarantor, or (3) approving a petition for, or effecting an arrangement in bankruptcy, or any other judicial modification or alteration of the rights of Mortgagee or of other creditors of Mortgagor, or any person, partnership or corporation holding an ownership interest in Mortgagor, or in any partnership comprising Mortgagor, or any guarantor; or
(B) Mortgagor, any partnership or corporation holding an ownership interest in Mortgagor or in any partnership comprising Mortgagor, shall (1) apply for or consent to the appointment of a receiver, trustee or liquidator for it or for any of its property, (2) as debtor, file a voluntary petition in bankruptcy, or petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it and any proceeding under such law, (3) admit in writing an inability to pay its debts as they mature, or (4) make a general assignment for the benefit of creditors; or
(C) An involuntary petition in bankruptcy is filed against Mortgagor, or any person, partnership or corporation holding an ownership interest in Mortgagor or in any partnership comprising Mortgagor and the same is not vacated or stayed within thirty (30) days of the filing date.
2.03. Misrepresentation. Mortgagor makes or furnishes a representation, warranty, statement, certificate, schedule and/or report to Mortgagee in or pursuant to this Mortgage or any of the Related Agreements which is false or misleading in any material respect as of the date made or furnished.
2.04. Default under Subordinate Loans. If Mortgagee in its sole discretion consents to a subordinate mortgage on the Property, then an occurrence of a default under any loan subordinate to this Mortgage which is not an independent default under this Mortgage which results in the commencement of foreclosure proceedings against the Property or the taking of any other remedial action under such subordinate loan.
2.05 Default under the Ground Lease. The occurrence of a default under the Ground Lease.
ARTICLE III
REMEDIES
Upon the occurrence of any Event of Default, Mortgagee shall have the following rights and remedies:
3.01. Acceleration. Notwithstanding the stated maturity date in the Note, or any note evidencing any Future Advance, Mortgagee may without notice or demand, declare the entire principal amount of the Note and/or any Future Advances then outstanding and accrued and unpaid interest thereon, and all other sums or payments required thereunder, including but not limited to the Prepayment Premium described in the Note, to be due and payable immediately.
3.02. Entry. Irrespective of whether Mortgagee exercises the option provided in section 3.01 above, Mortgagee in person or by agent or by court-appointed receiver (and
Mortgagee shall have the right to the immediate appointment of such a receiver without regard to the adequacy of the security and Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor) may, at its option, without any action on its part being required, without in any way waiving such Event of Default, with or without the appointment of a receiver, or an application therefor:
(A) take possession of the Property and conduct tests of, manage or hire a manager to manage, lease and operate the Property or any part thereof, on such terms and for such period of time as Mortgagee may deem proper, with full power to make, from time to time, all alterations, renovations, repairs or replacements thereto as may seem proper to Mortgagee;
(B) with or without taking possession of the Property, collect and receive all Rents and Profits, notify tenants under the Leases or any other parties in possession of the Property to pay Rents and Profits directly to Mortgagee, its agent or a court-appointed receiver and apply such Rents and Profits to the payment of:
(1) all costs and expenses incident to taking and retaining possession of the Property, management and operation of the Property, keeping the Property properly insured and all alterations, renovations, repairs and replacements to the Property;
(2) all taxes, charges, claims, assessments, and any other liens which may be prior in lien or payment to this Mortgage or the Note, and premiums for insurance, with interest on all such items; and
(3) the indebtedness secured hereby together with all costs and attorneys' fees, in such order or priority as to any of such items as Mortgagee in its sole discretion may determine, any statute, law, custom or use to the contrary notwithstanding;
(C) exclude Mortgagor, its agents and servants, wholly from the Property;
(D) have joint access with Mortgagor to the books, papers and accounts of Mortgagor relating to the Property, at the expense of Mortgagor;
(E) commence, appear in and/or defend any action or proceedings purporting to affect the interests, rights, powers and/or duties of Mortgagee hereunder, whether brought by or against Mortgagor or Mortgagee; and
(F) pay, purchase, contest or compromise any claim, debt, lien, charge or encumbrance which in the judgment of Mortgagee may affect or appear to affect the interest of Mortgagee or the rights, powers and/or duties of Mortgagee hereunder.
The receipt by Mortgagee of any Rents and Profits pursuant to this Mortgage after the institution of foreclosure or other proceedings under the Mortgage shall not cure any such Event of Default
or affect such proceedings or any sale pursuant thereto. After deducting the expenses and amounts set forth above in this section 3.02, as well as just and reasonable compensation for all Mortgagee's employees and other agents (including, without limitation, reasonable and actual attorneys' fees and management and rental commissions) engaged and employed, the moneys remaining, at the option of Mortgagee, may be applied to the indebtedness secured hereby. Whenever all amounts due on the Note and under this Mortgage shall have been paid and all Events of Default have been cured and any such cure has been accepted by Mortgagee, Mortgagee shall surrender possession to Mortgagor. The same right of entry, however, shall exist if any subsequent Event of Default shall occur; provided, however, Mortgagee shall not be under any obligation to make any of the payments or do any of the acts referred to in this section 3.02.
THE FOLLOWING PARAGRAPH SETS FORTH A WARRANT OF AUTHORITY FOR AN ATTORNEY TO CONFESS JUDGMENT AGAINST THE MORTGAGOR. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE MORTGAGOR, THE MORTGAGOR HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, ON THE ADVICE OF SEPARATE COUNSEL OF THE MORTGAGOR, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE MORTGAGOR HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA.
FOR THE PURPOSE OF OBTAINING POSSESSION OF THE PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER OR UNDER THE NOTE, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO ENTER IN ANY COMPETENT COURT AN ACTION IN EJECTMENT FOR POSSESSION OF THE PROPERTY AND TO APPEAR FOR AND CONFESS JUDGMENT AGAINST MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN FAVOR OF MORTGAGEE, FOR RECOVERY BY MORTGAGEE OF POSSESSION OF THE PROPERTY, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE PROPERTY, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE PROPERTY SHALL REMAIN IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO RECOVER POSSESSION OF THE PROPERTY. MORTGAGEE MAY BRING AN ACTION FOR EJECTMENT AND/OR POSSESSION AND CONFESS JUDGMENT THEREIN BEFORE OR AFTER THE
INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFF'S SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THE MORTGAGE AND THE NOTE, AND SHALL SURVIVE ANY EXECUTION SALE TO MORTGAGEE.
3.03. Judicial Action. Mortgagee shall have the right, from time to time, to bring an appropriate action to enforce any covenant contained herein, or to recover any sums required to be paid by Mortgagor under the terms of this Mortgage, as they become due, without regard to whether or not the principal indebtedness or any other sums secured by the Note and this Mortgage shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of Mortgage Foreclosure, or any other action, for any default by Mortgagor existing at the time the earlier action was commenced.
3.04. Foreclosure. Mortgagee may institute an action of mortgage foreclosure against the Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the principal debt and the Prepayment Premium, with interest at the rate stipulated in the Note to the date of default, and thereafter at the Default Rate specified in the Note, together with all other sums due by Mortgagor in accordance with the provisions of the Note and this Mortgage, including all sums which may have been advanced or loaned by Mortgagee to Mortgagor after the date of this Mortgage, including Future Advances, and all sums which may have been advanced by Mortgagee for taxes, water or sewer rents, charges or claims, payments on prior liens, insurance, utilities or repairs to the Property, all costs of suit, together with interest at the Default Rate on any judgment obtained by Mortgagee from and after the date of any Sheriff or other judicial sale until actual payment is made of the full amount due Mortgagee, and an attorney's commission for collection which shall be five percent (5%) of the total of the foregoing sums.
Any real estate sold pursuant to any writ of execution issued on a judgment obtained by virtue of the Note or this Mortgage, or pursuant to any other judicial proceedings under the Mortgage, may be sold in one parcel, as an entirety, or in such parcels, and in such manner or order as Mortgagee, in its sole discretion, may elect.
If for any reason after any action in mortgage foreclosure has been commenced it shall be discontinued, or possession of the Property shall remain in or be restored to Mortgagor, Mortgagee shall have the right for the same default or any subsequent event of default to bring one or more further actions in mortgage foreclosure.
In any action to foreclose this Mortgage, Mortgagee may, at its option, have a receiver appointed to take charge of the Property and to collect such rents, issues and profits, all without consideration of the value of the Property as security for the amount of indebtedness secured hereby. All such rents, issues and profits paid to Mortgagee or collected by such receiver shall be first applied to the cost of collection thereof (including the cost of such receivership, if any) and then to the payment of the interest on and principal of the Note. Mortgagor for itself and any subsequent owner of the Property hereby waives any and all defenses to the application for such receiver and hereby specifically consents to such appointment without notice.
3.05. Right to Remedy Defaults. If Mortgagor should fail to pay corporate taxes, real estate or other taxes, assessments, water and sewer rents, charges and claims, sums due under any prior lien or approved prior lien, or insurance premiums, or fail to make necessary repairs, or permit waste, or fail to cure any default under any prior lien or approved prior lien, Mortgagee, at its election and without notice to Mortgagor, but subject to Mortgagor's right of contest as set forth in section 1.06 of this Mortgage, shall have the right to make any payment or expenditure and to take any action which Mortgagor should have made or taken, or which Mortgagee deems advisable to protect the security of this Mortgage or the Property, without prejudice to any of Mortgagee's rights or remedies available hereunder or otherwise, at law or in equity. All such sums, as well as costs, advanced by Mortgagee pursuant to this Mortgage shall be due immediately from Mortgagor to Mortgagee, shall be secured hereby and the lien therefor shall relate back to the date of this Mortgage, and shall bear interest at the Default Rate specified by the Note from the date of payment by Mortgagee until the date of repayment.
3.06. Mortgagee's Remedies Respecting Collateral. Mortgagee may realize upon the Collateral, enforce and exercise all of the Mortgagor's rights, powers, privileges and remedies in respect of the Collateral, dispose of or otherwise deal with the Collateral in such order as Mortgagee may in its discretion determine, and exercise any and all other rights, powers, privileges and remedies afforded to a secured party under the laws of the state in which the Property is located as well as all other rights and remedies available at law or in equity.
3.07. Proceeds of Sales. The proceeds of any sale made under or by virtue of this Article III, together with all other sums which then may be held by Mortgagee under this Mortgage, whether under the provisions of this Article III or otherwise, shall be applied as follows:
FIRST: To the payment of the costs, fees and expenses of sale wherein the same may be made, and any other sums which are required by applicable law to be paid prior to distribution being made to Mortgagee;
SECOND: To the payment of any judgment obtained by Mortgagee on the Note, this Mortgage and/or any Related Agreement, together with interest thereon as provided in such judgment or under applicable law;
THIRD: The remainder, if any, to the person or persons, including the Mortgagor, legally entitled thereto.
3.08. Condemnation and Insurance Proceeds. All Condemnation Proceeds, Insurance Proceeds and any interest earned thereon shall be paid over either by the condemning authority, insurance company or escrow agent to Mortgagee and shall be applied first toward reimbursement of the costs and expenses of Mortgagee (including reasonable attorneys' fees), if any, in connection with the recovery of such Proceeds, and then shall be applied in the sole and absolute discretion of Mortgagee and without regard to the adequacy of its security under this Mortgage (A) to the payment or prepayment of all or any portion of the Note including the Prepayment Premium described in the Note; (B) to the reimbursement of expenses incurred by Mortgagee in connection with the restoration of the Property; or (C) to the performance of any of the covenants contained in this Mortgage as Mortgagee may determine. Any prepayment of the Note or portion thereof pursuant to Mortgagee's election under this section shall be subject to the Prepayment Premium described in the Note.
3.09. Waiver of Marshalling, Rights of Redemption, Homestead and Valuation.
(A) Mortgagor, for itself and for all persons hereafter claiming through or under it or who may at any time hereafter become holders of liens junior to the lien of this Mortgage, hereby expressly waives and releases all rights to direct the order in which any of the Property shall be sold in the event of any sale or sales pursuant hereto and to have any of the Property and/or any other property now or hereafter constituting security for any of the indebtedness secured hereby marshalled upon any foreclosure of this Mortgage or of any other security for any of said indebtedness.
(B) To the fullest extent permitted by law, Mortgagor, for itself and all who may at any time claim through or under it, hereby expressly waives, releases and renounces all rights of redemption from any foreclosure sale, all rights of homestead, exception, monitoring reinstatements, forbearance, appraisement, valuation, stay and all rights under any other laws which may be enacted extending the time for or otherwise affecting enforcement or collection of the Note, the debt evidenced thereby, or this Mortgage.
3.10. Remedies Cumulative. No remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive of any other remedy herein or by law provided, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of Mortgagee to exercise any right or power accruing upon any Event of Default shall impair any right or power or shall be construed to be a waiver of any Event of Default or any acquiescence therein. Every power and remedy given by this Mortgage to Mortgagee may be exercised separately, successively or concurrently from time to time as often as may be deemed expedient by Mortgagee. If there exists additional security for the performance of the obligations secured hereby, Mortgagee, at its sole option, and without limiting or affecting any of its rights or
remedies hereunder, may exercise any of the rights and remedies to which it may be entitled hereunder either concurrently with whatever rights and remedies it may have in connection with such other security or in such order as it may determine. Any application of any amounts or any portion thereof held by Mortgagee at any time as additional security or otherwise, to any indebtedness secured hereby shall not extend or postpone the due dates of any payments due from Mortgagor to Mortgagee hereunder or under the Note, any Future Advance, or under any of the Related Agreements, or change the amounts of any such payments or otherwise be construed to cure or waive any default or notice of default hereunder or invalidate any act done pursuant to any such default or notice.
3.11. Nonrecourse. Except as otherwise set forth in this paragraph, the liability of Mortgagor and the general partners of Mortgagor, if any, under the Note, this Mortgage and the Related Agreements shall be limited to, and satisfied from, the Property and the proceeds thereof, the Rents and Profits and all other income arising therefrom, the other assets of Mortgagor arising out of the Property which are given as collateral for the Note, and any other collateral given in writing to Mortgagee as security for repayment of the Note (all of the foregoing collectively referred to as the "Loan Collateral"); provided, however, that nothing contained in this section shall (A) preclude Mortgagee from foreclosing the lien of this Mortgage or from enforcing any of its rights or remedies in law or in equity against Mortgagor except as stated in this section, (B) constitute a waiver of any obligation evidenced by the Note or secured by this Mortgage or any Related Agreements, (C) limit the right of Mortgagee to name Mortgagor as a party defendant in any action brought under this Mortgage, the Note or any Related Agreements, (D) prohibit Mortgagee from pursuing all of its rights and remedies against any guarantor or surety, whether or not such guarantor or surety is a partner of Mortgagor, (E) limit the personal liability of Mortgagor or any shareholder of Mortgagor, or any general partner of Mortgagor, or of any member of Mortgagor, to Mortgagee, for misappropriation or misapplication of funds, fraud, waste, willful misrepresentation or willful damage to the Property, or (F) preclude Mortgagee from recovering from Mortgagor and the other Indemnitors under that certain Environmental Indemnity Agreement of even date herewith.
3.12. Evasion of Prepayment Premium. Mortgagor agrees that in the event Mortgagee exercises its right to accelerate the maturity date of the Note following an Event of Default, a tender of payment of an amount necessary to satisfy the entire indebtedness evidenced by the Note, but without including the Prepayment Premium described in the Note, made at any time prior to foreclosure sale either by Mortgagor, its successors and assigns or by anyone on behalf of Mortgagor, shall be deemed to constitute an evasion of the prepayment provisions of the Note and such payment shall therefore be deemed to be a prepayment under the Note, and to the extent permitted by law, shall include the Prepayment Premium described in the Note.
ARTICLE IV
MISCELLANEOUS
4.01. Severability. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein, but only to the extent that it is invalid, illegal or unenforceable.
4.02. Certain Charges and Brokerage Fees.
(A) Mortgagor agrees to pay Mortgagee for each written statement requested of Mortgagee as to the obligations secured hereby, furnished at Mortgagor's request. Mortgagor further agrees to pay the charges of Mortgagee for any other service rendered Mortgagor, or on its behalf, connected with this Mortgage or the indebtedness secured hereby, including, without limitation, the delivery to an escrow holder of a request for full or partial release or reconveyance of this Mortgage, transmittal to an escrow holder of moneys secured hereby, changing its records pertaining to this Mortgage and indebtedness secured hereby to show a new owner of the Property, and replacing an existing policy of insurance held hereunder with another such policy.
(B) Mortgagor agrees to indemnify and hold Mortgagee harmless from any responsibility and/or liability for the payment of any commission charge or brokerage fees to anyone which may be payable in connection with the funding of the loan evidenced by the Note and this Mortgage or refinancing of any prior indebtedness, if applicable, based upon any action taken by Mortgagor. It is understood that any such commission charge or brokerage fees shall be paid directly by Mortgagor to the entitled parties.
4.03. Notices.
(A) All notices expressly provided hereunder to be given by Mortgagee to Mortgagor and all notices, demands and other communications of any kind or nature whatever which Mortgagor may be required or may desire to give to or serve on Mortgagee shall be in writing and shall be (1) hand-delivered, effective upon receipt, (2) sent by United States Express Mail or by private overnight courier, effective upon receipt, or (3) served by certified mail, to the appropriate address set forth below, or at such other place as the Mortgagor or Mortgagee, as the case may be, may from time to time designate in writing by ten (10) days prior written notice thereof. Any such notice or demand served by certified mail, return receipt requested, shall be deposited in the United States mail, with postage thereon fully prepaid and addressed to the party so to be served at its address above stated or at such other address of which said party shall have theretofore notified in writing, as provided above, the party giving such notice. Service of any such notice or demand so made shall be deemed effective on the day of actual delivery as shown by the addressee's return receipt or the expiration of three (3) business days after the date of
mailing, whichever is the earlier in time. Any notice required to be given by Mortgagee shall be equally effective if given by Mortgagee's agent, if any.
(B) Mortgagor hereby requests that any notice, demand, request or other communication (including any notice of an Event of Default and notice of sale as may be required by law) desired to be given or required pursuant to the terms hereof be addressed to Mortgagor as follows:
Gustine Sixth Avenue Associates, Ltd.
c/o The Gustine Company
2100 Wharton Street, Suite 700
Pittsburgh, PA 15203
Attn: Chief Financial Officer and General Counsel
All notices and other communications to Mortgagee shall be addressed as follows:
Allstate Life Insurance Company
Allstate Plaza South, Suite G5C
3075 Sanders Road
Northbrook, Illinois 60062
Attention: Commercial Mortgage Loan
Servicing Manager
With a copy to:
Allstate Insurance Company
Investment Law Division
Allstate Plaza South, Suite G5A
3075 Sanders Road
Northbrook, Illinois 60062
4.04. Mortgagor Not Released.
(A) Extension of the time for payment or modification of the terms of payment of any sums secured by this Mortgage granted by Mortgagee to any successor in interest of Mortgagor shall not operate to release, in any manner, the liability of Mortgagor. Mortgagee shall not be required to commence proceedings against such successor or refuse to extend time for payment or otherwise modify the terms of payment of the sums secured by this Mortgage by reason of any demand made by Mortgagor. Without affecting the liability of any person, including Mortgagor, but subject to the terms and provisions of section 3.11, for the payment of any indebtedness secured hereby, or the legal operation and effect of this Mortgage on the remainder of the Property for the full amount of any such indebtedness and liability unpaid, Mortgagee may from time to time and without notice (1) release any person liable for the
payment of any of the indebtedness; (2) extend the time or otherwise alter the terms of payment of any of the indebtedness; (3) accept additional real or personal property of any kind as security therefor, whether evidenced by deeds of trust, mortgages, security agreements or any other instruments of security; or (4) alter, substitute or release any property securing the indebtedness.
(B) Mortgagee may, at any time, and from time to time,
(1) consent to the making of any map or plan of the Property or any part
thereof, (2) join in granting any easement or creating any restriction thereon,
(3) join in any subordination or other agreement affecting this Mortgage or the
legal operation and effect or charge hereof, or (4) release or reconvey, without
any warranty, all or part of the Property from the lien of this Mortgage.
4.05. Inspection. Upon reasonable prior notice and subject to the inspection rights of tenants under the Leases, Mortgagee may at any reasonable time make or cause to be made entry upon and make inspections, reappraisals, surveys, construction and environmental testing of the Property or any part thereof in person or by agent. All of the foregoing shall be at Mortgagor's sole cost and expense if done (a) after an Event of Default or (b) prior to an Event of Default where there is a reasonable basis to believe that the action taken is reasonably necessary in connection with Mortgagee's security.
4.06. Release. Upon the payment in full of all sums secured by this Mortgage, Mortgagee shall execute and deliver a release or satisfaction of this Mortgage and shall surrender this Mortgage and all notes evidencing indebtedness secured by this Mortgage to Mortgagor. The duly recorded release or satisfaction of this Mortgage shall constitute a reassignment of the Leases by the Mortgagee to the Mortgagor. Mortgagor shall pay all fees of Mortgagee and costs of recordation, if any. The recitals in such release or satisfaction of any matters or facts shall be conclusive proof of the truthfulness thereof.
4.07. Statute of Limitations. Mortgagor hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to any and all obligations secured by this Mortgage.
4.08. Interpretation. Wherever used in this Mortgage, unless the context otherwise indicates a contrary intent, or unless otherwise specifically provided herein, the word "Mortgagor" shall mean and include both Mortgagor and any subsequent owner or owners of the Property, and the word "Mortgagee" shall mean and include not only the original Mortgagee hereunder but also any future owner and holder, including pledgees, of the Note or other obligations secured hereby. In this Mortgage whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the neuter includes the feminine and/or masculine, and the singular number includes the plural. In this Mortgage, the use of the word "including" shall not be deemed to limit the generality of the term or clause to which it has reference, whether or not non-limiting language (such as "without limitation," or "but not limited, to," or words of similar import) is used with reference thereto.
4.09. Captions. The captions and headings of the Articles and sections of this Mortgage are for convenience only and are not to be used to interpret, define or limit the provisions hereof.
4.10. Consent. The granting or withholding of consent by Mortgagee to any transaction as required by the terms hereof shall not be deemed a waiver of the right to require consent to future or successive transactions. Mortgagor covenants and agrees to reimburse Mortgagee promptly on demand for all legal and other expenses incurred by Mortgagee or its servicing agent in connection with all requests by Mortgagor for consent or approval under this Mortgage.
4.11. Delegation to Subagents. Wherever a power of attorney is conferred upon Mortgagee hereunder or under the Related Agreements, it is understood and agreed that such power is conferred with full power of substitution, and Mortgagee may elect in its sole discretion to exercise such power itself or to delegate such power, or any part thereof, to one or more subagents.
4.12. Successors and Assigns. All of the grants, obligations, covenants, agreements, terms, provisions and conditions herein shall run with the land and shall apply to, bind and inure to the benefit of, the heirs, administrators, executors, legal representatives, successors and assigns of Mortgagor (but this shall not permit any assignment prohibited hereby) and the endorsees, transferees, successors and assigns of Mortgagee. In the event Mortgagor is composed of more than one party, the obligations, covenants, agreements, and warranties contained herein as well as the obligations arising therefrom are and shall be joint and several as to each such party.
4.13. Governing Law. THIS MORTGAGE IS INTENDED TO BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED. MORTGAGOR HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY.
4.14. Intentionally Deleted.
4.15. Changes in Taxation. If, after the date of this Mortgage, any law is passed by the state in which the Property is located or by any other governing entity, imposing upon Mortgagee any tax against the Property, or changing in any way the laws for the taxation of mortgages or deeds of trust or debts secured by mortgages or deeds of trust so that an additional or substitute tax is imposed on Mortgagee or the holder of the Note, Mortgagor shall reimburse Mortgagee for the amount of such taxes immediately upon receipt of written notice from Mortgagee. Provided, however, that such requirement of payment shall be ineffective if Mortgagor is permitted by law to pay the whole of such tax in addition to all other payments required hereunder, without any penalty or charge thereby accruing to Mortgagee and if Mortgagor in fact pays such tax prior to the date upon which payment is required by such notice.
4.16. Maximum Interest Rate. No provision of this Mortgage or of the Note or of any note evidencing a Future Advance shall require the payment or permit the collection of interest in excess of the maximum non-usurious rate permitted by applicable law. In the event such interest does exceed the maximum legal rate, it shall be cancelled automatically to the extent that such interest exceeds the maximum legal rate and if theretofore paid, credited on the principal amount of the Note or, if the Note has been prepaid, then such excess shall be rebated to Mortgagor.
4.17. Time of Essence. Time is of the essence of the obligations of Mortgagor in this Mortgage and each and every term, covenant and condition made herein by or applicable to Mortgagor.
4.18. Reproduction of Documents. This Mortgage and all documents relating thereto, specifically excluding the Note but including, without limitation, consents, waivers and modifications which may hereafter be executed, financial and operating statements, certificates and other information previously or hereafter furnished to Mortgagee, may be reproduced by Mortgagee by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and Mortgagee may destroy any original document ("Master") so reproduced. Mortgagor agrees and stipulates that any such reproduction is an original and shall be admissible in evidence as the Master in any judicial or administrative proceeding (whether or not the Master is in existence and whether or not such reproduction was made or preserved by Mortgagee in the regular course of business) and any enlargement, facsimile or further reproduction of such a reproduction shall be no less admissible.
4.19. No Oral Modifications. This Mortgage may not be amended or modified orally, but only by an agreement in writing signed by the party against whom enforcement of any amendment or modification is sought.
IN WITNESS WHEREOF and intending to be legally bound, the undersigned has executed this Mortgage as a sealed instrument as of the day and year first hereinabove written.
GUSTINE SIXTH AVENUE ASSOCIATES, LTD., a
Pennsylvania limited partnership, by its
sole general partner:
Gustine Sixth Avenue, Inc., a Pennsylvania
corporation
By: /s/ W. Gregg Baldwin
----------------------------------------
W. Gregg Baldwin, President
|
COMMONWEALTH OF PENNSYLVANIA )
)SS:
COUNTY OF ALLEGHENY )
|
On the 23 day of March, 1999, before me, the subscriber, a Notary Public in and for the State and County aforesaid, personally appeared W. Gregg Baldwin, who acknowledged himself to be the President of Gustine Sixth Avenue, Inc., a corporation which is the sole general partner of Gustine Sixth Avenue Associates, Ltd., a limited partnership, and who acknowledged that he, being authorized to do so, executed the foregoing instrument as the act and deed of the partnership for the purposes therein contained by signing the name of the partnership acting through its general partner by himself as President of such general partner, and desired that the same might be recorded as such.
WITNESS my hand and seal the day and year aforesaid
/s/ Judith L. White ------------------------------------ Notary Public [affix seal and stamp] |
[NOTARY STAMP]
EXHIBIT A
Legal Description of Fee Estate Land
PARCEL ONE
All that certain lot or piece of ground situate in the Second Ward of the City of Pittsburgh, County of Allegheny and Commonwealth of Pennsylvania, bounded and described as follows:
Beginning at the intersection of the Southeasterly side of Wood Street and the Southwesterly side of Sixth Avenue; thence along the said side of Wood Street, South 30 degrees 57' 40" West, a distance of 36 feet to the property of the First Presbyterian Church; thence by said property the following 2 courses and distances: South 60 degrees 02' 20" East, 60 feet to a point; thence North 30 degrees 57' 40" East, 36 feet to a point on the Southwesterly side of Sixth Avenue; thence by said side of Sixth Avenue, North 60 degrees 02' 20" West, a distance of 60 feet to the corner of Wood Street and Sixth Avenue at the place of beginning.
Being designated as Block 2-A, Lot 85-1 in the Deed Registry Office of Allegheny County, Pennsylvania.
PARCEL TWO
All that certain lot or piece of ground situate in the Second Ward of the City of Pittsburgh, County of Allegheny and Commonwealth of Pennsylvania, bounded and described as follows:
Beginning at the intersection of the Southeasterly side of Wood Street and the Northeasterly side of Oliver Avenue; thence along the said side of Wood Street, North 30 degrees 57' 40" East, a distance of 12 feet to a point on the line of property of the First Presbyterian Church; thence by said property the following 2 courses and distances: South 59 degrees 54' 20" East, 60 feet to a point, thence South 30 degrees 57' 40" West, 12 feet to a point on the Northeasterly side of Oliver Avenue; thence by said side of Oliver Avenue, North 59 degrees 54' 20" West, 60 feet to the corner of Wood Street and Oliver Avenue at the place of beginning.
Being designated as Block 2-A, Lot 85-2 in the Deed Registry Office of Allegheny County, Pennsylvania.
EXHIBIT B
Legal Description of Leasehold Estate Land
PARCEL THREE
All that certain lot or piece of ground situate in the Second Ward of the City of Pittsburgh, Allegheny County, Commonwealth of Pennsylvania, bounded and described as follows:
Beginning at a point on the Southeasterly side of Wood Street at a distance of 36 feet Southwesterly measured along the said side of Wood Street from the most Southerly corner of Sixth Avenue and Wood Street; thence along the said side of Wood Street, South 30 degrees 57' 40" West, 167.39 feet to a point on the line of land of Pittsburgh Business Properties, Inc.; thence by said property the following 2 courses and distances: South 59 degrees 54' 20" East, 60 feet to a point; thence South 30 degrees 57' 40" West, 12 feet to a point on the Northeasterly side of Oliver Avenue; thence by said side of Oliver Avenue, South 59 degrees 54' 20" East, 40 feet to a point; thence North 30 degrees 57' 40" East, 215.62 feet to a point on the Southwesterly side of Sixth Avenue; thence along said side of Sixth Avenue, North 60 degrees 02' 20" West, 40 feet to a point on the line of land of Pittsburgh Business Properties, Inc.; thence by said land the following 2 courses and distances: South 30 degrees 57' 40" West, 36 feet to a point; thence North 60 degrees 02' 20" West, 60 feet to Wood Street, the place of beginning.
PARCEL FOUR
All that certain lot or piece of ground situate in the Second Ward of the City of Pittsburgh, Allegheny County, Commonwealth of Pennsylvania, bounded and described as follows:
Beginning at a point on the Northeasterly side of Oliver Avenue at the line of Parcel Three herein described, said point being distant 100 feet measured along said side of Oliver Avenue from the most Easterly corner of Wood Street and Oliver Avenue; thence along the line of Parcel Three, North 30 degrees 57' 40" East, 190 feet to a point; thence by land of The First Presbyterian Church of Pittsburgh, the following 4 courses and distances: South 59 degrees 54' 20" East, 10.50 feet to a point; thence South 30 degrees 57' 40" West, 22 feet to a point; thence South 59 degrees 54' 20" East, 1.50 feet to a point; thence South 30 degrees 57' 40" West, 168.00 feet to a point on the Northeasterly side of Oliver Avenue; thence by said side of Oliver Avenue, North 59 degrees 54' 20" West, 12 feet to the place of beginning.
EXHIBIT 10.6
PATENT LICENSE AGREEMENT
This PATENT LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Investment Company, an Arizona corporation (hereinafter the "Licensee").
WHEREAS, Licensor is the owner of technology covered by certain Patent Rights (hereinafter defined) related to certain compositions that may be suitable for sale by Licensee.
WHEREAS, Licensee desires to acquire an exclusive right and license from Licensor for restricted exploitation of the Patent Rights within the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")) in order to develop, manufacture, have manufactured, market, offer for sale and sell certain product compositions bearing the "GNC" trademark to consumers (i.e. not franchisees) through Licensee owned retail stores, franchisee owned retail stores, Rite-Aid licensed retail stores or Licensee direct-to-consumer sales channels (i.e. internet).
WHEREAS, Licensor desires to grant such right and license to Licensee and to reserve Licensor's right to exploit the Patent Rights outside the Protected Business.
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "LICENSED PRODUCTS" means any product composition that is sold only within the Protected Business to consumers (i.e. not franchisees) through Licensee owned retail stores, franchisee owned retail stores, Rite-Aid Licensed retail stores or Licensee direct sales channels in a container or with a label that is marked with the "GNC" trademark, which if made, used or sold by Licensee, in the absence of the rights and license granted under this Agreement, would infringe one or more claims of the Patent Rights.
(b) "PATENT RIGHTS" means (i) the patents (the "Patents") and the patent applications (the "Patent Applications") set forth in Exhibit A, attached hereto and incorporated herein, and (ii) any counterpart patents or patent applications that are equivalents of the Patents or Patent Applications issued, granted or filed in any country other than the original filing country (the "Counterpart Patents"), exclusive of any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications not expressly set forth herein.
(c) "TERM" means the term of this Agreement as further defined in Article 7 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and
conditions of this Agreement, a personal, exclusive, royalty-free right and
license, without the right to sublicense, except as expressly provided in
Section 2.2, under the Patent Rights to make, have made, use, offer for sale and
sell Licensed Products solely within the Protected Business.
2.2 The right and license granted to Licensee is personal to
Licensee. Licensee shall not at any time: (a) sublicense such rights, or assign
or transfer such right and license granted herein to any Person, except an
Affiliate of Licensee, without the prior written consent of Licensor; nor (b)
permit any Lien upon such right and license. Notwithstanding the foregoing, this
Agreement shall be assignable as of right with any transfer substantially all of
the assets and the entire business associated therewith by the Licensee or its
Affiliate, provided that: (i) Licensee is in full compliance with all of the
terms and conditions of this Agreement; (ii) the acquiror of such assets and
business agrees in writing to assume all obligations of Licensee or its
Affiliate under this Agreement pursuant to an instrument in form and substance
reasonably satisfactory to Licensor; and (iii) Licensee or its Affiliate gives
Licensor prior written notice of such transfer and the identity of such
acquiror. Any attempted assignment or other transfer in contravention of this
Section 2.2 shall be void and ineffective.
2.3 Licensee shall restrict its practice of the Patent Rights to Licensed Products within the Protected Business only, and covenants not to practice the Patent Rights for any purpose outside the Protected Business.
2.4 Licensor reserves the unrestricted right to practice the Patent Rights outside the Protected Business.
2.5 Licensee covenants that the Licensed Products will not copy any product formulation sold by Licensor or any Affiliate thereof, in any possible form or formulation, currently or in the future. The foregoing limitation shall not apply (a) if Licensee can show by written records prior to the date of first sale of Licensor's product formulation that such product formulation was introduced by Licensee prior to Licensor, and (b) to the products currently sold by Licensee, as set forth in Exhibit B.
3. MARKING
3.1 Licensee agrees to lawfully mark all Licensed Products (or their containers or labels) with a proper patent marking based on the Patent Rights pursuant to the U.S. Code Title 35 or any other international marking requirements.
4. PROSECUTION AND MAINTENANCE
4.1 Licensor may, as it determines in its sole discretion: (a) prosecute any and all U.S. and foreign patent applications included in or related to the Patent Rights (the "Prosecution"); and (b) pay maintenance or annuity fees of any and all U.S. and foreign patents which result from the Patent Rights (the "Maintenance"). Upon Licensee's written request, Licensor will furnish copies of specifically requested Patent Rights-related documents to Licensee.
4.2 In the event Licensor decides not to pursue Prosecution or Maintenance of any of the Patent Rights, Licensor shall provide reasonable notice to Licensee thereof. If Licensee desires, at its sole cost, expense and discretion, to assume and continue the obligations of Prosecution or Maintenance of such Patent Rights, upon request by Licensee, Licensor shall execute and deliver such documents and perform such acts as may be reasonably necessary to effect assignment of all right, title and interest in and to such Patent Rights to Licensee, subject to any outstanding rights or licenses granted prior to such assignment, without further consideration from Licensee.
4.3 In the event that letters patent are issued or granted based on any patent application so assigned in accordance with Section 4.2, Licensee shall restrict its practice of such letters patent to making, having made, using, offering for sale and selling products covered by the claims of such letters patent within the Protected Business and hereby grants to Licensor an exclusive, royalty-free right and license, with the right to sublicense, under such letters patent to make, have made, use, offer for sale and sell any products covered by the claims of such letters patent outside the Protected Business and, except where the context otherwise requires, on such other terms as the Patent Rights provided in this Agreement as if such Patent Rights included such letters patent, Licensor as the Licensee hereunder with respect
to such letters patent and Licensee as the Licensor hereunder with respect to such letters patent.
5. INFRINGEMENT BY THIRD PARTIES
5.1 Each party shall promptly give notice to the other of any actual or potential infringement of any Patent Right by any third party that becomes known to such first-mentioned party. Licensor shall have the first right to take such action it determines, in its sole discretion, to be necessary to terminate or prevent any actual or potential infringement of such Patent Right. If Licensor has not taken any action (including an informed decision to take no action) within one hundred twenty (120) days from such first-mentioned party's notice, Licensee may submit to Licensor a notice that Licensee will take such action as Licensee reasonably determines is necessary to terminate or prevent the infringement, including filing suit to the extent provided by any applicable law, rule or regulation, unless Licensor notifies Licensee that Licensor will file suit or otherwise terminate such infringement within thirty (30) days after Licensor's receipt of such notice from Licensee.
5.2 In the event Licensor files suit to stop infringement, Licensor may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion. In the event Licensee elects to join Licensor in any such suit or action, Licensee shall pay it's own attorneys' fees and costs of its participation in such suit or action. Regardless if Licensee joins or does not join Licensor in any such suit or action, upon request by Licensor, Licensee shall cooperate with Licensor in such suit or action. In the event Licensor requests Licensee to join Licensor in participation in such suit or action, Licensee shall have the right to consult with Licensor and be represented by counsel at Licensor's sole expense. Any recovery of damages from any suit or action brought by Licensor, where Licensee has joined Licensor, shall be shared equally by the parties, after recovery by Licensor of its costs and expenses in connection therewith, including attorney's fees.
5.3 In the event Licensee solely files suit to stop infringement, Licensee may enter into any settlement, consent judgment or other voluntary final disposition of such suit subject to Licensor's approval. Any recovery of damages from any suit or action brought solely by Licensee shall be retained by Licensee.
6. COSTS; EXPENSES AND TAXES
6.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
6.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any
jurisdiction arising from the performance of its obligations under this Agreement.
7. TERM AND TERMINATION
7.1 The Term of this Agreement shall run from the Effective Date of this Agreement and shall terminate automatically upon the expiration or extinguishment of all of the Patent Rights set forth in Exhibit A and all letters patent that may be issued as contemplated by Section 4.3, subject to early termination, as set forth herein below:
(a) Either party shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within sixty (60) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon sixty (60) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer its interest in whole or in part, in this Agreement voluntarily or by operation of law to any other third party except as otherwise permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business, or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
7.2 The following provisions of this Agreement shall survive termination: Sections 7.3, 7.4 and 7.5, and Articles 6, 8, 9 and 10.
7.3 Neither party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the effective date of such termination.
7.4 Upon termination of this Agreement for any reason, and for one
(1) year following the effective date of termination, Licensee may continue to
sell any inventory of Licensed Products in its possession or control which was
manufactured, for which Licensee had issued binding commitments to manufacture
or for which Licensee had purchased or ordered raw materials to manufacture (all
in the ordinary course of business) prior to the effective date of termination.
7.5 Except as specified in Section 7.4, from and after any termination of this Agreement, Licensee shall not make or have made, use or have used or sell or have sold any Licensed Products under any of the Patent Rights.
7.6 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
8. LIMITATIONS OF WARRANTIES
8.1 PATENT RIGHTS ARE PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 Licensee shall indemnify, defend and hold harmless Licensor and its Affiliates against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, but not limited to, Licensee making, having made, using, offering for sale or selling the Licensed Products based upon the Patent Rights in whatever form, provided that Licensor promptly notifies Licensee in writing of any claim or action, Licensee has sole control of the defense and all related settlement negotiations, Licensor will reasonably cooperate, at Licensee's expense, in the defense of such claim or action and Licensor may fully participate to protect its own interests, at Licensee's expense, if Licensor determines that such participation is necessary.
10. LIMITATION OF LIABILITY
10.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee making, having made, using, offering for sale or selling of the Licensed Products based upon the Patent Rights.
11. GENERAL PROVISIONS
11.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
11.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee: N.V. Nutricia General Nutrition Investment Company Bosrandweg 20 300 Sixth Street 6704 PH Wageningen Pittsburgh, Pennsylvania 15222 Netherlands Fax No._____________________________ Fax No.________________________ Attn: ______________________________ Attn: _________________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
11.3 Licensee shall not use the name of the Licensor or any of its Affiliates in any advertising, marketing or sales without the prior written consent of Licensor, except that Licensee may state that the Licensed Products are licensed under the Patent Rights, Licensee may mark the Licensed Products pursuant to Section 3 of this Agreement and Licensee may use Licensor's name in various documents used by Licensee for capital raising and financing without such prior written consent only to the extent such use is required by any U.S. federal law or regulation. However, by entering into this Agreement, Licensor does not directly or indirectly endorse any Licensed
Products and Licensee shall not state or imply that this Agreement is an endorsement by Licensor.
11.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
11.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 11.2 hereof and actually received by the addressee.
11.6 If any provision in this Agreement may be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
11.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Patent Rights and/or Licensed Products.
11.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibits A and B, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
11.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
11.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
N.V. Nutricia General Nutrition Corporation
By: /s/ Bert Moulet By: /s/ James M. Sander
-------------------------- -----------------------------------
Printed Name: Bert Moulet Printed Name: James M. Sander
Title: EVP Title: VP
|
EXHIBIT A
APPLICATION PUBLICATION ISSUE
TITLE NUMBER DATE FILED NUMBER DATE COUNTRY
----------------------------------- --------------- ---------- ------------ ---------- -------------
Nutritional Preparation Comprising US 10/178,736 06/25/2002 US 6,548,483 04/15/2003 United States
Ribose and Medical Use Thereof
US 09/566,381 05/08/2000 US 6,420,342 07/16/2002 United States
AU 20010056856D AU 5685601 Australia
CN 20010809177T CN 1429113T China
EP 20010930315 EP 1282426 Europe
Pharmaceutical Composition for US 09/500,802 02/10/2000 US 6,521,591 02/18/2003 United States
Muscular Anabolism
AU 20010037809D AU 3780901 Australia
CA 20012398990 CA 2398990 Canada
EP 20010910231 EP 1253830 Europe
Rehydration Composition US 09/770,773 01/26/2001 US United States
2002/0176881
AU 2002230270 Australia
CA 20022436764 CA 2436764 Canada
EP 20020711526 EP 1353726 Europe
Method and Preparation for the US 09/899,922 07/09/2001 US United States
Preventing and/or Treating Vascular 2002/0040058
Disorders and Secondary
Disorders Associated Therewith
AU 20010055 114D AU 55 11401 Australia
CA 20012408032 CA 2408032 Canada
CN20010812461T CN 1440240T China
EP 20010205113 EP 1275399 Europe
EP 20010928256 EP 1282365 Europe
Nutritional or Pharmaceutical PCT/NL03/00448 06/19/2003 PCT
Compositions for Increasing the
Creatine Response of Organisms
|
Method and Composition for Treating PCT/NL03/00449 06/19/2003 PCT and Preventing Catabolism or Stimulating Anabolism in a Mammal Undergoing Metabolic Stress |
EXHIBIT B
Current Licensee Products
NO. PRODUCT --- ---------------- 1 Distance 2 Energel 3 Fuel Powder 4 MegaMRP 5 Whey iso burst 6 During 7 During RTD 8 Hydration Powder 9 Creatine Burst 10 Precreatine 11 Pro Protein 12 Cognita 13 MemorAll |
EXHIBIT 10.7
PATENT LICENSE AGREEMENT
This PATENT LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Investment Company, an Arizona corporation (hereinafter the "Licensee").
WHEREAS, Licensor is the owner of technology covered by certain Patent Rights (hereinafter defined) related to certain product compositions that may be suitable for sale by Licensee.
WHEREAS, Licensee desires to acquire a non-exclusive right and license from Licensor for restricted exploitation of the Patent Rights within the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")) in order to develop, manufacture, have manufactured, market, offer for sale and sell certain product compositions bearing the "GNC" trademark to consumers (i.e. not franchisees) through Licensee owned retail stores, franchisee owned retail stores Rite-Aid licensed retail stores or Licensee direct-to-consumer sales channels (i.e. internet).
WHEREAS, Licensor desires to grant such right and license to Licensee.
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "LICENSED PRODUCTS" means any product composition that is sold only within the Protected Business to consumers (i.e. not franchisees) through Licensee owned retail stores, franchisee owned retail stores, Rite-Aid Licensed retail stores or Licensee direct sales channels in a container or with a label that is marked with the "GNC" trademark, which if made, used or sold by Licensee, in the absence of the rights and license granted under this Agreement, would infringe one or more claims of the Patent Rights.
(b) "PATENT RIGHTS" means (i) the patent (the "Patent") and the patent application (the "Patent Application") set forth in Exhibit A, attached hereto and incorporated herein, and (ii) any counterpart patents or patent applications that are equivalents of the Patent or Patent Application issued, granted or filed in any country other than the original filing country (the "Counterpart Patents"), including without limitation any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications not expressly set forth herein as of the Effective Date; but exclusive of any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications that are filed in Licensor's sole discretion after the Effective Date.
(c) "TERM" means the term of this Agreement as further defined in Article 7 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and
conditions of this Agreement, a personal, non-exclusive, royalty-free right and
license, without the right to sublicense, except as expressly provided in
Section 2.2, under the Patent Rights to make, have made, use, offer for sale and
sell Licensed Products solely within the Protected Business.
2.2 The right and license granted to Licensee is personal to
Licensee. Licensee shall not at any time: (a) sublicense such rights, or assign
or transfer such right and license granted herein to any Person, except an
Affiliate of Licensee, without the prior written consent of Licensor; nor (b)
permit any Lien upon such right and license. Notwithstanding the foregoing, this
Agreement shall be assignable as of right with any transfer of substantially all
of the assets and the entire business associated therewith by the Licensee or
its Affiliate, provided that: (i) Licensee is in full compliance with all of the
terms and conditions of this Agreement; (ii) the acquiror of such assets and
business agrees in writing to assume all obligations of Licensee or its
Affiliate under this Agreement pursuant to an instrument in form and substance
reasonably satisfactory to Licensor; and (iii) Licensee or its Affiliate gives
Licensor prior written notice of such transfer and the identity of such
acquiror. Any attempted assignment or other transfer in contravention of this
Section 2.2 shall be void and ineffective.
2.3 Licensee shall restrict its practice of the Patent Rights to Licensed Products within the Protected Business only, and covenants not to practice the Patent Rights for any purpose outside the Protected Business.
2.4 Licensee covenants that the Licensed Products will not copy any product formulation sold by Licensor or any Affiliate thereof, in any possible form or formulation, currently or in the future. The foregoing limitation shall not apply (a) if Licensee can show by written records prior to the date of first sale of Licensor's product formulation that such product formulation was introduced by Licensee prior to Licensor, and (b) to the products currently sold by Licensee, as set forth in Exhibit B.
2.5 Notwithstanding anything to the contrary in this Agreement, Licensee agrees to accept the right and license granted in this Article 2 subject to any licenses or other rights of third parties under agreements executed by Licensor prior or subsequent to the date of this Agreement.
3. MARKING
3.1 Licensee agrees to lawfully mark all Licensed Products (or their containers or labels) with a proper patent marking based on the Patent Rights pursuant to the U.S. Code Title 35 or any other international marking requirements.
4. PROSECUTION AND MAINTENANCE
4.1 Licensor may, as it determines in its sole discretion: (a) prosecute any and all U.S. and foreign patent applications included in or related to the Patent Rights (the "Prosecution"); and (b) pay maintenance or annuity fees of any and all U.S. and foreign patents which result from the Patent Rights (the "Maintenance"). Upon Licensee's written request, Licensor will furnish copies of specifically requested Patent Rights-related documents to Licensee.
4.2 In the event Licensor decides not to pursue Prosecution or Maintenance of any of the Patent Rights, Licensor shall provide reasonable notice to Licensee thereof. If Licensee desires, at its sole cost, expense and discretion, to assume and continue the obligations of Prosecution or Maintenance of such Patent Rights, upon request by Licensee, Licensor shall execute and deliver such documents and perform such acts as may be reasonably necessary to effect assignment of all right, title and interest in and to such Patent Rights to Licensee, subject to any outstanding rights or licenses granted prior to such assignment, without further consideration from Licensee.
4.3 In the event that letters patent are issued or granted based on any patent application so assigned in accordance with Section 4.2, Licensee shall restrict its practice of such letters patent to making, having made, using, offering for sale and selling products covered by the claims of such letters patent within the Protected Business and hereby grants to Licensor an exclusive, royalty-free right and license, with the right to sublicense, under such letters patent to make, have made, use, offer for sale and sell any products covered by the claims of such letters patent outside the Protected
Business and, except where the context otherwise requires, on such other terms as the Patent Rights provided in this Agreement as if such Patent Rights included such letters patent, Licensor as the Licensee hereunder with respect to such letters patent and Licensee as the Licensor hereunder with respect to such letters patent.
5. INFRINGEMENT BY THIRD PARTIES
5.1 Each party shall promptly give notice to the other of any actual or potential infringement of any Patent Right by any third party that becomes known to such first-mentioned party. Licensor shall have the first right to take such action it determines, in its sole discretion, to be necessary to terminate or prevent any actual or potential infringement of such Patent Right. If Licensor has not taken any action (including an informed decision to take no action) within one hundred twenty (120) days from such first-mentioned party's notice, Licensee may submit to Licensor a notice that Licensee will take such action as Licensee reasonably determines is necessary to terminate or prevent the infringement, including filing suit to the extent provided by any applicable law, rule or regulation, unless Licensor notifies Licensee that Licensor will file suit or otherwise terminate such infringement within thirty (30) days after Licensor's receipt of such notice from Licensee.
5.2 In the event Licensor files suit to stop infringement, Licensor may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion. In the event Licensee elects to join Licensor in any such suit or action, Licensee shall pay it's own attorneys' fees and costs of its participation in such suit or action. Regardless if Licensee joins or does not join Licensor in any such suit or action, upon request by Licensor, Licensee shall cooperate with Licensor in such suit or action. In the event Licensor requests Licensee to join Licensor in participation in such suit or action, Licensee shall have the right to consult with Licensor and be represented by counsel at Licensor's sole expense. Any recovery of damages from any suit or action brought by Licensor, where Licensee has joined Licensor, shall be shared equally by the parties, after recovery by Licensor of its costs and expenses in connection therewith, including attorney's fees.
5.3 In the event Licensee solely files suit to stop infringement, Licensee may enter into any settlement, consent judgment or other voluntary final disposition of such subject to Licensor's approval. Any recovery of damages from any suit or action brought solely by Licensee shall be retained by Licensee.
6. COSTS; EXPENSES AND TAXES
6.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
6.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
7. TERM AND TERMINATION
7.1 The Term of this Agreement shall run from the Effective Date of this Agreement and shall terminate automatically upon the expiration or extinguishment of all of the Patent Rights set forth in Exhibit A and all letters patent that may be issued as contemplated by Section 4.3, subject to early termination, as set forth herein below:
(a) Either parry shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within sixty (60) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon sixty (60) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer its interest in whole or in part, in this Agreement voluntarily or by operation of law to any other third party except as otherwise permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business, or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated
or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
7.2 The following provisions of this Agreement shall survive termination: Sections 7.3, 7.4 and 7.5, and Articles 6, 8, 9 and 10.
7.3 Neither party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the effective date of such termination.
7.4 Upon termination of this Agreement for any reason, and for one
(1) year following the effective date of termination, Licensee may continue to
sell any inventory of Licensed Products in its possession or control which was
manufactured, for which Licensee had issued binding commitments to manufacture
or for which Licensee had purchased or ordered raw materials to manufacture (all
in the ordinary course of business) prior to the effective date of termination.
7.5 Except as specified in Section 7.4, from and after any termination of this Agreement, Licensee shall not make or have made, use or have used or sell or have sold any Licensed Products under any of the Patent Rights.
7.6 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
8. LIMITATIONS OF WARRANTIES
8.1 PATENT RIGHTS ARE PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 Licensee shall indemnify, defend and hold harmless Licensor and its Affiliates against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, but not limited to, Licensee making, having made, using, offering for sale or selling the Licensed Products based upon the Patent Rights in whatever form, provided that Licensor promptly notifies Licensee in writing of any claim or action, Licensee has sole control of the defense and all related settlement negotiations, Licensor will reasonably cooperate, at Licensee's expense, in the defense of such claim or action and
Licensor may fully participate to protect its own interests, at Licensee's expense, if Licensor determines that such participation is necessary.
10. LIMITATION OF LIABILITY
10.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee making, having made, using, offering for sale or selling of the Licensed Products based upon the Patent Rights.
11. GENERAL PROVISIONS
11.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
11.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee: N.V. Nutricia General Nutrition Investment Company Bosrandweg 20 300 Sixth Street 6704 PH Wageningen Pittsburgh, Pennsylvania 15222 Netherlands Fax No.____________________________ Fax No._______________________ Attn: _____________________________ Attn: ________________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
11.3 Licensee shall not use the name of the Licensor or any of its Affiliates in any advertising, marketing or sales without the prior written consent of Licensor, except that Licensee may state that the Licensed Products are licensed under the Patent Rights, Licensee may mark the Licensed Products pursuant to Section 3 of this Agreement and Licensee may use Licensor's name in various documents used by Licensee for capital raising and financing without such prior written consent only to the extent such use is required by any U.S. federal law or regulation. However, by entering into this
Agreement, Licensor does not directly or indirectly endorse any Licensed Products and Licensee shall not state or imply that this Agreement is an endorsement by Licensor.
11.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
11.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniences in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 11.2 hereof and actually received by the addressee.
11.6 If any provision in this Agreement may be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
11.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Patent Rights and/or Licensed Products.
11.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibits A and B, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
11.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
11.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
N.V. Nutricia General Nutrition Investment Company
By: /s/ Bert Moulet By: /s/ James M. Sander
----------------------- -----------------------------------
Printed Name: Bert Moulet Printed Name: James M. Sander
Title: EVP Title: SVP
|
EXHIBIT A
APPLICATION ISSUE
TITLE NUMBER DATE FILED PUBLICATION NUMBER DATE COUNTRY
----------------------- --------------- ---------- ------------------ ---------- --------------
Nutritional Composition US 08/691,023 08/05/1996 US 5,792,754 08/11/1998 United States
Containing Fibres
AU 19960060871 AU 702989 Australia
EP 19950202142 EP 0756828 Europe
DE 19956006095 DE 69506095T Germany
ES ES 2123903T Spain
19950202142T
Composition Containing US 09/769,245 01/26/2001 US 2002/150627 United States
Creatine and Phosphorus
AU 2002228484 Australia
CA 20022434 104 CA 2434104 Canada
EP 20020710564 EP 1353568 Europe
|
EXHIBIT B
Current Licensee Products
NO. PRODUCT NAME --- ------------------ 1 Total Lean Oat MRP 2 Multitech 3 Femfiber 4 Mega Creatine 5 Creatine clear |
EXHIBIT 10.8
PATENT LICENSE AGREEMENT
This PATENT LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Investment Company, an Arizona corporation (hereinafter the "Licensee").
WHEREAS, Licensor is the owner of technology covered by certain Patent Rights (hereinafter defined) related to certain compositions that may be suitable for sale by Licensee.
WHEREAS, Licensee desires to acquire a non-exclusive right and license from Licensor for restricted exploitation of the Patent Rights within the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")) in order to develop, manufacture, have manufactured, market, offer for sale and sell certain product compositions.
WHEREAS, Licensor desires to grant such right and license to Licensee.
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "LICENSED PRODUCTS" means a product composition that is sold only within the Protected Business, which if made, used or sold by Licensee, in the absence of the rights and license granted under this Agreement, would infringe one or more claims of the Patent Rights.
(b) "PATENT RIGHTS" means (i) the patent applications (the "Patent Applications") set forth in Exhibit A, attached hereto and incorporated herein, and (ii) any counterpart patents or patent applications that are equivalents of the Patent Applications issued, granted or filed in any country other than the original filing country (the "Counterpart Patents"), exclusive of any continuation, continuation-in-part, divisional, reexamination, reissue or any other patent right of the Patent Applications not expressly set forth herein.
(c) "TERM" means the term of this Agreement as further defined in Article 7 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and
conditions of this Agreement, a personal, non-exclusive, royalty-free right and
license, without the right to sublicense, except as expressly provided in
Section 2.2, under the Patent Rights to make, have made, use, offer for sale and
sell Licensed Products solely within the Protected Business.
2.2 The right and license granted to Licensee is personal to
Licensee. Licensee shall not at any time: (a) sublicense such rights, or assign
or transfer such right and license granted herein to any Person, except an
Affiliate of Licensee, without the prior written consent of Licensor; nor (b)
permit any Lien upon such right and license. Notwithstanding the foregoing, this
Agreement shall be assignable as of right with any transfer of substantially all
of the assets and the entire business associated therewith by the Licensee or
its Affiliate, provided that: (i) Licensee is in full compliance with all of the
terms and conditions of this Agreement; (ii) the acquiror of such assets and
business agrees in writing to assume all obligations of Licensee or its
Affiliate under this Agreement pursuant to an instrument in form and substance
reasonably satisfactory to Licensor; and (iii) Licensee or its Affiliate gives
Licensor prior written notice of such transfer and the identity of such
acquirer. Any attempted assignment or other transfer in contravention of this
Section 2.2 shall be void and ineffective.
2.3 Licensee shall restrict its practice of the Patent Rights to Licensed Products within the Protected Business only, and covenants not to practice the Patent Rights for any purpose outside the Protected Business.
2.4 Notwithstanding anything to the contrary in this Agreement, Licensee agrees to accept the right and license granted in this Article 2 subject to any outstanding licenses or other rights of third parties under agreements executed by Licensor prior or subsequent to the date of this Agreement.
3. MARKING
3.1 Licensee agrees to lawfully mark all Licensed Products (or their containers or labels) with a proper patent marking based on the Patent Rights pursuant to the U.S. Code Title 35 or any other international marking requirements.
4. PROSECUTION AND MAINTENANCE
4.1 Licensor may, as it determines in its sole discretion: (a) prosecute any and all U.S. and foreign patent applications included in or related to the Patent Rights (the "Prosecution"); and (b) pay maintenance or annuity fees of any and all U.S. and foreign patents which result from the Patent Rights (the "Maintenance"). Upon Licensee's written request, Licensor will furnish copies of specifically requested Patent Rights-related documents to Licensee.
4.2 In the event Licensor decides not to pursue Prosecution or Maintenance of any of the Patent Rights, Licensor shall provide reasonable notice to Licensee thereof. If Licensee desires, at its sole cost, expense and discretion, to assume and continue the obligations of Prosecution or Maintenance of such Patent Rights, upon request by Licensee, Licensor shall execute and deliver such documents and perform such acts as may be reasonably necessary to effect assignment of all right, title and interest in and to such Patent Rights to Licensee, subject to any outstanding rights or licenses granted prior to such assignment, without further consideration from Licensee.
4.3 In the event that letters patent are issued or granted based on any patent application so assigned in accordance with Section 4.2, Licensee shall restrict its practice of such letters patent to making, having made, using, offering for sale and selling products covered by the claims of such letters patent within the Protected Business and hereby grants to Licensor an exclusive, royalty-free right and license, with the right to sublicense, under such letters patent to make, have made, use, offer for sale and sell any products covered by the claims of such letters patent outside the Protected Business and, except where the context otherwise requires, on such other terms as the Patent Rights provided in this Agreement as if such Patent Rights included such letters patent, Licensor as the Licensee hereunder with respect to such letters patent and Licensee as the Licensor hereunder with respect to such letters patent.
5. INFRINGEMENT BY THIRD PARTIES
5.1 Each party shall promptly give notice to the other of any actual or potential infringement of any Patent Right by any third party that becomes known to such first-mentioned party. Licensor shall have the first right to take such action it determines, in its sole discretion, to be necessary to terminate or prevent any actual or potential infringement of such Patent Right. If Licensor has not taken any action (including an informed decision to take no action) within one hundred twenty (120) days from such first-mentioned party's notice, Licensee may submit to Licensor a notice that Licensee will take such action as Licensee reasonably determines is necessary to terminate or prevent the infringement, including filing suit to the extent provided by any applicable law, rule or regulation, unless Licensor notifies Licensee that Licensor will file suit
or otherwise terminate such infringement within thirty (30) days after Licensor's receipt of such notice from Licensee.
5.2 In the event Licensor files suit to stop infringement, Licensor may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion. In the event Licensee elects to join Licensor in any such suit or action, Licensee shall pay it's own attorneys' fees and costs of its participation in such suit or action. Regardless if Licensee joins or does not join Licensor in any such suit or action, upon request by Licensor, Licensee shall cooperate with Licensor in such suit or action. In the event Licensor requests Licensee to join Licensor in participation in such suit or action, Licensee shall have the right to consult with Licensor and be represented by counsel at Licensor's sole expense. Any recovery of damages from any suit or action brought by Licensor, where Licensee has joined Licensor, shall be shared equally by the parties, after recovery by Licensor of its costs and expenses in connection therewith, including attorney's fees.
5.3 In the event Licensee solely files suit to stop infringement, Licensee may enter into any settlement, consent judgment or other voluntary final disposition of such suit subject to Licensor's approval. Any recovery of damages from any suit or action brought solely by Licensee shall be retained by Licensee.
6. COSTS; EXPENSES AND TAXES
6.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
6.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
7. TERM AND TERMINATION
7.1 The Term of this Agreement shall run from the Effective Date of this Agreement and shall terminate automatically upon the expiration or extinguishment of all of the Patent Rights set forth in Exhibit A and all letters patent that may be issued as contemplated by Section 4.3, subject to early termination, as set forth herein below:
(a) Either party shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within sixty (60) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon sixty (60) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer its interest in whole or in part, in this Agreement voluntarily or by operation of law to any other third party except as otherwise permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business, or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
7.2 The following provisions of this Agreement shall survive termination: Sections 7.3, 7.4 and 7.5, and Articles 6, 8, 9 and 10.
7.3 Neither party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the effective date of such termination.
7.4 Upon termination of this Agreement for any reason, and for one
(1) year following the effective date of termination, Licensee may continue to
sell any inventory of Licensed Products in its possession or control which was
manufactured, for which Licensee had issued binding commitments to manufacture
or for which Licensee had purchased or ordered raw materials to manufacture (all
in the ordinary course of business) prior to the effective date of termination.
7.5 Except as specified in Section 7.4, from and after any termination of this Agreement, Licensee shall not make or have made, use or have used or sell or have sold any Licensed Products under any of the Patent Rights.
7.6 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
8. LIMITATIONS OF WARRANTIES
8.1 PATENT RIGHTS ARE PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 Licensee shall indemnify, defend and hold harmless Licensor and its Affiliates against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, but not limited to, Licensee making, having made, using, offering for sale or selling the Licensed Products based upon the Patent Rights in whatever form, provided that Licensor promptly notifies Licensee in writing of any claim or action, Licensee has sole control of the defense and all related settlement negotiations, Licensor will reasonably cooperate, at Licensee's expense, in the defense of such claim or action and Licensor may fully participate to protect its own interests, at Licensee's expense, if Licensor determines that such participation is necessary.
10. LIMITATION OF LIABILITY
10.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee making, having made, using, offering for sale or selling of the Licensed Products based upon the Patent Rights.
11. GENERAL PROVISIONS
11.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
11.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee: N.V. Nutricia General Nutrition Investment Company Bosrandweg 20 300 Sixth Street 6704 PH Wageningen Pittsburgh, Pennsylvania 15222 Netherlands Fax No.________________________ Fax No.________________ Attn: _________________________ Attn: _________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
11.3 Licensee shall not use the name of the Licensor or any of its Affiliates in any advertising, marketing or sales without the prior written consent of Licensor, except that Licensee may state that the Licensed Products are licensed under the Patent Rights, Licensee may mark the Licensed Products pursuant to Section 3 of this Agreement and Licensee may use Licensor's name in various documents used by Licensee for capital raising and financing without such prior written consent only to the extent such use is required by any U.S. federal law or regulation. However, by entering into this Agreement, Licensor does not directly or indirectly endorse any Licensed Products and Licensee shall not state or imply that this Agreement is an endorsement by Licensor.
11.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
11.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in
any manner permitted in Section 11.2 hereof and actually received by the addressee.
11.6 If any provision in this Agreement may be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
11.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Patent Rights and/or Licensed Products.
11.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
11.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
11.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
N.V. Nutricia General Nutrition Corporation
By: /s/ Bert Moulet BY: /s/ James Sander
--------------------------- -----------------------------
Printed Name: Bert Moulet Printed Name: James Sander
Title: EVP Title: VP
|
EXHIBIT A
APPLICATION PUBLICATION ISSUE
TITLE NUMBER DATE FILED NUMBER DATE COUNTRY
--------------------------------- ---------------- ---------- ------------- ------ ---------
Soft Drink Replacer US 10/279,968 10/25/2002 US United
2003/0134027 States
PCT/NL02/00857 12/20/2002 WO 03/053 169 PCT
Preparation for the Prevention PCT/NL02/00186 03/22/2002 WO 02/076241 PCT
and/or Treatment of Altered Bone
Metabolism
|
EXHIBIT 10.9
PATENT LICENSE AGREEMENT
This PATENT LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between General Nutrition Corporation, an Arizona corporation (hereinafter the "Licensor"), and N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensee").
WHEREAS, Licensor is the owner of technology covered by certain Patent Rights (as hereinafter defined) as a result of an Assignment, as of the date hereof, of such Patent Rights from Licensee to Licensor (the "Assignment").
WHEREAS, as a condition to said Assignment, Licensor agreed to grant an exclusive right and license to Licensee for unrestricted exploitation of the Patent Rights outside the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")) in order to continue to develop, manufacture, have manufactured, market, offer for sale and sell certain product compositions and to sublicense existing third party licensees.
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "LICENSED PRODUCTS" means (i) any product composition
outside the Protected Business, which if made, used or sold by
Licensee, in the absence of the rights and license granted under this
Agreement, would infringe one or more claims of the Patent Rights, or
(ii) any method, process, procedure or technique within or outside the
Protected Business, which if used or provided by Licensee, in the
absence of the rights and license granted under this Agreement, would
infringe one or more claims of the Patent Rights.
(b) "PATENT RIGHTS" means (i) the patents (the "Patents") and the patent applications (the "Patent Applications") set forth in Exhibit A, attached hereto and incorporated herein, and (ii) any counterpart patents or patent applications that are equivalents of the Patents or Patent Applications issued, granted or filed in any country other than the
original filing country (the "Counterpart Patents"), including without limitation any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications not expressly set forth herein as of the Effective Date; but exclusive of any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications that are filed in Licensor's sole discretion after the Effective Date.
1.2 "TERM" means the term of this Agreement as further defined in Article 7 below.
1.3 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, an exclusive, worldwide, royalty-free right and license, without the right to sublicense (except to Affiliates of Licensee and as provided in Section 2.2), under the Patent Rights to make, have made, use, offer for sale and sell Licensed Products outside the Protected Business.
2.2 Prior to the Assignment, Licensee granted to certain third parties the right and license to practice certain of the Patent Rights. Licensee shall have the right and license to continue to sublicense such third parties in accordance with the terms of any prior agreement between Licensee and such third party.
2.3 Licensor shall restrict its practice of the Patent Rights to the Protected Business only, and covenants not to practice the Patent Rights for any purpose outside the Protected Business.
3. MARKING
3.1 Licensee agrees to lawfully mark all Licensed Products (or their containers or labels) with a proper patent marking based on the Patent Rights pursuant to the U.S. Code Title 35 or any other international marking requirements.
4. PROSECUTION AND MAINTENANCE
4.1 Licensor may, as it determines in its sole discretion: (a) prosecute any and all U.S. and foreign patent applications included in or related to the Patent Rights (the "Prosecution"); and (b) pay maintenance or annuity fees of any and all U.S. and foreign patents which result from the Patent Rights (the
"Maintenance"). Upon Licensee's written request, Licensor will furnish copies of specifically requested Patent Rights-related documents to Licensee.
4.2 In the event Licensor decides not to pursue Prosecution or Maintenance of any of the Patent Rights, Licensor shall provide reasonable notice to Licensee thereof. If Licensee desires, at its sole cost, expense and discretion, to assume and continue the obligations of Prosecution or Maintenance of such Patent Rights to Licensee, upon request by Licensee, Licensor shall execute and deliver such documents and perform such acts as may be reasonably necessary to effect assignment of all right, title and interest in and to such Patent Rights, subject to any outstanding rights or licenses granted prior to such assignment, without further consideration from Licensee.
4.3 In the event that letters patent are issued or granted based on any patent application so assigned in accordance with Section 4.2, Licensee shall restrict its practice of such letters patent to making, having made, using, offering for sale and selling products covered by the claims of such letters patent outside the Protected Business and hereby grants to Licensor an exclusive, royalty-free right and license, with the right to sublicense, under such letters patent to make, have made, use, offer for sale and sell any products covered by the claims of such letters patent within the Protected Business and, except where the context otherwise requires, on such other terms as the Patent Rights provided in this Agreement as if such Patent Rights included such letters patent, Licensor as the Licensee hereunder with respect to such letters patent and Licensee as the Licensor hereunder with respect to such letters patent.
5. INFRINGEMENT BY THIRD PARTIES
5.1 Each party shall promptly give notice to the other of any actual or potential infringement of any Patent Right by any third party that becomes known to such first-mentioned party. Licensor shall have the first right to take such action it determines, in its sole discretion, to be necessary to terminate or prevent any actual or potential infringement of such Patent Right. If Licensor has not taken any action (including an informed decision to take no action) within one hundred twenty (120) days from such first-mentioned party's notice, Licensee may submit to Licensor a notice that Licensee will take such action as Licensee reasonably determines is necessary to terminate or prevent the infringement, including filing suit to the extent provided by any applicable law, rule or regulation, unless Licensor notifies Licensee that Licensor will file suit or otherwise terminate such infringement within thirty (30) days after Licensor's receipt of such notice from Licensee.
5.2 In the event Licensor files suit to stop infringement. Licensor may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion. In the event Licensee elects to
join Licensor in any such suit or action, Licensee shall pay it's own attorneys' fees and costs of its participation in such suit or action. Regardless if Licensee joins or does not join Licensor in any such suit or action, upon request by Licensor, Licensee shall cooperate with Licensor in such suit or action. In the event Licensor requests Licensee to join Licensor in participation in such suit or action, Licensee shall have the right to consult with Licensor and be represented by counsel at Licensor's sole expense. Any recovery of damages from any suit or action brought by Licensor, where Licensee has joined Licensor, shall be shared equally by the parties.
5.3 In the event Licensee solely files suit to stop infringement, Licensee may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion, so long as the same does not adversely affect Licensor's rights or interest in the Patent Rights. Any recovery of damages from any suit or action brought solely by Licensee shall be retained by Licensee.
6. COSTS; EXPENSES AND TAXES
6.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
6.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
7. TERM AND TERMINATION
7.1 The Term of this Agreement shall run from the Effective Date of this Agreement and shall terminate automatically upon the expiration or extinguishment of all of the Patent Rights set forth in Exhibit A and all letters patent that may be issued as contemplated by Section 4.3, subject to early termination, as set forth herein below:
(a) Either party shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within sixty (60) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon sixty (60) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer its interest in whole or in part, in this Agreement voluntarily or by operation of law to any other third party except as otherwise permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business, or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
7.2 The following provisions of this Agreement shall survive termination: Sections 7.3, 7.4 and 7.5, and Articles 6, 8, 9 and 10.
7.3 Neither party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the effective date of such termination.
7.4 Upon termination of this Agreement for any reason, and for one
(1) year following the effective date of termination, Licensee may continue to
sell any inventory of Licensed Products in its possession or control which was
manufactured, for which Licensee had issued binding commitments to manufacture
or for which Licensee had purchased or ordered raw materials to manufacture (all
in the ordinary course of business) prior to the effective date of termination.
7.5 Except as specified in Section 7.4, from and after any termination of this Agreement, Licensee shall not make or have made, use or have used or sell or have sold any Licensed Products under any of the Patent Rights.
7.6 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
8. LIMITATIONS OF WARRANTIES
8.1 PATENT RIGHTS ARE PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 Licensee shall indemnify Licensor and its Affiliates against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, Licensee making, having made, using, offering for sale or selling the Licensed Products based upon the Patent Rights in whatever form.
10. LIMITATION OF LIABILITY
10.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee making, having made, using, offering for sale or selling of the Licensed Products based upon the Patent Rights.
11. GENERAL PROVISIONS
11.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
11.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee:
General Nutrition Corporation N.V. Nutricia
300 Sixth Street Bosrandweg 20
Pittsburgh, Pennsylvania 15222 6704 PH Wageningen
Fax No._______________________ Netherlands
Attn: _______________________ Fax No._________________________
Attn:___________________________
|
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
11.3 Licensee shall not use the name of the Licensor or any of its Affiliates in any advertising, marketing or sales without the prior written consent of Licensor, except that Licensee may state that the Licensed Products are licensed under the Patent Rights, Licensee may mark the Licensed Products pursuant to Section 3 of this Agreement and Licensee may use Licensor's name in various documents used by Licensee for capital raising and financing without such prior written consent only to the extent such use is required by any U.S. federal law or regulation. However, by entering into this Agreement, Licensor does not directly or indirectly endorse any Licensed Products and Licensee shall not state or imply that this Agreement is an endorsement by Licensor.
11.4 NO waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
11.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 11.2 hereof and actually received by the addressee.
11.6 If any provision in this Agreement may be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
11.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without
limitation, all import/export laws, restrictions, controls and regulations relating to the Patent Rights and/or Licensed Products.
11.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
11.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
11.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
General Nutrition Corporation N.V. Nutricia
By: /s/ James Sander By: /s/ Bert Moulet
----------------------------- -------------------------------
Printed Name: James Sander Printed Name: Bert Moulet
Title: VP Title: EVP
|
EXHIBIT A
DATE DATE COUNTRY
PATENT TITLE APPLN. NO. FILED PUBL. NO. ISSUED ISSUED
---------------------- --------------------- ---------- --------------- ------------ ---------
Composition US 09/812,839 03/21/2001 US 2002/0172732 United
Comprising Cocoa States
AU 2002241397 Australia
No application number Canada
yet
EP 02707335.2 EP 1370273 Europe
Reducing Appetite in US 09/956,463 09/20/2001 6,638,542 10/28/03 United
Mammals by States
Administering
Procyanidin and WO 2002NL00607 WO 03/024245 PCT
Hydroxycitric Acid
Method for the US 10/384,750 03/11/2003 US 2003/0175368 United
Treatment and States
Prevention of
Overweight in
Mammals
PCT/NL03/00179 03/11/2003 WO 03/075941 PCT
Method for the PCT/NL03/00198 03/18/2003 PCT
Reduction of
Mammalian Appetite
Method for the US 10/323,826 12/20/2002 United
Prevention or States
Treatment of
Overweight in
Mammals
Stimulation of In Vivo US 10/325,711 12/20/2002 United
Production of States
Proteins
Method of Increasing US 09/639,469 08/16/2000 US 6,495,170 12/17/2002 United
the Presence of States
Glutathione in Cells
DE 20011051148 DE 10151148 Germany
WO2001EP10671 WO 03/024487 PCT
US 10/284,158 10/31/2002 US 2003/0054048 United
States
|
Compositions PCT/NL01/00233 03/22/2001 WO 01/70248 PCT
Suitable for
the Treatment of Damage AU 20010042876D AU 4287601 Australia
Caused by Ischemia/
Reperfusion or EP 20000201051 EP 1136073 Europe
Oxidative Stress
EP20010915929 EP 1267901 Europe
JP 20010568445T JP 2003527434 Japan
Chlorogenic Acid and US 09/734,389 08/15/2002 US 6,632,459 10/14/2003 United
an Analog Thereof for States
Immune System
Stimulation
US Divisional - No United
application number yet States
AU 20020025512D AU 2551202 Australia
Method for the US 10/015,582 12/17/2001 US 2003/0113310 United
Treatment of Obesity, States
Overweight and
Fluctuations in Blood PCT/NL02/00836 WO 03/051391 PCT
Insuline and/ or
Glucose Levels
|
EXHIBIT 10.10
KNOW-HOW LICENSE AGREEMENT
This KNOW-HOW LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Corporation, a Pennsylvania corporation (hereinafter the "Licensee").
WHEREAS, Licensor possesses certain valuable confidential and proprietary technical know-how, expertise and other information useful in the manufacture of certain product compositions set forth on Exhibit A, attached hereto and incorporated herein.
WHEREAS, Licensee desires to obtain, and Licensor desires to grant, A limited right and license, under the terms of this Agreement, to use certain Technical Information (as hereinafter defined) in the manufacture of Products (as hereinafter defined).
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement").
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "PRODUCTS" means those certain products to be manufactured by Licensee pursuant to certain separate patent rights obtained from Licensor as of the date hereof.
(b) "TECHNICAL INFORMATION" means all of Licensor's proprietary and confidential information, including without limitation engineering, scientific and practical information and formulas, manufacturing procedures, know-how, expertise and specifications, used in or related to the product compositions on Exhibit A pursuant to certain separate patent rights obtained from Licensor as of the date hereof, as such product compositions currently exist on the Effective Date.
(c) "TERM" means the term of this Agreement as further defined in Article 6 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, a limited, personal, non-exclusive, royalty-free right and license, without the right to sublicense, except as specifically set forth in Section 2.2 and 2.4, to use the Technical Information only to manufacture Products.
2.2 The right and license granted to Licensee is personal to Licensee. Licensee shall not at any time: (a) sublicense such right, or assign or transfer such right and license granted herein to any Person, except an Affiliate of Licensee, without the prior written consent of Licensor; nor (b) permit any Lien upon such right and license. Notwithstanding the foregoing, this Agreement shall be assignable as of right with any transfer of substantially all the assets and the entire business associated therewith of the Licensee provided that: (i) Licensee is in full compliance with all of the terms and conditions of this Agreement; (ii) the acquiror of such assets and business agrees in writing to assume all obligations of Licensee under this Agreement pursuant to an instrument in form and substance reasonably satisfactory to Licensor; and (iii) Licensee gives Licensor prior written notice of such transfer and the identity of such acquiror. Any attempted assignment or other transfer in contravention of this Section 2.2 shall be void and ineffective.
2.3 Notwithstanding anything to the contrary in this Agreement, Licensee agrees to accept the right and license granted in this Article 2 subject to any licenses or other rights of third parties under agreements executed by Licensor prior or subsequent to the date of this Agreement.
2.4 In the event Licensee desires to contract with a third party to manufacture the Products using the licensed Technical Information, Licensee shall immediately notify Licensor and identify such third party. The third party shall execute a written agreement, including terms no less restrictive than the terms of this Agreement. Such written agreement shall be subject to Licensor's approval prior to: its execution by such third party; any disclosure of Technical Information to such third party; and manufacturing of any Products by such third party.
3. DISCLOSURE OF TECHNICAL INFORMATION
3.1 Licensor will make a single disclosure of all written Technical Information to Licensee within forty-five (45) days after the Effective Date.
3.2 Licensor will make its representatives with knowledge of the Technical Information available for an in-person meeting with designated
representatives of Licensee in order to disclose Technical Information not in written form within three (3) months of the Effective Date; provided that such meeting takes place at a mutually agreeable date and time in a location designated by Licensor in Wageningen, Holland.
4. CONFIDENTIALITY
4.1 Licensee shall treat and maintain all Technical Information as confidential and proprietary, regardless if such Technical Information has been marked or otherwise identified as confidential. All such Technical Information is and shall remain the exclusive property of Licensor. Licensee shall not disclose such Technical Information to any third party other than as expressly permitted in this Agreement.
4.2 Upon receiving Technical Information, Licensee shall keep such Technical Information in strict confidence using measures equal to those utilized by Licensee for safeguarding its own confidential and proprietary information, but in no event, less than commercially reasonable methods for protecting confidentiality, and shall use the Technical Information only for purposes expressly granted in this Agreement.
4.3 Licensee shall be permitted to disclose the Technical Information to Licensee's employees, on a need to know basis and subject to the terms of this Agreement in order to exploit the right and license granted in this Agreement; provided that, Licensee's employees are aware of and expressly agree in a separate written instrument to comply with the terms of this Agreement. Licensee shall be responsible for its employees holding the Technical Information in trust and confidence.
4.4 Within thirty (30) days after termination of this Agreement, Licensee shall surrender to Licensor all Technical Information in any written, recorded or other tangible form, including without limitation, all notes, memoranda, software (in any version or form), notebooks, drawings, prototypes or models (including all copies thereof) related to or associated with the Technical Information, that are then in the possession or control of Licensee or any Affiliate of Licensee.
4.5 Technical Information disclosed hereunder is not or will no longer be deemed to be confidential information for purposes of this Agreement if: (a) Licensee can demonstrate by written records prepared prior to the receipt of such Technical Information that Licensee was in possession of such Technical Information before disclosure; (b) the Technical Information is or becomes publicly available through no fault of Licensee; (c) the Technical Information is lawfully obtained by Licensee from a third party under no obligation of confidentiality regarding such Technical Information; or (d) the Technical Information is designated in writing by Licensor as non-confidential.
4.6 In the event that Licensee is or may be required by law or court order to disclose any Technical Information, Licensee shall: (a) provide to Licensor immediate written notice of the same; and (b) cooperate with Licensor to take all reasonable actions to prevent such disclosure, to limit the scope of same and to obtain protective orders to protect the confidentiality of such Technical Information, including, without limitation, filing motions and otherwise making appearances before the court.
4.7 The obligations of confidentiality and use with respect to Technical Information under this Agreement shall survive termination of this Agreement.
5. COSTS; EXPENSES AND TAXES
5.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
5.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
6. TERM AND TERMINATION
6.1 The Term of this Agreement shall run from the Effective Date of this Agreement and continue in full force and effect thereafter until terminated, as set forth herein below:
(a) Either party shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within thirty (30) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon thirty (30) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer any of the rights or interests in whole or in part, in or under this Agreement voluntarily or by operation of law to any
other third party, except as otherwise expressly permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business; or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
6.2 The following provisions of this Agreement shall survive termination: Articles 4, 5, 6, 7, 8 and 9; Sections 6.2, 6.3 and 6.4.
6.3 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
6.4 Licensee agrees that monetary damages would not be a sufficient remedy for breach of the terms of this Agreement. In the event of any disclosure or other misappropriation of Technical Information in violation of this Agreement by Licensee, Licensor shall be entitled to all equitable remedies, including immediate injunctive and other equitable relief and to obtain an order, from a court of competent jurisdiction, restraining any further disclosure or misappropriation of such Technical Information without the necessity of proving damages or posting bond, and for further relief (including obtaining monetary damages and reasonable attorney's fees incurred in enforcing its rights hereunder) as may be appropriate under the circumstances. In addition, Licensee acknowledges that any Technical Information received from Licensor constitutes a "trade secret" of Licensor and, consequently, Licensor shall be entitled to all remedies therewith under any applicable state, territorial or other international law.
7. LIMITATIONS OF WARRANTIES
7.1 TECHNICAL INFORMATION IS PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
8. INDEMNIFICATION
8.1 Licensee shall indemnify Licensor and its Affiliates and hold them harmless against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, Licensee using the Technical Information to manufacture Products or distributing or selling Products.
9. LIMITATION OF LIABILITY
9.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee using the Technical Information to manufacture Products or distributing or selling Products.
10. GENERAL PROVISIONS
10.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
10.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee: N.V. Nutricia General Nutrition Corporation Bosrandweg 20 300 Sixth Street 6704 PH Wageningen Pittsburgh, Pennsylvania 15222 Netherlands Fax No.______________________________ Fax No.___________________________ Attn: _______________________________ Attn: ____________________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
10.3 Licensee shall not use the name of the Licensor or its Affiliates in any advertising, marketing or sales activity without the prior written consent of Licensor. By entering into this Agreement, Licensor does not directly or indirectly endorse any Products and Licensee shall not state or imply that this Agreement constitutes any such endorsement by Licensor.
10.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
10.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 10.2 hereof and actually received by the addressee.
10.6 If any provision in this Agreement is held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder of this Agreement shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
10.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Technical Information and/or Products.
10.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
10.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
10.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
N.V. Nutricia General Nutrition Corporation By: /s/ Bert Moulet By: /s/ James M. Sander ------------------------------- ----------------------------- Printed Name: Bert Moulet Printed Name: James M. Sander Title: EVP Title: VP |
EXHIBIT A
Licensor Product Compositions
NO. PRODUCT NAME 1 Cartila 2 Fast Flex 3 MigraPlex |
EXHIBIT 10.11
KNOW-HOW LICENSE AGREEMENT
This KNOW-HOW LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between Numico Research B.V., a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Investment Company, an Arizona corporation (hereinafter the "Licensee").
WHEREAS, Licensor possesses certain valuable confidential and proprietary technical know-how, expertise and other information useful in the manufacture of certain product compositions set forth on Exhibit A, attached hereto and incorporated herein.
WHEREAS, Licensee desires to obtain, and Licensor desires to grant, a limited right and license, under the terms of this Agreement, to use certain Technical Information (as hereinafter defined) only to manufacture Products (as hereinafter defined) solely within the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")).
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "PRODUCTS" means those certain products to be manufactured by Licensee pursuant to certain separate patent rights obtained from Licensor as of the date hereof.
(b) "TECHNICAL INFORMATION" means all of Licensor's proprietary and confidential information, including without limitation engineering, scientific and practical information and formulas, manufacturing procedures, know-how, expertise and specifications, used in or related to the product compositions on Exhibit A manufactured pursuant to certain separate patent rights obtained from Licensor as of the date hereof, as such product compositions currently exist on the Effective Date.
(c) "TERM" means the term of this Agreement as further defined in Article 6 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, a limited, personal, non-exclusive, royalty-free right and license, without the right to sublicense, except as specifically set forth in Section 2.2 and 2.4, to use the Technical Information only to manufacture Products solely within the Protected Business.
2.2 The right and license granted to Licensee is personal to Licensee. Licensee shall not at any time: (a) sublicense such right, or assign or transfer such right and license granted herein to any Person, except an Affiliate of Licensee, without the prior written consent of Licensor; nor (b) permit any Lien upon such right and license. Notwithstanding the foregoing, this Agreement shall be assignable as of right with any transfer of substantially all the assets and the entire business associated therewith of the Licensee provided that: (i) Licensee is in full compliance with all of the terms and conditions of this Agreement; (ii) the acquiror of such assets and business agrees in writing to assume all obligations of Licensee under this Agreement pursuant to an instrument in form and substance reasonably satisfactory to Licensor; and (iii) Licensee gives Licensor prior written notice of such transfer and the identity of such acquiror. Any attempted assignment or other transfer in contravention of this Section 2.2 shall be void and ineffective.
2.3 Licensee shall restrict its use of the Technical Information for Products within the Protected Business only and covenants not to use the Technical Information for Products or any other purpose outside the Protected Business.
2.4 Notwithstanding anything to the contrary in this Agreement, Licensee agrees to accept the right and license granted in this Article 2 subject to any licenses or other rights of third parties under agreements executed by Licensor prior or subsequent to the date of this Agreement.
2.5 In the event Licensee desires to contract with a third party to manufacture the Products using the licensed Technical Information, Licensee shall immediately notify Licensor and identify such third party. The third party shall execute a written agreement, including terms no less restrictive than the terms of this Agreement. Such written agreement shall be subject to Licensor's approval prior to: its execution by such third party; any disclosure of Technical Information to such third party; and manufacturing of any Products by such third party.
3. DISCLOSURE OF TECHNICAL INFORMATION
3.1 Licensor will make a single disclosure of all written Technical Information to Licensee within forty-five (45) days after the Effective Date.
3.2 Licensor will make its representatives with knowledge of the Technical Information available for an in-person meeting or teleconference with designated representatives of Licensee in order to disclose Technical Information not in written form within three (3) months of the Effective Date; provided that such meeting takes place at a mutually agreeable date and time and if in-person in a location designated by Licensor in Wageningen, Holland.
4. CONFIDENTIALITY
4.1 Licensee shall treat and maintain all Technical Information as confidential and proprietary, regardless if such Technical Information has been marked or otherwise identified as confidential. All such Technical Information is and shall remain the exclusive property of Licensor. Licensee shall not disclose such Technical Information to any third party other than as expressly permitted in this Agreement.
4.2 Upon receiving Technical Information, Licensee shall keep such Technical Information in strict confidence using measures equal to those utilized by Licensee for safeguarding its own confidential and proprietary information, but in no event, less than commercially reasonable methods for protecting confidentiality, and shall use the Technical Information only for purposes expressly granted in this Agreement.
4.3 Licensee shall be permitted to disclose the Technical Information to Licensee's employees, on a need to know basis and subject to the terms of this Agreement in order to exploit the right and license granted in this Agreement; provided that, Licensee's employees are aware of and expressly agree in a separate written instrument to comply with the terms of this Agreement. Licensee shall be responsible for its employees holding the Technical Information in trust and confidence.
4.4 Within thirty (30) days after termination of this Agreement, Licensee shall surrender to Licensor, all Technical Information in any written, recorded or other tangible form, including without limitation, all notes, memoranda, software (in any version or form), notebooks, drawings, prototypes or models (including all copies thereof) related to or associated with the Technical Information, that are then in the possession or control of Licensee or any Affiliate of Licensee.
4.5 Technical Information disclosed hereunder is not or will no longer be deemed to be confidential information for purposes of this Agreement if: (a) Licensee can demonstrate by written records prepared prior to the receipt of
such Technical Information that Licensee was in possession of such Technical Information before disclosure; (b) the Technical Information is or becomes publicly available through no fault of Licensee; (c) the Technical Information is lawfully obtained by Licensee from a third party under no obligation of confidentiality regarding such Technical Information; or (d) the Technical Information is designated in writing by Licensor as non-confidential.
4.6 In the event that Licensee is or may be required by law or court order to disclose any Technical Information, Licensee shall: (a) provide to Licensor immediate written notice of the same; and (b) cooperate with Licensor to take all reasonable actions to prevent such disclosure, to limit the scope of same and to obtain protective orders to protect the confidentiality of such Technical Information, including, without limitation, filing motions and otherwise making appearances before the court.
4.7 The obligations of confidentiality and use with respect to Technical Information under this Agreement shall survive termination of this Agreement.
5. COSTS; EXPENSES AND TAXES
5.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
5.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
6. TERM AND TERMINATION
6.1 The Term of this Agreement shall run from the Effective Date of this Agreement and continue in full force and effect thereafter until terminated, as set forth herein below:
(a) Licensor shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within thirty (30) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon thirty (30) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer any of the rights or interests in whole or in part, in or under this Agreement voluntarily or by operation of law to any other third party, except as otherwise expressly permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business; or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
6.2 The following provisions of this Agreement shall survive termination: Articles 4, 5, 6, 7, 8 and 9; Sections 6.2, 6.3 and 6.4.
6.3 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
6.4 Licensee agrees that monetary damages would not be a sufficient remedy for breach of the terms of this Agreement. In the event of any disclosure or other misappropriation of Technical Information in violation of this Agreement by Licensee, Licensor shall be entitled to all equitable remedies, including immediate injunctive and other equitable relief and to obtain an order, from a court of competent jurisdiction, restraining any further disclosure or misappropriation of such Technical Information without the necessity of proving damages or posting bond, and for further relief (including obtaining monetary damages and reasonable attorney's fees incurred in enforcing its rights hereunder) as may be appropriate under the circumstances. In addition, Licensee acknowledges that any Technical Information received from Licensor constitutes a "trade secret" of Licensor and, consequently, Licensor shall be
entitled to all remedies therewith under any applicable state, territorial or other international law.
7. LIMITATIONS OF WARRANTIES
7.1 TECHNICAL INFORMATION IS PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
8. INDEMNIFICATION
8.1 Licensee shall indemnify Licensor and its Affiliates and hold them harmless against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, Licensee using the Technical Information to manufacture Products or distributing or selling Products.
9. LIMITATION OF LIABILITY
9.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee using the Technical Information to manufacture Products or distributing or selling Products.
10. GENERAL PROVISIONS
10.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
10.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee:
Numico Research B.V. General Nutrition Investment Company
Bosrandweg 20 300 Sixth Street
6704 PH Wageningen Pittsburgh, Pennsylvania 15222
Netherlands Fax No._______________________________
6
|
Fax No.________________________ Attn: ________________________________ Attn: _________________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
10.3 Licensee shall not use the name of the Licensor or its Affiliates in any advertising, marketing or sales activity without the prior written consent of Licensor. By entering into this Agreement, Licensor does not directly or indirectly endorse any Products and Licensee shall not state or imply that this Agreement constitutes any such endorsement by Licensor.
10.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
10.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 10.2 hereof and actually received by the addressee.
10.6 If any provision in this Agreement is held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder of this Agreement shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
10.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Technical Information and/or Products.
10.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
10.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
10.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
Numico Research B.V. General Nutrition Corporation By: /s/ Bert Moulet By: /s/ James Sander ---------------------------------- ----------------------------- Printed Name: Bert Moulet Printed Name: James Sander Title: EVP Title: VP |
EXHIBIT A
Licensor Product Compositions
NO. PRODUCT NAME 1 Body Answer |
EXHIBIT 10.12
KNOW-HOW LICENSE AGREEMENT
This KNOW-HOW LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between N.V. Nutricia, a company organized under the laws of The Netherlands (hereinafter the "Licensor"), and General Nutrition Corporation, a Pennsylvania corporation (hereinafter the "Licensee").
WHEREAS, Licensor possesses certain valuable confidential and proprietary technical know-how, expertise and other information useful in the manufacture of certain product compositions set forth on Exhibit A, attached hereto and incorporated herein.
WHEREAS, Licensee desires to obtain, and Licensor desires to grant, a limited right and license, under the terms of this Agreement, to use certain Technical Information (as hereinafter defined) only to manufacture Products (as hereinafter defined) solely within the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")).
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "PRODUCTS" means those certain products to be manufactured by Licensee pursuant to certain separate patent rights obtained from Licensor as of the date hereof.
(b) "TECHNICAL INFORMATION" means all of Licensor's proprietary and confidential information , including without limitation engineering, scientific and practical information and formulas, manufacturing procedures, know-how, expertise and specifications, used in or related to the product compositions on Exhibit A manufactured pursuant to certain separate patent rights obtained from Licensor as of the date hereof, as such product compositions currently exist on the Effective Date.
(c) "TERM" means the term of this Agreement as further defined in Article 6 below.
1.2 Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Purchase Agreement.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, a limited, personal, non-exclusive, royalty-free right and license, without the right to sublicense, except as specifically set forth in Section 2.2 and 2.4, to use the Technical Information only to manufacture Products solely within the Protected Business.
2.2 The right and license granted to Licensee is personal to Licensee. Licensee shall not at any time: (a) sublicense such right, or assign or transfer such right and license granted herein to any Person, except an Affiliate of Licensee, without the prior written consent of Licensor; nor (b) permit any Lien upon such right and license. Notwithstanding the foregoing, this Agreement shall be assignable as of right with any transfer of substantially all the assets and the entire business associated therewith of the Licensee provided that: (i) Licensee is in full compliance with all of the terms and conditions of this Agreement; (ii) the acquiror of such assets and business agrees in writing to assume all obligations of Licensee under this Agreement pursuant to an instrument in form and substance reasonably satisfactory to Licensor; and (iii) Licensee gives Licensor prior written notice of such transfer and the identity of such acquiror. Any attempted assignment or other transfer in contravention of this Section 2.2 shall be void and ineffective.
2.3 Licensee shall restrict its use of the Technical Information for Products within the Protected Business only and covenants not to use the Technical Information for Products or any other purpose outside the Protected Business.
2.4 Notwithstanding anything to the contrary in this Agreement, Licensee agrees to accept the right and license granted in this Article 2 subject to any licenses or other rights of third parties under agreements executed by Licensor prior or subsequent to the date of this Agreement.
2.5 In the event Licensee desires to contract with a third party to manufacture the Products using the licensed Technical Information, Licensee shall immediately notify Licensor and identify such third party. The third party shall execute a written agreement, including terms no less restrictive than the terms of this Agreement. Such written agreement shall be subject to Licensor's approval prior to: its execution by such third party; any disclosure of Technical Information to such third party; and manufacturing of any Products by such third party.
3. DISCLOSURE OF TECHNICAL INFORMATION
3.1 Licensor will make a single disclosure of all written Technical Information to Licensee within forty-five (45) days after the Effective Date.
3.2 Licensor will make its representatives with knowledge of the Technical Information available for an in-person meeting or teleconference with designated representatives of Licensee in order to disclose Technical Information not in written form within three (3) months of the Effective Date; provided that such meeting takes place at a mutually agreeable date and time and if in-person in a location designated by Licensor in Wageningen, Holland.
4. CONFIDENTIALITY
4.1 Licensee shall treat and maintain all Technical Information as confidential and proprietary, regardless if such Technical Information has been marked or otherwise identified as confidential. All such Technical Information is and shall remain the exclusive property of Licensor. Licensee shall not disclose such Technical Information to any third party other than as expressly permitted in this Agreement.
4.2 Upon receiving Technical Information, Licensee shall keep such Technical Information in strict confidence using measures equal to those utilized by Licensee for safeguarding its own confidential and proprietary information, but in no event, less than commercially reasonable methods for protecting confidentiality, and shall use the Technical Information only for purposes expressly granted in this Agreement.
4.3 Licensee shall be permitted to disclose the Technical Information to Licensee's employees, on a need to know basis and subject to the terms of this Agreement in order to exploit the right and license granted in this Agreement; provided that, Licensee's employees are aware of and expressly agree in a separate written instrument to comply with the terms of this Agreement. Licensee shall be responsible for its employees holding the Technical Information in trust and confidence.
4.4 Within thirty (30) days after termination of this Agreement, Licensee shall surrender to Licensor, all Technical Information in any written, recorded or other tangible form, including without limitation, all notes, memoranda, software (in any version or form), notebooks, drawings, prototypes or models (including all copies thereof) related to or associated with the Technical Information, that are then in the possession or control of Licensee or any Affiliate of Licensee.
4.5 Technical Information disclosed hereunder is not or will no longer be deemed to be confidential information for purposes of this Agreement if: (a) Licensee can demonstrate by written records prepared prior to the receipt of
such Technical Information that Licensee was in possession of such Technical Information before disclosure; (b) the Technical Information is or becomes publicly available through no fault of Licensee; (c) the Technical Information is lawfully obtained by Licensee from a third party under no obligation of confidentiality regarding such Technical Information; or (d) the Technical Information is designated in writing by Licensor as non-confidential.
4.6 In the event that Licensee is or may be required by law or court order to disclose any Technical Information, Licensee shall: (a) provide to Licensor immediate written notice of the same; and (b) cooperate with Licensor to take all reasonable actions to prevent such disclosure, to limit the scope of same and to obtain protective orders to protect the confidentiality of such Technical Information, including, without limitation, filing motions and otherwise making appearances before the court.
4.7 The obligations of confidentiality and use with respect to Technical Information under this Agreement shall survive termination of this Agreement.
5. COSTS; EXPENSES AND TAXES
5.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
5.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
6. TERM AND TERMINATION
6.1 The Term of this Agreement shall run from the Effective Date of this Agreement and continue in full force and effect thereafter until terminated, as set forth herein below:
(a) Licensor shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within thirty (30) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon thirty (30) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer any of the rights or interests in whole or in part, in or under this Agreement voluntarily or by operation of law to any other third party, except as otherwise expressly permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business; or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
6.2 The following provisions of this Agreement shall survive termination: Articles 4, 5, 6, 7, 8 and 9; Sections 6.2, 6.3 and 6.4.
6.3 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
6.4 Licensee agrees that monetary damages would not be a sufficient remedy for breach of the terms of this Agreement. In the event of any disclosure or other misappropriation of Technical Information in violation of this Agreement by Licensee, Licensor shall be entitled to all equitable remedies, including immediate injunctive and other equitable relief and to obtain an order, from a court of competent jurisdiction, restraining any further disclosure or misappropriation of such Technical Information without the necessity of proving damages or posting bond, and for further relief (including obtaining monetary damages and reasonable attorney's fees incurred in enforcing its rights hereunder) as may be appropriate under the circumstances. In addition, Licensee acknowledges that any Technical Information received from Licensor constitutes a "trade secret" of Licensor and, consequently, Licensor shall be
entitled to all remedies therewith under any applicable state, territorial or other international law.
7. LIMITATIONS OF WARRANTIES
7.1 TECHNICAL INFORMATION IS PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
8. INDEMNIFICATION
8.1 Licensee shall indemnify Licensor and its Affiliates and hold them harmless against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, Licensee using the Technical Information to manufacture Products or distributing or selling Products.
9. LIMITATION OF LIABILITY
9.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee using the Technical Information to manufacture Products or distributing or selling Products.
10. GENERAL PROVISIONS
10.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
10.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee:
N.V. Nutricia General Nutrition Corporation
Bosrandweg 20 300 Sixth Street
6704 PH Wageningen Pittsburgh, Pennsylvania 15222
Netherlands Fax No.______________________________
6
|
Fax No._____________________________ Attn: _______________________________ Attn: ______________________________ |
All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
10.3 Licensee shall not use the name of the Licensor or its Affiliates in any advertising, marketing or sales activity without the prior written consent of Licensor. By entering into this Agreement, Licensor does not directly or indirectly endorse any Products and Licensee shall not state or imply that this Agreement constitutes any such endorsement by Licensor.
10.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
10.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 10.2 hereof and actually received by the addressee.
10.6 If any provision in this Agreement is held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder of this Agreement shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
10.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without limitation, all import/export laws, restrictions, controls and regulations relating to the Technical Information and/or Products.
10.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
10.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
10.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
N.V. Nutricia General Nutrition Corporation
By: /s/ Bert Moulet By: /s/ James Sander
--------------------------- ------------------------------
Printed Name: Bert Moulet Printed Name: James Sander
Title: EVP Title: VP
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EXHIBIT A
Licensor Product Compositions
NO. PRODUCT NAME ------- --------------------------------- 1 Women's Ultra Mega Super VitaPak 2 Total Lean 3 Total Lean Plus 4 Chocolate diet 5 Red Core 6 Thermoburst 7 Diet Product 8 Preworkout 9 Liver Health 10 MegaMen 11 Women's Ultra Mega 12 Super VitaPaks 13 Resistance Plus 14 PSA Prostate Cancer Formula 15 Total Lean Oat MRP 16 Multitech/ Femfiber 17 H2O-Lean 18 Distance 19 Energel 20 Fuel powder 21 MegaMRP 22 Whey iso burst 23 MegaCreatine 24 Creatine clear 25 During 26 During RTD 27 Hydration powder 28 Creatine Burst 29 Precreatine 30 Pro Protein 31 New Bone Concept 32 Cognita 33 MemorAll |
EXHIBIT 10.13
PATENT LICENSE AGREEMENT
This PATENT LICENSE AGREEMENT (this "Agreement"), dated December 5, 2003, (the "Effective Date") is made and entered into by and between General Nutrition Investment Company, an Arizona corporation (hereinafter the "Licensor"), and Numico Research B.V., a company organized under the laws of The Netherlands (hereinafter the "Licensee").
WHEREAS, Licensor is the owner of technology covered by certain Patent Rights (as hereinafter defined) as a result of an Assignment, as of the date hereof, of such Patent Rights from Licensee to Licensor (the "Assignment").
WHEREAS, as a condition to said Assignment, Licensor agreed to grant an exclusive right and license to Licensee for unrestricted exploitation of the Patent Rights outside the Protected Business (as defined in that certain Purchase Agreement, dated as of October 16, 2003, among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc., as amended (the "Purchase Agreement")) in order to continue to develop, manufacture, have manufactured, market, offer for sale and sell certain product compositions and to sublicense existing third party licensees.
WHEREAS, this Agreement is made pursuant to and is subject to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the capitalized terms set forth herein shall have the following meanings:
(a) "LICENSED PRODUCTS" means (i) any product composition
outside the Protected Business, which if made, used or sold by
Licensee, in the absence of the rights and license granted under this
Agreement, would infringe one or more claims of the Patent Rights, or
(ii) any method, process, procedure or technique within or outside the
Protected Business, which if used or provided by Licensee, in the
absence of the rights and license granted under this Agreement, would
infringe one or more claims of the Patent Rights.
(b) "PATENT RIGHTS" means (i) the patents (the "Patents") and the patent applications (the "Patent Applications") set forth in Exhibit A, attached hereto and incorporated herein, and (ii) any counterpart patents or patent applications that are equivalents of the Patents or Patent Applications issued, granted or filed in any country other than the
original filing country (the "Counterpart Patents"), including without limitation any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications not expressly set forth herein as of the Effective Date; but exclusive of any continuation, continuation-in-part, divisional, reexamination, reissue or any other such patent right of the Patents or Patent Applications that are filed in Licensor's sole discretion after the Effective Date.
1.2 "TERM" means the term of this Agreement as further defined in Article 7 below.
2. LICENSE GRANT
2.1 Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, an exclusive, worldwide, royalty-free right and license, with the right to sublicense, under the Patent Rights to make, have made, use, offer for sale and sell Licensed Products outside the Protected Business.
2.2 Prior to the Assignment, Licensee granted to certain third parties the right and license to practice certain of the Patent Rights. Licensee shall have the right and license to continue to sublicense such third parties in accordance with the terms of any prior agreement between Licensee and such third party.
2.3 Licensor shall restrict its practice of the Patent Rights to the Protected Business only, and covenants not to practice the Patent Rights for any purpose outside the Protected Business.
3. MARKING
3.1 Licensee agrees to lawfully mark all Licensed Products (or their containers or labels) with a proper patent marking based on the Patent Rights pursuant to the U.S. Code Title 35 or any other international marking requirements.
4. PROSECUTION AND MAINTENANCE
4.1 Licensor may, as it determines in its sole discretion: (a) prosecute any and all U.S. and foreign patent applications included in or related to the Patent Rights (the "Prosecution"); and (b) pay maintenance or annuity fees of any and all U.S. and foreign patents which result from the Patent Rights (the "Maintenance"). Upon Licensee's written request, Licensor will furnish copies of specifically requested Patent Rights-related documents to Licensee.
4.2 In the event Licensor decides not to pursue Prosecution or Maintenance of any of the Patent Rights, Licensor shall provide reasonable notice to Licensee thereof. If Licensee desires, at its sole cost, expense and discretion, to assume and continue the obligations of Prosecution or Maintenance of such Patent Rights, upon request by Licensee, Licensor shall execute and deliver such documents and perform such acts as may be reasonably necessary to effect assignment of all right, title and interest in and to such Patent Rights to Licensee, subject to any outstanding rights or licenses granted prior to such assignment, without further consideration from Licensee.
4.3 In the event that letters patent are issued or granted based on any patent application so assigned in accordance with Section 4.2, Licensee shall restrict its practice of such letters patent to making, having made, using, offering for sale, and selling products covered by the claims of such letters patent outside the Protected Business and hereby grants to Licensor an exclusive, royalty-free right and license, with the right to sublicense, under such letters patent to make, have made, use, offer for sale and sell any products covered by the claims of such letters patent within the Protected Business and, except where the context otherwise requires, on such other terms as the Patent Rights provided in this Agreement, as if such Patent Rights included such letters patent, Licensor as the Licensee hereunder with respect to such letters patent and Licensee as the Licensor hereunder with respect to such letters patent.
5. INFRINGEMENT BY THIRD PARTIES
5.1 Each party shall promptly give notice to the other of any actual or
potential infringement of any Patent Right by any third party that becomes known
to such first-mentioned party. Licensor shall have the first right to take such
action it determines, in its sole discretion, to be necessary to terminate or
prevent any actual or potential infringement of such Patent Right. If Licensor
has not taken any action (including an informed decision to take no action)
within one hundred twenty (120) days from such first-mentioned party's notice,
Licensee may submit to Licensor a notice that Licensee will take such action as
Licensee reasonably determines is necessary to terminate or prevent the
infringement, including filing right to file suit to the extent provided by any
applicable law, rule or regulation, unless Licensor notifies Licensee that
Licensor will file suit or otherwise terminate such infringement within thirty
(30) days after Licensor's receipt of such notice from Licensee.
5.2 In the event Licensor files suit to stop infringement, Licensor may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion. In the event Licensee elects to join Licensor in any such suit or action, Licensee shall pay it's own attorneys' fees and costs of its participation in such suit or action. Regardless if Licensee joins or does not join Licensor in any such suit or action, upon request by
Licensor, Licensee shall cooperate with Licensor in such suit or action. In the event Licensor requests Licensee to join Licensor in participation in such suit or action, Licensee shall have the right to consult with Licensor and be represented by counsel at Licensor's sole expense. Any recovery of damages from any suit or action brought by Licensor, where Licensee has joined Licensor, shall be shared equally by the parties.
5.3 In the event Licensee solely files suit to stop infringement, Licensee may enter into any settlement, consent judgment or other voluntary final disposition of such suit at its sole discretion, so long as the same does not adversely affect Licensor's rights or interest in the Patent Rights. Any recovery of damages from any suit or action brought solely by Licensee shall be retained by Licensee.
6. COSTS; EXPENSES AND TAXES
6.1 Except as otherwise provided herein, each party shall bear its own costs and expenses incurred by it in performing its obligations hereunder.
6.2 Each party shall be responsible for payment of any applicable sales, use and income taxes, including any privilege or excise taxes in the nature of sales or use taxes, and other similar charges imposed upon it by any jurisdiction arising from the performance of its obligations under this Agreement.
7. TERM AND TERMINATION
7.1 The Term of this Agreement shall run from the Effective Date of this Agreement and shall terminate automatically upon the expiration or extinguishment of all of the Patent Rights set forth in Exhibit A and all letters patent that may be issued as contemplated by Section 4.3, subject to early termination, as set forth herein below:
(a) Either party shall have the right to terminate this Agreement without judicial resolution upon written notice to the other party of a material breach of any provision of this Agreement by such other party that is not cured within sixty (60) days after such notice.
(b) This Agreement shall be terminated immediately upon Licensor and Licensee reaching mutual agreement to so terminate this Agreement.
(c) Licensee may terminate this Agreement without cause upon sixty (60) days notice to Licensor.
(d) This Agreement shall automatically terminate, without requirement of notice, upon the occurrence of any of the following:
(i) any attempt by Licensee to assign or otherwise transfer its interest in whole or in part, in this Agreement voluntarily or by operation of law to any other third party except as otherwise permitted herein; or
(ii) a cessation by Licensee of all or substantially all of its business, or
(iii) a petition in bankruptcy or reorganization is filed by Licensee under any applicable bankruptcy law now or hereafter in force or shall be filed against Licensee and not vacated or dismissed within sixty (60) days after such filing; or Licensee shall make an assignment for the benefit of its creditors, or a receiver, trustee, liquidator or custodian shall be appointed for all or a substantial part of Licensee's property, and the order of appointment is not vacated or dismissed within sixty (60) days after it is made; or all or any material portion of Licensee's property shall be sequestered, and the order of sequestration is not vacated or dismissed within sixty (60) days after it is entered; or Licensee shall generally fail or admit in writing its inability to pay its debts as such debts become due and payable.
7.2 The following provisions of this Agreement shall survive termination: Sections 7.3, 7.4 and 7.5, and Articles 6, 8, 9 and 10.
7.3 Neither party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the effective date of such termination.
7.4 Upon termination of this Agreement for any reason, and for one (1) year following the effective date of termination, Licensee may continue to sell any inventory of Licensed Products in its possession or control which was manufactured, for which Licensee had issued binding commitments to manufacture or for which Licensee had purchased or ordered raw materials to manufacture (all in the ordinary course of business) prior to the effective date of termination.
7.5 Except as specified in Section 7.4, from and after any termination of this Agreement, Licensee shall not make or have made, use or have used or sell or have sold any Licensed Products under any of the Patent Rights.
7.6 The rights and remedies granted herein, and any other rights or remedies which the parties may have, either at law or in equity, are cumulative and not exclusive of others.
8. LIMITATIONS OF WARRANTIES
8.1 PATENT RIGHTS ARE PROVIDED "AS IS" WITH NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, AND LICENSOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 Licensee shall indemnify Licensor and its Affiliates against all damages, costs, and expenses, including reasonable attorney's fees, arising or resulting from, Licensee making, having made, using, offering for sale or selling the Licensed Products based upon the Patent Rights in whatever form.
10. LIMITATION OF LIABILITY
10.1 Neither Licensor nor its Affiliates will be responsible for any injury to or death of persons, or damage to or destruction of materials, or other property, or for any other loss, damage, or injury of any kind whatsoever resulting from Licensee making, having made, using, offering for sale or selling of the Licensed Products based upon the Patent Rights.
11. GENERAL PROVISIONS
11.1 Under the terms of this Agreement, Licensor and Licensee are independent contractors. Neither party is an employee, agent, partner or representative of the other party. Nothing contained herein shall be deemed to create a joint venture relationship between the parties. Each party specifically acknowledges that it does not have authority to incur any obligations or responsibilities on behalf of the other party.
11.2 All notices required or permitted to be given by one party to the other under this Agreement shall be sufficient if sent by certified mail, return receipt requested, by a nationally recognized courier or by hand delivery to the parties at the respective addresses set forth below or to such other address as the party to receive the notice has designated by notice to the other party:
Licensor: Licensee:
General Nutrition Investment Company Numico Research B.V.
300 Sixth Street Bosrandweg 20
Pittsburgh, Pennsylvania 15222 6704 PH Wageningen
Fax No.______________________________ Netherlands
Attn:________________________________ Fax No.___________________________
Attn: ____________________________
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All notices shall be effective upon receipt or refusal of delivery by the party being notified. Either party may change its address, etc., by giving notice of such change as provided herein, provided that such notice is effective only on receipt.
11.3 Licensee shall not use the name of the Licensor or any of its Affiliates in any advertising, marketing or sales without the prior written consent of Licensor, except that Licensee may state that the Licensed Products are licensed under the Patent Rights, Licensee may mark the Licensed Products pursuant to Section 3 of this Agreement and Licensee may use Licensor's name in various documents used by Licensee for capital raising and financing without such prior written consent only to the extent such use is required by any U.S. federal law or regulation. However, by entering into this Agreement, Licensor does not directly or indirectly endorse any Licensed Products and Licensee shall not state or imply that this Agreement is an endorsement by Licensor.
11.4 No waiver of the terms and conditions of this Agreement, or the failure of either party to strictly enforce any such term or condition on one or more occasions, shall be construed as a waiver of the same or of any other term or condition of this Agreement on any other occasion.
11.5 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without reference to any principles of conflicts of laws. The parties hereby consent to the jurisdiction and venue of the United States district courts sitting in the State of New York and any courts of the State of New York in which any suit, action or proceeding is brought arising under this Agreement. The parties hereby waive any claim of forum non conveniens in any suit, action or proceeding brought in any of the above-mentioned courts. Licensor and Licensee agree that service of process in any such suit, action or proceeding shall be effective if in writing, delivered in any manner permitted in Section 11.2 hereof and actually received by the addressee.
11.6 If any provision in this Agreement may be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the meaning of such provision shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save such provision, it shall be severed from this Agreement and the remainder shall remain in full force and effect. However, in the event such provision is considered an essential element of this Agreement, the parties shall promptly negotiate alternative, reasonably equivalent, enforceable terms.
11.7 Licensee shall comply with all laws, rules and regulations applicable to the performance of its obligations hereunder, including, without
limitation, all import/export laws, restrictions, controls and regulations relating to the Patent Rights and/or Licensed Products.
11.8 Subject to the Purchase Agreement, the terms and conditions contained in this Agreement, including the attached Exhibit A, supersede all prior oral or written understandings between the parties with respect to the subject matter thereof, and constitutes the entire agreement of the parties with respect to such subject matter. All prior negotiations, representations, agreements, and understandings are merged into, extinguished by and completely expressed by this Agreement. Such terms and conditions shall not be modified or amended except by a writing signed by authorized representatives of both parties.
11.9 This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. A signature page of this Agreement executed and transmitted via facsimile or electronic mail shall be deemed an original for all purposes.
11.10 This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted assigns and successors.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.
General Nutrition Investment Company Numico Research, B.V.
By: /s/ James M. Sander By: /s/ Bert Moulet
--------------------------- -------------------------------
Printed Name: James M. Sander Printed Name: Bert Moulet
Title: SVP Title: EVP
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EXHIBIT A
APPLICATION PUBLICATION ISSUE
TITLE NUMBER DATE FILED NUMBER DATE COUNTRY
------------------------------- ------------- ---------- --------------- ----- -------------
Dietetic Preparation and Method US 09/880,937 06/15/2001 US 2003/0004215 United States
for Inhibiting Intestinal
Carbohydrate Absorption WO WO 02/102362 PCT
2002NL00394
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EXHIBIT 10.14
GENERAL NUTRITION, INCORPORATED
GNC LIVE WELL LATER NON-QUALIFIED DEFERRED COMPENSATION PLAN
General Nutrition, Incorporated (the "Employer"), hereby adopts the GNC Live Well Later Non-qualified Deferred Compensation Plan (the "Plan") for the benefit of a select group of management or highly compensated employees. This Plan is an unfunded arrangement and is intended to be exempt from the participation, vesting, funding, and fiduciary requirements set forth in Title I of the Employee Retirement Income Security Act of 1974, as amended. This Plan is effective February 1, 2002.
ARTICLE 1
DEFINITIONS
1.1 ACCOUNT. The bookkeeping account established for each Participant as
provided in Section 5.1 hereof.
1.2 ADMINISTRATOR. The Employer shall administer the Plan under the
auspices of the Retirement Committee consisting of the Chief Financial
Officer, the General Counsel, the Vice President of Tax, the Vice
President of Human Resources and the Benefits Director .
1.3 BENEFICIARY. The person, persons, trust or other entity a Participant
designates by written revocable designation filed with the
Administrator to receive payments in event of his or her death.
1.4 BOARD. The Board of Directors of the Employer.
1.5 BONUS. Compensation which is designated as such by the Employer and
which relates to services performed during an incentive period by an
Eligible Employee in addition to his or her Salary, including any
pretax elective deferrals from said Bonus to any Employer sponsored
plan that includes amounts deferred under a Deferral Election or a
qualified cash or deferred arrangement under Code Section 401(K) or
cafeteria plan under Code Section 125.
1.6 CODE. The Internal Revenue Code of 1986, as amended.
1.7 COMPENSATION. The Participant's earned income, including Salary and
Bonus from the Employer.
1.8 DEFERRALS. The portion of Compensation that a Participant elects to
defer in accordance with Section 3.1 hereof.
1.9 DEFERRAL ELECTION. The separate written agreement, submitted to the
Administrator, by which an Eligible Employee agrees to participate in
the Plan and make Deferrals thereto. The Deferral Election will specify
the amount of Compensation that a Participant chooses to defer.
1.10 DISABILITY. Any medically determinable physical or mental disorder that
renders a Participant incapable of continuing in the employment of the
Employer in his or her regular duties of employment, as determined by
the Administrator in its sole discretion.
1.11 EFFECTIVE DATE. February 1, 2002
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1.12 ELIGIBLE EMPLOYEE. Each employee designated by the Administrator
pursuant to Section 2.1 as eligible to participate in the Plan.
1.13 EMPLOYEE. Any person employed by the Employer.
1.14 EMPLOYER. General Nutrition, Incorporated and any directly or
indirectly affiliated subsidiary corporations, any other affiliate
designated by the Board, or any successor to the business thereof;
excluding Nutricia Manufacturing USA Inc, Rexall Sundown, Inc. and its
subsidiaries and Unicity Network, Inc. and its subsidiaries, unless
such affiliates are specifically included by the Board.
1.15 ENROLLMENT PERIOD
a) For individuals who are Eligible Employees prior to the
commencement of a given Plan Year, Enrollment Period means the
period set by the Administrator, which ends prior to the first
day of a Plan Year.
b) With respect to an Eligible Employee designated as such by the
Employer effective as of any day after the first day of a Plan
Year, Enrollment Period means the period beginning with the
date of his/her designation as an Eligible Employee, and
ending prior to the first day such Eligible Employee's
participation in the Plan commences.
1.16 FINANCIAL HARDSHIP Financial Hardship means a severe financial hardship
of the Participant resulting from a disability of the Participant, a
sudden and unexpected illness or accident of the Participant, loss of
the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstance arising as a result of
events beyond the control of the Participant. Financial Hardship shall
be determined by the Retirement Committee based on such standards as
are, from time to time, established by the Retirement Committee, and
such determination shall be the sole discretion of the Retirement
Committee.
1.17 INVESTMENT INDEX. Each Investment Index, which serves as a means to
measure value, will determine increases or decreases with respect to a
Participant's Accounts. For purposes of this Plan, the Investment Index
will be fixed to separate account unit values of applicable variable
life insurance policy(s) purchased by the Administrator on the
Participant's life.
1.18 MATCHING CONTRIBUTION. An Employer contribution as described in Section
3.2 hereof.
1.19 NORMAL RETIREMENT AGE. Participant's attainment of 65 years of age.
1.20 PARTICIPANT. An Eligible Employee who is a Participant as defined in
Article 2.
1.21 PLAN. GNC Live Well Later Non-qualified Deferred Compensation Plan.
1.22 PLAN YEAR. January 1, through December 31 for each subsequent Plan
Year.
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1.23 RETIREMENT. Retirement means the termination of the Participant's
employment or contract with the Employer for any reason other than
death or Disability upon the occurrence of any one of the following:
(a) at Normal Retirement Age; or
(b) if the Participant has at least ten (10) Years of Service with
the Employer at any time after attaining age 55.
1.24 SALARY. An Eligible Employee's base salary rate or rates in effect at
any time during a Plan Year, including any pretax elective deferrals
from said Salary to any Employer sponsored plan that includes amounts
deferred under a Deferral Election or a qualified cash or deferred
arrangement under Code Section 401(K) or cafeteria plan under Code
Section 125.
1.25 TRUST. The agreement between the Employer and the Trustee under which
the assets of the Plan are held, administered and managed, which shall
conform to the terms of Rev. Proc. 92 - 64.
1.26 TRUSTEE. Sample Employer Trust Department, or such other successor that
shall become trustee pursuant to the terms of the Plan.
1.27 YEARS OF SERVICE. A Participant's "Years of Service" shall be measured
by the total number of full twelve (12) month periods that an
individual has been an Employee.
ARTICLE 2
PARTICIPATION
2.1 DESIGNATION AS ELIGIBLE EMPLOYEE. The Administrator shall from time to
time specify one or more persons from a select group of management or
highly compensated employees as Eligible Employees. Such specification
shall be in writing, with a copy delivered to the Employer and the
person designated as eligible, and shall set the date as of when the
person becomes eligible.
An Eligible Employee who is unable to pass a medical underwriting
examination prior to the purchase of their applicable variable life
insurance policy shall not be eligible for any Death Benefit under this
Plan as provided for in Section 6.4 below. An Eligible Employee, who is
ineligible to receive a Death Benefit under this Plan, shall remain an
Eligible Employee for all other facets of this Plan unless otherwise
provided by the Administrator.
For the initial Plan Year, and for subsequent Plan Years until the
Administrator otherwise directs, an Eligible Employee shall mean each
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Employee:
(a) who is designated as such by the Employer; and
(b) is considered within a select group of management or highly compensated employees.
An individual's designation as an Eligible Employee may be revoked at any time upon written notice of the Administrator to such individual.
2.2 COMMENCEMENT OF PARTICIPATION. Each Eligible Employee shall become a Participant at the earlier of the first day of the Plan Year or the date on which his or her Deferral Election first becomes effective.
2.3 LOSS OF ELIGIBLE EMPLOYEE STATUS.
(a) A Participant who is no longer an Eligible Employee shall not be permitted to submit a Deferral Election and all Deferrals for such Participant shall cease as of the end of the Plan Year in which such Participant is determined to no longer be an Eligible Employee.
Amounts credited to the Account of a Participant described in subsection (a) shall continue to be held, pursuant to the terms of the Plan and shall be distributed as provided in Article 6.
A Participant who is no longer an Eligible Employee shall continue to receive quarterly statements, and shall retain the right to make changes in investment selection according to Section 5.2.
ARTICLE 3
CONTRIBUTIONS
3.1 DEFERRALS.
(a) On an annual basis, each Participant may authorize the Employer to reduce his/her future Compensation by a percentage not to exceed an amount allowed for the Plan Year as established by the Employer, and to have a corresponding amount credited to his/her Account, in accordance with Article 5, by filing a Deferral Agreement with the Administrator during his/her initial Enrollment Period or any subsequent Enrollment Period preceding the Plan Year during which such Compensation will be earned.
(b) Each Eligible Employee shall deliver an annual Deferral Election to the Employer before any Deferrals can become effective. Such Deferral Election shall be void with respect to any Deferral unless submitted before the beginning of the Plan Year during which the amount to be deferred will be earned; provided, however, that in the year in which the Plan is first adopted or an Employee is first eligible to participate, such Deferral Election shall be filed within thirty (30) days of the date on which the Plan is adopted or the date on which an Employee is first eligible to participate, respectively, with respect to Compensation earned during the remainder of the calendar year.
(c) In the event that a Participant submits a Deferral Agreement to the administrator that in the sole discretion of the Retirement Committee is incomplete or inaccurate, the Retirement Committee shall be authorized to assume the following, and such assumptions shall be communicated to the Participant:
i) If no Benefit Allocation is listed - assume Retirement Account was selected;
ii) If Benefit Allocation listed equals less than 100% - assume balance is deferred into Retirement Account;
iii) If Benefit Allocation listed equals more the 100% - assume proportionate reduction to each Benefit Allocation selected;
iv) If no Portfolio is selected - assume Money Market fund was selected;
v) If Portfolio selected equals less than 100% - assume Money Market fund was selected for the balance;
vi) If Portfolio selected equals more than 100% - assume proportionate reduction in each Portfolio selected;
vii) If no Benefit Distribution is elected - assume lump sum of In-service Distribution Account and 5 year for Retirement Account;
viii) If no time payment for In-service Distribution Account - assume the earliest possible date available under the provisions of the Plan.
(d) The Deferral Election shall, subject to the limitation set forth in Section 3.1(a) hereof, designate the amount of Compensation deferred by each Participant, the Beneficiary or Beneficiaries of the Participant and such other items as the Administrator may prescribe. Such Deferral Elections shall remain effective for the Plan Year.
(e) The minimum amount of Salary that may be deferred each Plan Year is two hundred dollars ($200.00). Participants may defer a minimum of two percent (2%) and a maximum of twenty-five percent (25%) of their Salary in each Plan Year, subject to the aforementioned minimum deferral amount.
(f) The minimum amount of Bonus that may be deferred each Plan Year is two thousand dollars ($2000.00). Participants may defer a minimum of two percent (2%) and a maximum of twenty-five percent (25%) of their Bonus in each Plan Year, subject to the aforementioned minimum deferral amount.
3.2 MATCHING CONTRIBUTION. At its sole and absolute discretion, the
Employer may elect to make a Matching Contribution to the Account of
some or all of the Participants. The amount of the Matching
Contribution, if any, shall be determined by the Employer annually and
communicated to all Eligible Employees. Such Matching Contribution
shall be allocated to the Participant's Account in accordance with
Section 5.1.
3.3 TIME OF CONTRIBUTIONS. Deferrals and Matching Contributions shall be transferred to the Trust as soon as administratively feasible following the end of each month
3.4 FORM OF CONTRIBUTIONS. All Deferrals and Matching Contributions to the Trust shall be made in the form of cash or cash equivalents of US currency.
ARTICLE 4
VESTING
4.1 VESTING OF DEFERRALS. A Participant shall have a one hundred percent (100%) vested right to the portion of his or her Account attributable to Deferrals and any earnings on the investment of such Deferrals.
4.2 VESTING OF MATCHING CONTRIBUTIONS. Participants eligible for the Plan as of the initial Plan Year shall have a one hundred percent (100%) vested right to the portions of his or her Account attributable to Matching Contributions. Participants who become eligible to participate subsequent to the initial Plan Year will be one hundred percent (100%) vested right to the portions of his or her Account attributable to Matching Contributions only after completion of one (1) year of service with the Employer.
4.3 VESTING IN EVENT OF CHANGE OF CONTROL. Notwithstanding any provision contained herein to the contrary, in the event that, prior to the time that the entire amount of the Matching Contributions becomes vested a Change of Control occurs, then that portion of the Matching Contributions which has not yet become vested shall immediately become vested to such Participant or such Participant's Beneficiary or estate, as the case may be, as of the date of such Change of Control. For purposes of this Agreement Change of Control means:
a) a sale of all or substantially all of the assets of the Employer or a Significant Stock Acquisition of the Employer (as hereinafter defined) which is followed, within an eighteen month period, by the Employer (or the acquiring or surviving entity) (A) terminating the Participant's employment with the Employer (or the acquiring or surviving entity); (B) changing the Participant's position with the Employer (or the acquiring or surviving entity) so that the nature and scope of the Participant's duties or his/her responsibilities with the Employer (or the acquiring or surviving entity) are reduced to a level below that which he/she enjoyed immediately prior to such change; or (C) reducing the Participant's Base Salary; or
b) a sale of all or substantially all of the assets of the Employer or a Significant Stock Acquisition of the Employer (as hereinafter defined) which is preceded within a six month period by the Employer terminating Participant's employment with the Employer without cause.
c) A Significant Stock Acquisition of the Employer shall have occurred if more than fifty percent (50%) of the votes attributed to the Employer's outstanding equity securities shall be acquired, either directly or indirectly (including but not limited to, a merger) by any corporation, person or persons who act in concert as described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended.
d) A merger, consolidation or other extraordinary transaction to which Royal Numico N.V. (Numico) or any affiliate is a party if the Persons who were stockholders of Numico immediately prior to the transaction do not continue immediately after the transaction to be the beneficial owners in substantially the same proportions of at least a majority of the total combined voting power for elections of directors of the entity or entities which immediately
following the transaction hold at least two-thirds in value of the consolidated total assets of Numico immediately prior to the transaction; or
e) Any Person becomes the beneficial owner in the aggregate of securities of Numico representing 50% or more of the total combined voting power for election of directors of Numico unless such Person (or a Person owned directly or indirectly by such Person) was the beneficial owner, directly or indirectly, as of the Matching Contribution date applicable to the affected Participant, of 50% or more of the Numico voting securities outstanding as of the Matching Contribution date; or
f) A majority in value of the consolidated assets of Numico are transferred to any Person or entity that is not an affiliate of Numico; or
g) the stockholders of Numico approve any plan or proposal for the liquidation of Numico; or
h) if the Participant is the employee of a subsidiary, Numico shall cease to hold securities of the subsidiary having at least a majority of the total combined voting power for the election of directors of such subsidiary.
4.4 AMOUNTS NOT VESTED. Any amounts credited to a Participant's Account that are not vested at the time of his or her termination of employment with the Employer shall be forfeited.
ARTICLE 5
ACCOUNTS
1.1 ACCOUNTS. The Administrator shall establish and maintain a bookkeeping "Retirement Account" for each Participant. His or her Retirement Account shall be credited with Deferrals (as specified in the Participant's Deferral Election), any Matching Contributions allocable thereto and the Participant's allocable share of any earnings or losses on the foregoing. Each Participant's Account shall be reduced by any distributions made plus any federal, state and/or local tax withholding and any social security withholding tax as may be required by law. Each Participant shall receive a quarterly statement showing the balances in the Participant's Account.
1.2 INVESTMENTS, GAINS AND LOSSES.
a) assets shall be invested in accordance with written directions from the Employer. Such directions shall provide investment discretion to invest the above-referenced amounts within broad guidelines established by the Employer as set forth therein.
b) The Administrator shall adjust the amounts credited to each Participant's Account to reflect Deferrals, Matching Contributions, investment experience, distributions and any other appropriate adjustments. Such adjustments shall be made as frequently as is administratively feasible.
c) A Participant may direct that his or her Retirement Account established pursuant to Section 5.1 may be valued as if they were tied to an Investment Index provided by the Administrator.
A Participant's Retirement Account will be credited with an interest rate equal to the increase or loss, if any, of the appropriate Investment Index. Administrator may provide for the multiple Participant use of a single Investment Index.
1.3 FORFEITURES. Any forfeitures from a Participant's Account shall continue to be held in the Trust, and shall be used to reduce the Employer's future Matching Contributions under the Plan. If no such further contributions will be made, then such forfeitures shall be returned to the Employer.
ARTICLE 6
DISTRIBUTIONS
6.1 DISTRIBUTION ELECTION. Each Participant shall designate on his or her Deferral Election the timing of his or her distribution by indicating the type of account as described under Section 5.1. A Participant may not modify, alter, amend or revoke such designation for a Plan Year after such Plan year begins. Further, amounts in one Account cannot be transferred to another Account. Each Participant shall also designate the manner in which Retirement Account payments shall be made from the choices available under Section 6.2 (a) hereof.
6.2 PAYMENT OPTIONS.
a) Retirement Account payments shall commence as soon as administratively feasible immediately after the Participant's Retirement. The Participant may elect any one of the following forms of payment so long as the election is made in writing, delivered to the Administrator at least 12 months prior to the year in which the Participant's benefit becomes payable.
i) A Participant entitled to a benefit hereunder may elect to receive his/her Retirement Account in substantially equal annual installments over a period of five or ten years. In the event Participant fails to make an election, Section 6.2 (a)(i) shall control Participant's distribution method.
The amount of the substantially equal payments described above shall be determined by multiplying the Participant's Retirement Account by a fraction, the denominator of which in the first year of payment equals the number years over which benefits are to be paid, and the numerator of which is one (1).
The amounts of the payments for each succeeding year shall be determined by multiplying the Participant's Retirement Account as of the applicable anniversary of the Participant's Retirement Date by a fraction, the denominator of which equals the number of remaining years over which benefits are to be paid, and the numerator of which is one (1).
ii) Single lump-sum distribution of the value of the Participant's Retirement Account as soon as administratively feasible.
b) The vested portion of a Participant's In-Service Account shall
be distributed to the Participant upon the date chosen by the
Participant in the first Deferral Agreement which designated a
portion of the Compensation deferred to be allocated to the
In-Service Account but in no event shall the date selected be
earlier than the first day of the month of the sixth calendar
year following the initial filing of the Deferral Agreement
with respect to that In-Service Account. The benefit payment
shall be that form selected by the Participant pursuant to
section XX. However, if the Participant terminates employment
with the Company prior to the date so chosen by the
Participant, the vested portion of the In-Service Account
shall be added to the Retirement Account as of the date of
termination of service and shall be paid in accordance with
Section 6.2. Payment shall commence as soon as practical, but
in no event later than sixty days after the date selected by
the Participant under this Section, and subsequent payments
shall be made on the anniversary date of the initial payment.
6.3 COMMENCEMENT OF PAYMENT UPON DISABILITY OR TERMINATION.
a) Upon the Disability of a Participant, all amounts credited to his or her Account shall be paid to the Participant, in a lump-sum payment, as soon as administratively feasible.
b) Upon termination of Participant's employment with the Employer for reason other than Retirement, death or Disability, all vested amounts credited to his or her Account shall be distributed to the Participant upon Participant attaining Normal Retirement Age in a lump-sum payment, as soon as administratively feasible.
6.4 HARDSHIP DISTRIBUTIONS Upon a finding that a Participant has suffered a Financial Hardship or disability, the Retirement Committee may, in its sole discretion, amend the existing Deferral Agreement, or make distributions from any of all of the Participant's Accounts. The amount of such distribution shall be limited to the amount reasonable necessary to meet the Participant's needs resulting from the Financial Hardship or disability, an will not exceed the Participant's vested Account balances. If payment is made due to Financial Hardship, the Participant's deferrals under this Plan shall cease for the period of Financial Hardship or disability and for twelve months thereafter. Any resumption of the Participant's deferrals under the Plan after such twelve-month period shall be made only at the election of the Participant in accordance with Article XX herein.
6.5 WITHDRAWAL OF PARTICIPATION The Participant may elect, in the sole discretion of the Participant, to terminate participation in this Plan, and to cause the total vested portion of the Participant's Account balances to be distributed in accordance with Article XX as if the Participant had terminated services with the Company as of the time of the election. Such resulting amount shall be paid to the Participant or the Participant's beneficiary as soon as administratively practical. The Participant, or the Participant's beneficiary, may file such an election at any time prior to the complete payment of benefits due under this Plan. Upon filing of this election, any Deferral Agreement for the current year shall be terminated and the Participant shall be prohibited from participating in this Plan at any time in the future.
6.6 DEATH BENEFIT. If a Participant dies before Retirement and the Plan is in effect at the that time, his or her Employer will pay or cause to be paid a Death Benefit to such Participant's Beneficiary, as provided for below, in a lump sum payment, as soon as administratively possible. The said Death Benefit shall be the greater of; i) the Participant's Retirement Account balance at the time of death, or ii) fifteen (15) times the Participant's first (1st) Deferral amount up to $500,000, as found in their initial Deferral Election.
Notwithstanding the immediately preceding paragraph of this Section 6.4, the Employer will pay or cause to be paid the Death Benefit specified therein only if:
a) at the time of the Participant's death prior to attaining his or her Retirement, Participant was an Employee and had not taken advantage of Retirement; and
b) the Participant's participation in the Plan, as evidenced by Participant's in force Deferral Election, has been continuous from the date of the Deferral Election to the date of Participant's death; and
c) the Participant's death was due to causes other than suicide within two (2) years of the date of his or her original Deferral Election or within two (2) years of the date of any amendment to Participant's Deferral Election or any subsequent Deferral Election resulting from an additional Death Benefit granted; but the Participant's suicide shall relieve the Employer only of its obligation to pay that portion of the Death Benefit that was granted within two (2) years prior to the date of such suicide; and
d) the Participant's death is determined not to be from a bodily or mental cause or causes, information about which was withheld, or knowingly concealed, or falsely provided by the Participant when requested by the Employer to furnish evidence of good health upon the Participant's enrolling in the Plan or upon an application for an increase in benefits because of an increase in Participant's Death Benefit; and
e) If the Death Benefit is not paid as a result of any Section herein above, Participant's Beneficiary will receive what has accumulated in Participant's Account representing Participant's Deferrals.
f) Proof of death in such form as determined acceptable by Administrator is furnished.
6.7 MINIMUM DISTRIBUTION. Notwithstanding any provision to the contrary, if the vested balance of a Participant's Account at the time of a termination due to Retirement is less than $10,000.00, then the Participant shall be paid his or her benefits as a single lump sum as soon as administratively feasible following said termination.
6.8 WITHHOLDING; PAYROLL TAXES The Company shall withhold from any payment made pursuant to this Plan any taxes required to be withheld from such payment under local, state or federal law. A Beneficiary, however, may elect not to have withholding of federal income tax pursuant to Section 3405(a)(2) of the Code, or any successor provision thereto.
6.9 PAYMENT TO GUARDIAN If a Plan benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of the property, the Retirement Committee may direct payment tot he guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Retirement Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution. Such distribution shall completely discharge the Retirement Committee and Company from all liability with respect to such benefit.
ARTICLE 7
BENEFICIARIES
7.1 BENEFICIARIES. Each Participant may from time to time designate one or more persons (who may be any one or more members of such person's family or other persons, administrators, trusts, foundations or other entities) as his or her Beneficiary under the Plan. Such designation shall be made on a form prescribed by the Administrator. Each Participant may at any time and from time to time, change any previous Beneficiary designation, without notice to or consent of any previously designated Beneficiary, by amending his or her previous designation on a form prescribed by the Administrator. If no person shall be designated by the Participant as a Beneficiary, or if the designated Beneficiary shall not survive the Participant, payment of his/her interest shall be made to the Participant's estate. If more than one person is the beneficiary of a deceased Participant, each such person shall receive a pro rata share of any death benefit payable unless otherwise designated on the applicable form.
7.2 LOST BENEFICIARY.
a) All Participants and Beneficiaries shall have the obligation to keep the Administrator informed of their current address until such time as all benefits due have been paid.
b) If a Participant or Beneficiary cannot be located by the Administrator exercising due diligence, then, in its sole discretion, the Administrator may presume that the Participant or beneficiary is deceased for purposes of the Plan and all unpaid amounts (net of due diligence expenses) owed to the Participant or beneficiary shall be paid accordingly or, if a Beneficiary cannot be so located, then such amounts may be forfeited. Any such presumption of death shall be final, conclusive and binding on all parties. Notwithstanding the foregoing, if any such Beneficiary is located within five years from the date of any such forfeiture, such Beneficiary shall be entitled to receive the amount previously forfeited.
7.3 CHANGE IN MARITAL STATUS If the Participant's marital status changes after the Participant has made a beneficiary designation, the following shall apply:
a) If the participant is married at death but was unmarried when
the designation was made, the designation shall be void unless
the spouse has consented to in the manner prescribed in
Section 7.1.
b) If the Participant is unmarried at death but was married when the designation was made:
i) the designation shall be void if the spouse was named beneficiary.
ii) the designation shall remain valid if a non-spouse beneficiary was named.
c) If the Participant was married when the designation was made and is married to a different spouse at death, the designation shall be void unless the new spouse has consented to it in the manner prescribed in Section 7.1.
ARTICLE 8
FUNDING
7.1 PROHIBITION AGAINST FUNDING. Should any investment be acquired in connection with the liabilities assumed under this Plan, it is expressly understood and agreed that the Participants and Beneficiaries shall not have any right with respect to, or claim against, such assets nor shall any such purchase be construed to create a trust of any kind or a fiduciary relationship between the Employer and the Participants, their Beneficiaries or any other person. Any such assets shall be and remain a part of the general, unpledged, unrestricted assets of the Employer, subject to the claims of its general creditors. It is the express intention of the parties hereto that this arrangement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. Each Participant and beneficiary shall be required to look to the provisions of this Plan and to the Employer itself for enforcement of any and all benefits due under this Plan, and to the extent any such person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer. The Employer or the Trust shall be designated the owner and beneficiary of any investment acquired in connection with its obligation under this Plan.
7.2 DEPOSITS IN TRUST. Notwithstanding paragraph 8.1, or any other provision of this Plan to the contrary, the Employer may deposit into the Trust any amounts it deems appropriate to pay the benefits under this Plan. The amounts so deposited may include all contributions made pursuant to a Deferral Election by a Participant along with any Matching Contributions.
7.3 INDEMNIFICATION OF TRUSTEE.
a) The Trustee shall not be liable for the making, retention, or sale of any investment or reinvestment made by it, as herein provided, nor for any loss to, or diminution of, the Trust assets, unless due to its own negligence, willful misconduct or lack of good faith.
b) Such Trustee shall be indemnified and saved harmless by the Employer from and against all personal liability to which it may be subject by reason of any act done or omitted to be done in its official capacity as Trustee in good faith in the administration of the Plan and Trust, including all expenses reasonably incurred in its defense in the event the Employer fails to provide such defense upon the request of the Trustee. The Trustee is relieved of all responsibility in connection with its duties hereunder to the fullest extent permitted by law, short of breach of duty to the beneficiaries.
7.4 WITHHOLDING OF EMPLOYEE CONTRIBUTIONS. The Administrator is authorized to make any and all necessary arrangements with the Employer in order to withhold the Participant's Deferrals under
Section 3.1 hereof from his or her Compensation. The Administrator shall determine the amount and timing of such withholding.
ARTICLE 9
CLAIMS ADMINISTRATION
9.1 GENERAL. If a Participant, Beneficiary or his/her representative is denied all or a portion of an expected Plan benefit for any reason and the Participant, Beneficiary or his/her representative desires to dispute the decision of the Administrator, he/she must file a written notification of his/her claim with the Administrator.
9.2 CLAIM REVIEW. Upon receipt of any written claim for benefits, the Administrator shall be notified and shall give due consideration to the claim presented. If the claim is denied to any extent by the Administrator, the Administrator shall furnish the claimant with a written notice setting forth (in a manner calculated to be understood by the claimant):
a) the specific reason or reasons for denial of the claim;
b) a specific reference to the Plan provisions on which the denial is based;
c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
d) an explanation of the provisions of this Article.
9.4 RIGHT OF APPEAL. A claimant who has a claim denied under Section 9.2 may appeal to the Administrator for reconsideration of that claim. A request for reconsideration under this section must be filed by written notice within sixty (60) days after receipt by the claimant of the notice of denial under Section 9.2.
9.4 REVIEW OF APPEAL. Upon receipt of an appeal the Administrator shall
promptly take action to give due consideration to the appeal. Such
consideration may include a hearing of the parties involved, if the
Administrator feels such a hearing is necessary. In preparing for this
appeal the claimant shall be given the right to review pertinent
documents and the right to submit in writing a statement of issues and
comments. After consideration of the merits of the appeal the
Administrator shall issue a written decision which shall be binding on
all parties subject to Section 9.6 below. The decision shall be written
in a manner calculated to be understood by the claimant and shall
specifically state its reasons and pertinent Plan provisions on which
it relies. The Administrator's decision shall be issued within sixty
(60) days after the appeal is filed, except that if a hearing is held
the decision may be issued within one hundred twenty (120) days after
the appeal is filed.
9.5 DESIGNATION. The Administrator may designate any other person of its choosing to make any determination otherwise required under this Article.
9.6 ARBITRATION. A claimant whose appeal has been denied under Section 9.4 shall have the right to submit said claim to final and binding arbitration in the State of Pennsylvania pursuant to the rules of the American Arbitration Association. Any such requests for arbitration must be filed by written demand to the American Arbitration Association within sixty (60) days after receipt of the decision regarding the appeal. The costs and expenses of arbitration, including the fees of the arbitrators, shall be borne by the losing party. The prevailing party shall recover as expenses all reasonable attorney's fees incurred by it in connection with the arbitration proceeding or any appeals therefrom.
ARTICLE 10
GENERAL PROVISIONS
10.1 ADMINISTRATOR.
a) The Administrator is expressly empowered to limit the amount
of compensation that may be deferred; to deposit amounts into
trust in accordance with Section 8.2 hereof; to interpret the
Plan, and to determine all questions arising in the
administration, interpretation and application of the Plan; to
employ actuaries, accountants, counsel, and other persons it
deems necessary in connection with the administration of the
Plan; to request any information from the Employer it deems
necessary to determine whether the Employer would be
considered insolvent or subject to a proceeding in bankruptcy;
and to take all other necessary and proper actions to fulfill
its duties as Administrator.
b) negligence, willful misconduct or lack of good faith.
c) The Administrator shall be indemnified and saved harmless by
the Employer from and against all personal liability to which
it may be subject by reason of any act done or omitted to be
done in its official capacity as Administrator in good faith
in the administration of the Plan and Trust, including all
expenses reasonably incurred in its defense in the event the
Employer fails to provide such defense upon the request of the
Administrator. The Administrator is relieved of all
responsibility in connection with its duties hereunder to the
fullest extent permitted by law, short of breach of duty to
the beneficiaries.
d) The Administrator is expressly empowered to purchase life
insurance policies on all the Participant's lives as a
condition precedent to participation in this Plan. In the
event the Administrator is unable to procure life insurance on
a Participant's life, the Administrator is expressly empowered
to deny participation to that uninsurable Participant, and/or
cease implantation of the Plan.
10.2 NO ASSIGNMENT. No benefit under the Plan shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge
encumbrance or charge, and any such action shall be void for all
purposes of the Plan. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor
shall it be subject to attachments or other legal process for or
against any person, except to such extent as may be required by law.
10.3 NO EMPLOYMENT RIGHTS. Participation in this Plan shall not be construed
to confer upon any Participant the legal right to be retained in the
employ of the Employer, or give a Participant or
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beneficiary, or any other person, any right to any payment whatsoever,
except to the extent of the benefits provided for hereunder. Each
Participant shall remain subject to discharge to the same extent as if
this Plan had never been adopted.
10.4 INCOMPETENCE. If the Administrator determines that any person to whom a
benefit is payable under this Plan is incompetent by reason of physical
or mental disability, the Administrator shall have the power to cause
the payments becoming due to such person to be made to another
individual for the Participant's benefit without responsibility of the
Administrator or the Employer to see to the application of such
payments. Any payment made pursuant to such power shall, as to such
payment, operate as a complete discharge of the Employer, the
Administrator and the Trustee.
10.5 IDENTITY. If, at any time, any doubt exists as to the identity of any
person entitled to any payment hereunder or the amount or time of such
payment, the Administrator shall be entitled to hold such sum until
such identity or amount or time is determined or until an order of a
court of competent jurisdiction is obtained. The Administrator shall
also be entitled to pay such sum into court in accordance with the
appropriate rules of law. Any expenses incurred by the Employer,
Administrator, and Trust incident to such proceeding or litigation
shall be charged against the Account of the affected Participant.
10.6 OTHER BENEFITS. The benefits of each Participant or beneficiary
hereunder shall be in addition to any benefits paid or payable to or on
account of the Participant or beneficiary under any other pension,
disability, annuity or retirement plan or policy whatsoever.
10.7 NO LIABILITY. No liability shall attach to or be incurred by any
manager of the Employer, Trustee or any Administrator under or by
reason of the terms, conditions and provisions contained in this Plan,
or for the acts or decisions taken or made thereunder or in connection
therewith; and as a condition precedent to the establishment of this
Plan or the receipt of benefits thereunder, or both, such liability, if
any, is expressly waived and released by each Participant and by any
and all persons claiming under or through any Participant or any other
person. Such waiver and release shall be conclusively evidenced by any
act or participation in or the acceptance of benefits or the making of
any election under this Plan.
10.8 EXPENSES. All expenses incurred in the administration of the Plan,
whether incurred by the Employer or the Plan, shall be paid by the
Employer.
10.8 INSOLVENCY. Should the Employer be considered insolvent (as defined by
the Trust), the Employer, through its Board and chief executive
officer, shall give immediate written notice of such to the
Administrator of the Plan and the Trustee. Upon receipt of such notice,
the Administrator or Trustee shall cease to make any payments to
Participants who were Employees of the Employer or their beneficiaries
and shall hold any and all assets attributable to the Employer for the
benefit of the general creditors of the Employer.
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10.9 AMENDMENT AND TERMINATION.
a) Except as otherwise provided in this section, the Employer
shall have the sole authority to modify, amend or terminate
this Plan; provided, however, that any modification or
termination of this Plan shall not reduce, without the consent
of a Participant, a Participant's right to any amounts already
credited to his or her Account, or lengthen the time period
for a payout from an established Account, on the day before
the effective date of such modification or termination.
Following such termination, payment of such credited amounts
may be made in a single sum payment if the Employer so
designates. Any such decision to pay in a single sum shall
apply to all Participants.
b) A Participant shall have a vested right to his or her Account
in the event of the termination of the Plan pursuant to
section (a), above.
c) Any funds remaining in the Trust after termination of the Plan
and satisfaction of all liabilities to Participants and
others, shall be returned to the Employer.
10.10 EMPLOYER DETERMINATIONS. Any determinations, actions or decisions of
the Employer (including but not limited to, Plan amendments and Plan
termination) shall be made by the Board in accordance with its
established procedures or by such other individuals, groups or
organizations that have been properly delegated by the Board to make
such determination or decision.
10.11 CONSTRUCTION. All questions of interpretation, construction or
application arising under or concerning the terms of this Plan shall be
decided by the Administrator, in its sole and final discretion, whose
decision shall be final, binding and conclusive upon all persons.
10.12 GOVERNING LAW. This Plan shall be governed by, construed and
administered in accordance with the applicable laws of the Commonwealth
of Pennsylvania.
10.13 SEVERABILITY. Should any provision of the Plan or any regulations
adopted thereunder be deemed or held to be unlawful or invalid for any
reason, such fact shall not adversely affect the other provisions or
regulations unless such invalidity shall render impossible or
impractical the functioning of the Plan and, in such case, the
appropriate parties shall immediately adopt a new provision or
regulation to take the place of the one held illegal or invalid.
10.14 HEADINGS. The Article headings contained herein are inserted only as a
matter of convenience and for reference and in no way define, limit,
enlarge or describe the scope or intent of this Plan nor in any way
shall they affect this Plan or the construction of any provision
thereof.
10.15 TERMS. Capitalized terms shall have meanings as defined herein.
Singular nouns hall be read as plural, masculine pronouns shall be read
as feminine, and vice versa, as appropriate.
10.16 NOTICE Any notice required or permitted under the Plan shall be
sufficient if in writing and hand delivered or sent by registered or
certified mail. Such notice shall be deemed given as of
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the date of delivery or , if delivered is made by mail, as of the date
shown on the postmark on the receipt for registration or certification.
Mailed notice to the Retirement Committee shall be directed to the
Company's address. Mailed notice to the Participant or Beneficiary
shall be directed to the individual's last known address in company's
records.
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IN WITNESS WHEREOF, General Nutrition, Inc. has caused this instrument to be executed by its duly authorized officer, effective as of this 29th day of March, 2002.
GENERAL NUTRITION, INCORPORATED ATTEST
By: /s/ Samuel Bookheimer By: /s/ James Sander
--------------------------------- --------------------------------
Samuel Bookheimer James Sander
Benefits Director Senior Vice President, Law,
Chief Legal Officer
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Exhibit 10.15
GENERAL NUTRITION CENTERS HOLDING COMPANY
2003 OMNIBUS STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board (defined below) on December 4, 2003, subject to the approval of the stockholders of the Company (defined below). The purpose of the Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the Company's success and to provide incentives to Participants (defined below) that are linked directly to increases in stockholder value and will therefore inure to the benefit of all stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) "Administrator" means the Board, or if and to the
extent the Board does not administer the Plan, the Committee in accordance with
Section 2 below.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(d) "Committee" means any committee the Board may appoint to administer the Plan. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.
(e) "Company" means General Nutrition Centers Holding Company, a Delaware corporation (or any successor corporation).
(f) "Deferred Stock" means the right to receive Stock at the end of a specified deferral period granted pursuant to Section 7 below.
(g) "Disability" shall have the meaning set forth in the Participant's employment agreement, or if no such meaning is set forth, means the inability of a Participant to perform substantially his or her duties and responsibilities to the Company or to any Parent or Subsidiary by reason of a physical or mental disability or infirmity (i) for a continuous period of six months, or (ii) at such earlier time as the Participant submits medical evidence satisfactory to the Administrator that the Participant has a physical or mental disability or infirmity that will likely prevent the Participant from returning to the performance of the Participant's work duties for six months or longer. The date of such Disability shall be the last day of such six-month period or the day on which the Participant submits such satisfactory medical evidence, as the case may be.
(h) "Eligible Recipient" means an officer, director, employee, consultant or advisor of the Company or of any Parent or Subsidiary.
(i) "Fair Market Value" means, as of any given date, with respect to any awards granted hereunder, (A) the closing sale price of a share of Stock on such date on the principal securities exchange on which the Company's equity securities are listed or traded, (B) the fair market value of a share of Stock as determined in accordance with a method prescribed in the agreement evidencing any award hereunder, (C) in the case of a Limited Stock Appreciation Right, the per share "change in control price" (as defined in the agreement evidencing such Limited Stock Appreciation Right) of the Stock as of the date of exercise or (D) the fair market value of a share of Stock as otherwise determined by the Administrator in the good faith exercise of its discretion.
(j) "Incentive Stock Option" means any Stock Option
intended to be designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(k) "Limited Stock Appreciation Right" means a Stock Appreciation Right that can be exercised only in the event of a "change in control" (as defined in the award evidencing such Limited Stock Appreciation Right).
(l) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option, including any Stock Option that provides (as of the time such Stock Option is granted) that it will not be treated as an Incentive Stock Option.
(m) "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain.
(n) "Participant" means any Eligible Recipient selected by the Administrator, pursuant to the Administrator's authority in Section 2 below, to receive grants of Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, awards of Restricted Stock, Deferred Stock, or Performance Shares or any combination of the foregoing.
(o) "Performance Shares" means shares of Stock that are subject to restrictions based upon the attainment of specified performance objectives granted pursuant to Section 7 below.
(p) "Restricted Stock" means shares of Stock subject to certain restrictions granted pursuant to Section 7 below.
(q) "Stock" means the common stock, par value $0.01 per share, of the Company.
(r) "Stock Appreciation Right" means the right pursuant to an award granted under Section 6 below to receive an amount equal to the excess, if any, of (A) the Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the shares of Stock covered by such right or such portion thereof, over (B) the aggregate exercise price of such right or such portion thereof.
(s) "Stock Option" means an option to purchase shares of Stock granted pursuant to Section 5 below.
(t) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board or, at the Board's sole discretion, by the Committee, which shall be appointed by the Board, and which shall serve at the pleasure of the Board. Pursuant to the terms of the Plan, the Administrator shall have the power and authority:
Pursuant to the terms of the Plan, the Administrator shall have the power and authority:
(a) to select those Eligible Recipients who shall be Participants;
(b) to determine whether and to what extent Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, awards of Restricted Stock, Deferred Stock or Performance Shares or a combination of any of the foregoing, are to be granted hereunder to Participants;
(c) to determine the number of shares of Stock to be covered by each award granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of each award granted hereunder
(including, but not limited to, (x) the restrictions applicable to awards of
Restricted Stock or Deferred Stock and the conditions under which restrictions
applicable to such awards of Restricted Stock or Deferred Stock shall lapse, and
(y) the performance goals and periods applicable to awards of Performance
Shares);
(e) to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, awards of Restricted Stock, Deferred Stock or Performance Shares or any combination of the foregoing granted hereunder; and
(f) to reduce the option price of any Stock Option to the then current Fair Market Value if the Fair Market Value of the Stock covered by such Stock Option has declined since the date such Stock Option was granted.
The Administrator shall have the authority, in its sole discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 4,000,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
To the extent that (i) a Stock Option expires or is otherwise terminated without being exercised, or (ii) any shares of Stock subject to any award of Restricted Stock, Deferred Stock or Performance Shares granted hereunder are forfeited, such shares of Stock shall again be available for issuance in connection with future awards granted under the Plan. If any shares of Stock have been pledged as collateral for indebtedness incurred by a Participant in connection with the exercise of a Stock Option and such shares of Stock are returned to the Company in satisfaction of such indebtedness, such shares of Stock shall again be available for issuance in connection with future awards granted under the Plan.
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number of shares of Stock reserved for issuance under the Plan and the maximum number of shares of Stock that may be granted to any Participant in any calendar year, (ii) the kind, number and option price of shares of Stock subject to outstanding Stock Options and Stock Appreciation Rights granted under the Plan, and (iii) the kind, number and purchase price of shares of Stock subject to outstanding awards of Restricted Stock, Deferred Stock and Performance Shares granted under the Plan, in each case as may be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made as may be determined by the Administrator, in its sole discretion. An adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right or Limited Stock Appreciation Right related to any Stock Option. In connection with any event described in this paragraph, the Administrator may provide, in its sole discretion, for the cancellation of any outstanding awards and payment in cash or other property therefor.
SECTION 4. ELIGIBILITY.
Eligible Recipients shall be eligible to be granted Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, awards of Restricted Stock, Deferred Stock or Performance Shares or any combination of the foregoing hereunder. The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Recipients, and the Administrator shall determine, in its sole discretion, the number of shares of Stock covered by each such award.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of Stock Option awards need not be the same with respect to each Participant. Participants who are granted Stock Options shall enter into a subscription and/or award agreement with the Company, in such form as the Administrator shall determine, which agreement shall set forth, among other things, the option price of the Stock Option, the term of the Stock Option and provisions regarding exercisability of the Stock Option granted thereunder.
The Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant to any officer or employee of the Company or of any Parent or Subsidiary (including directors who are also officers of the Company) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights or Limited Stock Appreciation Rights). Directors who are not also officers of the Company or of any Parent or Subsidiary, consultants or advisors to the Company or to any Parent or Subsidiary may only be granted Non-Qualified Stock Options (with or without Stock Appreciation Rights or Limited Stock Appreciation Rights). To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. More than one Stock Option may be granted to the same Participant and be outstanding concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Option Price. The per share Exercise Price of Shares
purchasable under an Option shall be determined by the Administrator in its sole
discretion at the time of grant but shall not, (i) in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Common Stock on
such date, (ii) in the case of Non-Qualified Stock Options, be less than the par
value (if any) of the Common Stock. If a Participant owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary and an Incentive Stock Option is granted to such Participant, the per share Exercise Price of such Incentive Stock Option (to the extent required at the time of grant by the Code shall be no less than 110% of the Fair Market Value of the Common Stock on the date such Incentive Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be
fixed by the Administrator, but no Stock Option shall be exercisable more than
ten years after the date such Stock Option is granted; provided, however, that
if an employee owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary and an Incentive
Stock Option is granted to such employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five years from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after the time of grant. The Administrator may provide at the time of grant, in its sole discretion, that any Stock Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine, in its sole discretion, including but not limited to in connection with any "change in control" of the Company (as defined in the agreement evidencing such Stock Option).
(d) Method of Exercise. Subject to paragraph (c) of this
Section 5, Subject to Section 6(c), Options may be exercised in whole or in part
at any time during the Option period, by giving written notice of exercise to
the Company specifying the number of Shares to be purchased, accompanied by
payment in full of the aggregate Exercise Price of the Shares so purchased in
cash or its equivalent, as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made (i) by means of any cashless exercise procedure approved by the
Administrator, (ii) in the form of unrestricted Stock already owned by the
Participant which, (x) in the case of unrestricted Stock acquired upon exercise
of an option, have been owned by the Participant for more than six months on the
date of surrender, and (y) has a Fair Market Value on the date of surrender
equal to the aggregate option price of the Stock as to which such Stock Option
shall be exercised, (iii) any other form of consideration approved by the
Administrator and permitted by applicable law or (iv) any combination of the
foregoing. A Participant shall generally have the rights to dividends and any
other rights of a stockholder with respect to the Stock subject to the Stock
Option only after the Participant has given written notice of exercise, has paid
in full for such shares, and, if requested, has given the representation
described in paragraph (b) of Section 10 below.
Notwithstanding anything to the contrary contained herein, a Stock Option may not be exercised for a fraction of a share of Stock.
The Administrator may require the surrender of all or a portion of any Stock Option granted under the Plan as a condition precedent to the grant of a new Stock Option. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at the price, during such period and on such other terms and conditions as are specified by the Administrator at the time the new Stock Option is granted. Upon their surrender, Stock Options shall be canceled and the shares of Stock previously subject to such canceled Stock Options shall again be available for future grants of Stock Options and other awards hereunder.
(e) Non-Transferability of Options. Except by will or under the laws of descent and distribution, the Participant shall not be permitted to sell, transfer, pledge or assign any Stock Option, and all Stock Options shall be exercisable, during the Participant's lifetime, only by the Participant.
(f) Termination of Employment or Service. If a Participant's employment with or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary terminates by reason of his or her death, Disability or for any other reason, the Stock Option may thereafter be exercised to the extent provided in the agreement evidencing such Stock Option, or as otherwise determined by the Administrator.
(g) Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of shares of Stock with respect to which Incentive Stock Options granted to a Participant under this Plan and all other option plans of the Company or of any Parent or Subsidiary become exercisable for the first time by the Participant during any calendar year exceeds $100,000 (as determined in accordance with Section 422(d) of the Code), the portion of such Incentive Stock Options in excess of $100,000 shall be treated as Non-Qualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights and Limited Stock Appreciation Rights may be granted either alone ("Free Standing Rights") or in conjunction with all or part of any Stock Option granted under the Plan ("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock Appreciation Rights or Limited Stock Appreciation Rights shall be made; the number of shares of Stock to be awarded, the exercise price (or, in the case of a Limited Stock Appreciation Right, the "change in control price"), and all other conditions of Stock Appreciation Rights and Limited Stock Appreciation Rights. The provisions of Stock Appreciation Rights and Limited Stock Appreciation Rights need not be the same with respect to each Participant.
Stock Appreciation Rights and Limited Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Awards. The prospective recipient of a Stock Appreciation Right or Limited Stock Appreciation Right shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award (a "Stock Appreciation Right Agreement" or "Limited Stock Appreciation Right Agreement," as appropriate) and delivered a fully executed copy thereof to the Company, within a period of sixty days (or such other period as the Administrator may specify) after the award date. Participants who are granted Stock Appreciation Rights or Limited Stock Appreciation Rights shall have no rights as stockholders of the Company with respect to the grant or exercise of such rights.
(b) Exercisability.
(i) Stock Appreciation Rights that are Free Standing Rights ("Free Standing Stock Appreciation Rights") shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant; provided, however, that no Free Standing Stock Appreciation Right shall be exercisable during the first six months of its term, except that this additional limitation shall not apply in the event of a Participant's death or Disability prior to the expiration of such six-month period.
(ii) Stock Appreciation Rights that are Related Rights ("Related Stock Appreciation Rights") shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 above and this Section 6 of the Plan; provided, however, that a Related Stock Appreciation Right granted in connection with an Incentive Stock Option shall be exercisable only if and when the Fair Market Value of the Stock subject to the Incentive Stock Option exceeds the option price of such Stock Option; provided, further, that no Related Stock Appreciation Right shall be exercisable during the first six months of its term, except that this additional limitation shall not apply in the event of a Participant's death or Disability prior to the expiration of such six-month period.
(iii) Limited Stock Appreciation Rights shall only be exercised within the 30-day period following a "change in control" (as defined by the Administrator in the Limited Stock Appreciation Right Agreement evidencing such right) and, with respect to Limited Stock Appreciation Rights that are Related Rights ("Related Limited Stock Appreciation Rights"), only to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 above and this Section 6 of the Plan.
(c) Payment Upon Exercise.
(i) Upon the exercise of a Free Standing Stock Appreciation Right, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and shares of Stock) equal in value to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the price per share specified in the Free Standing Stock Appreciation Right (which price shall be no less than 100% of the Fair Market Value of the Stock on the date of grant) multiplied by the number of shares of Stock in respect of which the Free Standing Stock Appreciation Right is being exercised, with the Administrator having the right to determine the form of payment.
(ii) A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, an amount in cash or that number of shares of Stock (or any combination of cash and shares of Stock) equal in value to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the option price per share specified in the related Stock Option multiplied by the number of shares of Stock in respect of which the Related Stock Appreciation Right is being exercised, with the Administrator having the right to determine the form of payment. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
(iii) Upon the exercise of a Limited Stock Appreciation Right, the Participant shall be entitled to receive an amount in cash equal in value to the excess of the "change in control price" (as defined in the agreement evidencing such Limited Stock Appreciation Right) of one share of Stock as of the date of exercise over (A) the option price per share specified in the related Stock Option, or (B) in the case of a Limited Stock Appreciation Right which is a Free Standing Stock Appreciation Right, the price per share specified in the Free Standing Stock Appreciation Right, such excess to be multiplied by the number of shares in respect of which the Limited Stock Appreciation Right shall have been exercised.
(d) Non-Transferability.
(i) Free Standing Stock Appreciation Rights shall be transferable only when and to the extent that a Stock Option would be transferable under Section 5 of the Plan.
(ii) Related Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Section 5 of the Plan.
(iii) Limited Stock Appreciation Rights shall be transferable only when and to the extent that a Stock Option would be transferable under Section 5 of the Plan.
(e) Termination of Employment or Service.
(i) In the event of the termination of employment or service of a Participant who has been granted one or more Free Standing Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
(ii) In the event of the termination of employment or service of a Participant who has been granted one or more Related Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the related Stock Options.
(iii) In the event of the termination of employment or service of a Participant who has been granted one or more Limited Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.
(f) Term.
(i) The term of each Free Standing Stock Appreciation Right shall be fixed by the Administrator, but no Free Standing Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted.
(ii) The term of each Related Stock Appreciation Right shall be the term of the Stock Option to which it relates, but no Related Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted.
(iii) The term of each Limited Stock Appreciation Right shall be fixed by the Administrator, but no Limited Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
Awards of Restricted Stock, Deferred Stock or Performance Shares may be issued either alone or in addition to other awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Stock, Deferred Stock or Performance Shares shall be made; the number of shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock, Deferred Stock or Performance Shares; the Restricted Period (as defined in paragraph (b) of this Section 7) applicable to awards of Restricted Stock or Deferred Stock; the performance objectives applicable to awards of Deferred Stock or Performance Shares; and all other conditions of the awards of Restricted Stock, Deferred Stock and Performance Shares. Subject to the requirements of Section 162(m) of the Code, as applicable, the Administrator may also condition the grant of the award of Restricted Stock, Deferred Stock or Performance Shares upon the exercise of Stock Options, or upon such other criteria as the Administrator may determine, in its sole discretion. The provisions of the awards of Restricted Stock, Deferred Stock or Performance Shares need not be the same with respect to each Participant.
(a) Awards and Certificates. The prospective recipient of awards of Restricted Stock, Deferred Stock or Performance Shares shall not have any rights with respect to any such award, unless and until such recipient has executed an agreement evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock Award Agreement" or "Performance Shares Award Agreement," as appropriate) and delivered a fully executed copy thereof to the Company, within a period of sixty days (or such other period as the Administrator may specify) after the award date. Except as otherwise provided below in this Section 7(b), (i) each Participant who is granted an award of Restricted Stock or Performance Shares shall be issued a stock certificate in respect of such shares of Restricted Stock or Performance Shares; and (ii) such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such award.
The Company may require that the stock certificates evidencing Restricted Stock or Performance Shares granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock or Performance Shares, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award.
With respect to awards of Deferred Stock, at the expiration of the Restricted Period, stock certificates in respect of such shares of Deferred Stock shall be delivered to the Participant, or his legal representative, in a number equal to the number of shares of Stock covered by the Deferred Stock award.
(b) Restrictions and Conditions. The awards of Restricted Stock, Deferred Stock and Performance Shares granted pursuant to this Section 7 shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock Award Agreement, Deferred Stock Award Agreement or Performance Shares Award Agreement, as appropriate, governing any such award, during such period as may be set by the Administrator commencing on the date of grant (the "Restricted Period"), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock, Deferred Stock or Performance Shares awarded under the Plan; provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals, the Participant's termination of employment or service as a director, consultant or advisor to the Company or any Parent or Subsidiary, the Participant's death or Disability or the occurrence of a "change in control" as defined in the Restricted Stock Award Agreement, Deferred Stock Award Agreement or Performance Shares Award Agreement, as appropriate, evidencing such award.
(ii) Except as provided in paragraph (b)(i) of this Section 7, the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted Stock or Performance Shares during the Restricted Period. The
Participant shall generally not have the rights of a stockholder with respect to Stock subject to awards of Deferred Stock during the Restricted Period; provided, however, that dividends declared during the Restricted Period with respect to the number of shares of Stock covered by Deferred Stock shall be paid to the Participant. Certificates for shares of unrestricted Stock shall be delivered to the Participant promptly after, and only after, the Restricted Period shall expire without forfeiture in respect of such awards of Restricted Stock, Deferred Stock or Performance Shares except as the Administrator, in its sole discretion, shall otherwise determine.
(iii) The rights of Participants granted awards of Restricted Stock, Deferred Stock or Performance Shares upon termination of employment or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary terminates for any reason during the Restricted Period shall be set forth in the Restricted Stock Award Agreement, Deferred Stock Award Agreement or Performance Shares Award Agreement, as appropriate, governing such awards.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any award theretofore granted without such Participant's consent, or that, without the approval of the stockholders (as described below), would:
(a) except as provided in Section 3 of the Plan, increase the total number of shares of Stock reserved for issuance under the Plan;
(b) change the class of officers, directors, employees, consultants and advisors eligible to participate in the Plan; or
(c) extend the maximum option period under paragraph (b) of Section 5 of the Plan.
Notwithstanding the foregoing, stockholder approval under this
Section 8 shall only be required at such time and under such circumstances as
stockholder approval would be required under Section 422 of the Code, stock
exchange rules or other applicable law or regulation with respect to any
material amendment to an employee benefit plan of the Company.
The Administrator may amend the terms of any award theretofore granted, prospectively or retroactively, but, subject to Section 3 of Plan, no such amendment shall impair the rights of any Participant without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
SECTION 10. GENERAL PROVISIONS.
(a) Shares of Stock shall not be issued pursuant to the exercise of any award granted hereunder unless the exercise of such award and the issuance and delivery of such shares of Stock pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act and the requirements of any stock exchange upon which the Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) The Administrator may require each person acquiring shares of Stock hereunder to represent to and agree with the Company in writing that such person is acquiring the shares of Stock without a view to distribution thereof. The certificates for such shares of Stock may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.
(c) Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval, if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment or service with the Company or any Parent or Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Parent or Subsidiary to terminate the employment or service of any of its Eligible Recipients at any time.
(d) Each Participant shall, no later than the date as of which the value of an award first becomes includible in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such award. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
(e) No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
Stockholder Approval; Effective Date of Plan.
(a) The grant of any Award hereunder shall be contingent upon stockholder approval of the Plan being obtained within 12 months before or after the date the Board adopts the Plan.
(b) Subject to the approval of the Plan by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted by the Board, the Plan shall be effective as of December 5, 2003 (the "Effective Date").
SECTION 11. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock Appreciation Right, or awards of Restricted Stock, Deferred Stock or Performance Shares shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards theretofore granted may extend beyond that date.
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 5th day of December, 2003 (the "Effective Date"), by and between General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and LOUIS MANCINI (the "Executive").
WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES.
1.1 TITLE. During the "Employment Period" (as defined in SECTION 2 hereof), the Executive shall serve as the President and Chief Executive Officer of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions. During the Employment Period, in his capacity as President and Chief Executive Officer of the Company, the Executive shall report directly to the Board of Directors of the Company (the "Board").
1.2 DUTIES. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to him by the Board, commensurate with his serving as President and Chief Executive Officer. Except for sick leave, reasonable vacations, and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all his working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities of his positions in furtherance of the business affairs and activities of the Company, and its subsidiaries and affiliates and, except where the Company provides its written consent otherwise, shall maintain his principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as the Board may from time to time reasonably establish for senior executive officers of the Company.
2. TERM OF EMPLOYMENT.
2.1 EMPLOYMENT PERIOD. Subject to (i) the consummation of the transaction pursuant to that certain Purchase Agreement dated October 16, 2003 by and among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc. (the "Transaction"), and (ii) execution by the Executive of that certain Stockholders' Agreement by and among General Nutrition Centers Holding Company ("Holdings") and its Stockholders dated December 5, 2003 and (iii) the investment by Executive of $600,000 in common stock ("Common Stock") of Holdings on the closing of the Transaction, the employment of the Executive hereunder shall
continue until the later to occur of (i) December 31, 2005, or (ii) the
applicable expiration date of any extension of this Agreement as provided in
SECTION 2.2 hereof, unless terminated earlier in accordance with the provisions
of this Agreement (the "Employment Period").
2.2 EXTENSION. On October 31, 2004, and on each October 31st thereafter, the Employment Period shall be extended for an additional one-year period unless the Company or the Executive notifies the other in writing at least 30 days prior to such date of its or his election, in its or his sole discretion, not to extend the Employment Period.
3. COMPENSATION AND GENERAL BENEFITS.
3.1 BASE SALARY.
(a) During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to Five Hundred Twenty-Five Thousand Dollars ($525,000) (such base salary, as adjusted from time to time pursuant to SECTION 3.1(B), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the practice of the Company in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.
(b) The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may increase Executive's Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.
3.2 BONUS. With respect to the 2004 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") based upon the Company's attainment of annual goals established by the Board or the Compensation Committee, which are based on the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and debt amortization goals. Executive's target Annual Bonus shall be fifty percent (50%) of Executive's Base Salary with a maximum of one hundred and twenty percent (120%) of Executive's Base Salary if the Company exceeds the EBITDA and debt amortization goals based on levels to be determined by the Board or the Compensation Committee for the applicable year. Any Annual Bonus earned shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures. Any Annual Bonus payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.
3.3 EXPENSES. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3.3 or elsewhere herein, the Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable and necessary expenses incurred by him in performing his duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.
3.4 FRINGE BENEFITS. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its executives and key management employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy. The award of any additional fringe benefits under this SECTION 3.4 shall be separate and distinct from the right of the Executive to receive the Annual Bonus payment from the Company described in SECTION 3.2.
3.5 STOCK OPTIONS. Pursuant to the General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (the "Plan") and subject to SECTION 4 below and the approval of the Administrator of the Plan (as defined therein), Executive shall be granted an initial option to purchase a total of 375,000 shares of Common Stock, with a per share exercise price equal to $6 per share. Such option shall become vested and exercisable in four (4) equal annual installments on each anniversary of the Effective Date. The Administrator may grant additional options to purchase Common Stock to the Executive, pursuant to the terms of the Plan. Except as otherwise provided, the option shall be subject to the terms and conditions of the Plan and the form of option agreement approved by the Administrator. In the event of a Change of Control (as defined in SECTION 4.3(H) below), all of Executive's stock options granted pursuant to the Plan shall vest in full and become immediately exercisable, but in no event shall such options be exercisable following their expiration date.
4. TERMINATION.
4.1 GENERAL. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in SECTION 2, unless earlier terminated in accordance with the provisions of this SECTION 4.
4.2 DEATH OR DISABILITY OF THE EXECUTIVE.
(a) The employment of the Executive
hereunder (and the Employment Period) shall terminate upon (i) the death of the
Executive, and (ii) at the option of the Company, upon not less than fifteen
(15) days' prior written notice to the Executive or his personal representative
or guardian, if the Executive suffers a "Total Disability" (as defined in
SECTION 4.2(B) below). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the
case may be (reduced by any benefits paid or payable to the Executive, his
beneficiaries or estate under any Company-sponsored disability benefit plan;
provided, however, that no such reduction shall be made for any benefits paid
upon the Executive's death under the Company's life insurance policy), (i) the
Executive's current Base Salary for the remainder of the Employment Period
(without giving effect to any further extensions pursuant to SECTION 2.2 hereof)
and (ii) a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof
(based on the period of actual employment) that the Executive would have been
entitled to had he worked the full year during which the termination occurred,
provided that bonus targets are met for the year of such termination. The bonus
shall be payable in full within forty-five (45) days following the determination
of the amount thereof and in accordance with the Company's normal payroll
practices and procedures.
(b) For purposes of this Agreement,
"Total Disability" shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform,
with or without reasonable accommodation, the material duties of the Executive
required hereby, and that such disability has lasted for one hundred twenty days
(120) days during the immediately preceding twelve (12) month period or is, as
of the date of determination, reasonably expected to last six (6) months or
longer after the date of determination, in each case based upon medically
available reliable information, or (iii) Executive's qualifying for benefits
under the Company's long-term disability coverage, if any.
(c) In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (i) any examinations that the Board determines are relevant to a determination of whether he is mentally and/or physically disabled, or required by the Company physician, (ii) furnish such medical information as may be reasonably requested, and (iii) waive any applicable physician patient privilege that may arise because of such examination.
(d) With respect to outstanding stock options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180) day period following such date of termination.
(e) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.2(d) hereof), for the two hundred seventy
(270) day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive or his
beneficiary, as applicable, and the Executive or his beneficiary hereby agrees
to sell any or all such shares to the Company (or the Company's designee) for an
amount equal to the product of (x) the per share current fair market value of a
share of Common Stock (as determined by the Board in good faith) and (y) the
number of shares so purchased. Executive (or his beneficiary) shall have the
right to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.2(E), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON.
(a) The Company may terminate Executive's employment without "Cause" (as defined below), and thereby terminate Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice.
(b) The Executive may resign, and thereby terminate his employment (and the Employment Period), at any time for "Good Reason" (as defined below), upon not less than thirty (30) days' prior written notice to the Company specifying in reasonable detail the reason therefor; provided, however, that the Company shall have a reasonable opportunity to cure any such "Good Reason " (to the extent possible) within thirty (30) days after the Company's receipt of such notice.
(c) In the event the Executive's employment is terminated (i) by the Company without "Cause," or (ii) by the Executive for "Good Reason" then, subject to SECTION 4.3(d) hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period without giving effect to any further extensions pursuant to SECTION 2.2 hereof, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company.
(ii) If such termination occurs upon or within six (6) months following a Change of Control (as defined below), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) for a two (2) year period following such date of termination, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company, subject to SECTION 4.3(c)(vii) hereof.
(iii) The Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had he worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures, subject to SECTION 4.3(c)(vii) hereof.
(iv) Unless prohibited by law or, with respect to any insured benefit, the terms of the applicable insurance contract, the Executive shall continue to participate in, and be covered under, the Company's group life, disability, sickness, accident and health insurance programs on the same basis as other executives of the Company (A) through
the expiration of the Employment Period, or, (B) in the event that Executive's Base Salary is being paid pursuant to clause (ii) of this Section 4.3(c), for the two (2) year period the Executive is entitled to such payment, without giving effect to any further extensions pursuant to SECTION 2.2 hereof.
(v) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (x) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (y) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(vi) With respect to any
shares of Common Stock held by the Executive that are vested as of the date of
termination (or issued pursuant to the exercise of options following such date
of termination pursuant to SECTION 4.3(c)(v) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.3(c)(vi), shall be reduced by 10% excluding such other tax or withholding as
may be required by applicable law.
(vii) With respect to the amounts payable to the Executive under clauses (ii) and (iii) of this SECTION 4.3 following a Change of Control, the Executive may elect to receive the present value of such amounts in a lump sum based on a present value discount rate equal to six percent (6%) per year. Such election must be made in writing by the Executive within fifteen (15) days of his date of termination.
(d) The Executive agrees to release the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, representatives, and successors from and against any and all claims that the Executive may have against any such person relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.
(e) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a "Payment")
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code
of 1986, as amended (and any regulations issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right, in his sole discretion, to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.
(i) Subject to the provisions of SECTION 4.3(e)(ii), all determinations required to be made under this SECTION 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by PricewaterhouseCoopers LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to SECTIONS 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.
(ii) As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under the preceding clause (i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.
(iii) The Executive shall give written notice to the Company of any claim by the IRS that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the
Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.
(iv) This SECTION 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.
(f) For purposes of this Agreement, the Executive would be entitled to terminate his employment for "Good Reason" if without the Executive's prior written consent:
(i) The Company fails to comply with any material obligation imposed by this Agreement;
(ii) The Company assigns to the Executive duties or responsibilities that are materially inconsistent with the Executive's positions, duties, responsibilities, titles and offices in effect on the Effective Date;
(iii) The Company effects a reduction in the Executive's Base Salary; or
(iv) The Company requires the Executive to be based (excluding regular travel responsibilities) at any office or location more than 75 miles from the principal office of the Company on the Effective Date.
(g) For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events:
(i) a material failure by the Executive to comply with any material obligation imposed by this Agreement (including, without limitation, any violation of SECTIONS 5.1 or 5.2 hereof);
(ii) the Executive's being convicted of, or pleading guilty or nolo contendere to, or being indicted for any felony;
(iii) theft, embezzlement, or fraud by the Executive in connection with the performance of his duties hereunder;
(iv) the Executive's engaging in any activity that gives rise to a material conflict of interest with the Company that is not be cured following ten (10) days' written notice and a demand to cure such conflict; or
(v) the misappropriation by the Executive of any material business opportunity of the Company.
(h) For purposes of this Agreement, "Change of Control" shall be defined as set forth in Exhibit A, which is attached hereto.
4.4 TERMINATION FOR CAUSE AND VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON.
(a) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause" and the Executive may voluntarily resign and thereby terminate his employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice. Upon termination by the Company for Cause or resignation by the Executive other than for Good Reason, the following provisions shall apply:
(b) The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(d) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.4(c) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.4(d), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
(e) Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1 CONFIDENTIALITY; INTELLECTUAL PROPERTY.
(a) The Executive recognizes that the
Company's business interests require a confidential relationship between the
Company and the Executive and the fullest practical protection and confidential
treatment of all "Trade Secrets or Confidential or Proprietary Information" (as
defined in SECTION 5.3 hereof). Accordingly, the Executive agrees that, except
as required by law or court order, the Executive will keep confidential and will
not disclose to anyone (other than the Company or any Persons designated by the
Company), or publish, utter, exploit, make use of (or aid others in publishing,
uttering, exploiting or using), or otherwise "Misappropriate" (as defined in
SECTION 5.3 hereof) any Trade Secrets or Confidential or Proprietary Information
at any time. The Executive's obligations hereunder shall continue during the
Employment Period and thereafter for so long as such Trade Secrets or
Confidential or Proprietary Information remain Trade Secrets or Confidential or
Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the Company, and he is and will be intimately involved in the development and/or implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches SECTION 5.1 hereof with respect to any Trade Secrets or Confidential or Proprietary Information, such breach shall be deemed to be a Misappropriation of such Trade Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or Confidential or Proprietary Information will result in immediate and irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas, inventions, marketing, sales and business plans, formulae, designs, pricing, studies, programs, reviews and related materials, strategies and products, whether domestic or foreign, developed by him during the Employment Period, including, without limitation, any process, operation, technique, product, improvement or development which may be patentable or copyrightable, are and will be the property of the Company, and that he will do, at the Company's request and cost, whatever is reasonably necessary to secure the rights thereto by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period and at any other time upon request, the Executive further agrees to surrender to the Company all documents, writings, notes, business, marketing or strategic plans, financial information, customer, distributor and supplier lists, manuals, illustrations, models, and other such materials (collectively, "Company Documents") produced by the Executive or coming into his possession by or through employment with the Company during the Employment Period, within the scope of such employment, and agrees that all Company Documents are at all times the company's
property, provided that the Executive may maintain a copy of any Company Documents that are not Trade Secrets or Confidential or Proprietary Information.
(e) During the Employment Period, the Executive represents and agrees that he will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that he will not bring onto the premises of the Company such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.
5.2 NONCOMPETITION AND NONSOLICITATION. During the Employment Period and until the end of the Restricted Period (as defined below), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, owner, officer, director, stockholder, member, employee, agent or consultant of any other Person within the United States of America or in any other country or territory in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide services as a consultant to, or participate in the ownership, management, operation, or control of, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the nutritional supplements industry.
(b) solicit, hire, or otherwise attempt to establish for any Person, any employment, agency, consulting or other business relationship with any Person who is or was an employee of the Company or any of its Affiliates.
(c) The parties hereto acknowledge and agree that, notwithstanding anything in SECTION 5.2(a) hereof, (x) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in SECTION 5.2(a) as long as with respect to each such investment, the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and, such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (y) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (x) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend his name to, any such Person.
(d) The Executive acknowledges and agrees that, for purposes of this SECTION 5.2, an act by his spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling, or other member of his immediate family will be treated as an indirect act by the Executive.
5.3 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential or Proprietary Information by a Person who knows or has reason to know that the Trade Secret or Confidential or Proprietary Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means (each, an "Improper Means"); or
(ii) the disclosure or use of
any Trade Secret or Confidential or Proprietary Information without the express
consent of the Company by a Person who (x) used Improper Means to acquire
knowledge of the Trade Secret or Confidential or Proprietary Information; or (y)
at the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Trade Secret or Confidential or Proprietary Information was (i)
derived from or through a Person who had utilized Improper Means to acquire it,
(ii) acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use, or (iii) derived from or through a Person who owed a duty to
the Company to maintain its secrecy or limit its use; or (z) before a material
change of his or her position, knew or had reason to know that it was a Trade
Secret or Confidential or Proprietary Information and that knowledge of it had
been acquired by accident or mistake.
(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, or government or other agency or political subdivision thereof, or any other legal or commercial entity.
(d) "Restricted Period" shall mean the
longer of (i) the first anniversary of the date of termination of employment or
(ii) the period during which the Executive is receiving payments from the
Company pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary Information" shall mean:
(i) any and all information, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic or otherwise), arrangements, pricing and other data (collectively, "Information") that (a) derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts by the Company that are reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information (i) unique to the Company which has a significant business purpose and is not known or generally available from sources outside of such Persons or typical of industry practice, or (ii) the disclosure of which would have a material adverse effect on the business of the Company.
5.4 REMEDIES. The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of SECTION 5 hereof,
the Company may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have, the Company shall be entitled to seek
injunctive relief, specific performance or any other form of equitable relief to
remedy a breach or threatened breach of this Agreement (including, without
limitation, any actual or threatened Misappropriation) by the Executive and to
enforce the provisions of this Agreement. The Executive and the Company each
agrees (i) to submit to the jurisdiction of any competent court where the
Company may choose to seek equitable relief, (ii) to waive any and all defenses
the Executive may have on the grounds of lack of jurisdiction of such court; and
(iii) that neither party shall be required to post any bond, undertaking, or
other financial deposit or guarantee in seeking or obtaining such equitable
relief. The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company may
have at law or in equity.
5.5 INTERPRETATION; SEVERABILITY.
(a) The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions, and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision, or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common
law to enforce its rights with respect to any and all Trade Secrets or Confidential or Proprietary Information or unfair competition by the Executive.
6. MISCELLANEOUS.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION,
PROVIDED, HOWEVER, THAT THE PARTIES AGREE THAT ANY ARBITRATOR OR ARBITRATORS
SELECTED OR APPOINTED TO HEAR THE ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF
THE CIRCUIT OR APPELLATE COURTS OF NEW YORK OR A PRACTICING ATTORNEY WITH AT
LEAST FIFTEEN (15) YEARS OF EXPERIENCE IN MATTERS REASONABLY RELATED TO THE
ISSUE OR ISSUES IN DISPUTE. ANY RESULTING HEARING SHALL BE HELD IN THE NEW YORK
AREA. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE
BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION. COSTS AND FEES
INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL BE BORNE BY THE PARTIES AS
DETERMINED BY THE ARBITRATION.
6.2 ENTIRE AGREEMENT; WAIVER. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to principles of conflict of laws.
6.4 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation, or sale of all or substantially all of such Person's assets or equity interests.
6.5 REPRESENTATION BY COUNSEL. Each of the parties hereto acknowledges that (i) it or he has read this Agreement in its entirety and understands all of its terms and conditions, (ii) it or he has had the opportunity to consult with any individuals of its or his choice regarding its or his agreement to the provisions contained herein, including legal counsel of its or his choice, and any decision not to was his or its alone, and (iii) it or he is entering into this Agreement of its or his own free will, without coercion from any source.
6.6 INTERPRETATION. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that he, it, or his or its counsel was the drafter thereof.
6.7 SURVIVAL. The provisions of SECTIONS 5 AND 6 hereof shall survive the termination of this Agreement.
6.8 NOTICES. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Attn: Board of Directors
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Attention: Jeffrey Cohen, Esq.
Telephone: (213) 687-5000
Facsimile: (213) 687-5600
If to the Executive, to:
Louis Mancini
c/o General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
or to such other address as one party may provide in writing to the other party from time to time.
6.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
6.10 CAPTIONS. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.
6.11 NO THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.
6.12 WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James M. Sander
--------------------------- ---------------------------------
Name: James M. Sander
Title: Senior Vice President
EXECUTIVE
/s/ Thomasine Kiggins /s/ Louis Mancini
--------------------------- ------------------------------------
Louis Mancini
|
EXHIBIT A
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
For purposes of this definition, the following terms shall have the meanings set forth below:
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
EXHIBIT 10.17
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment (the "Amendment") to that certain Employment Agreement dated as of December 5, 2003 (the "Employment Agreement") among Louis Mancini (the "Executive") and General Nutrition Centers, Inc., a Delaware corporation (the "Company") is entered into as of the 12th day of February 2004 among the Executive and the Company.
The Employment Agreement is hereby amended to the extent set forth below, such amendment to be effective upon the execution hereof by the Company and the Executive. All other provisions of the Employment Agreement shall remain in full force and effect.
1. Section 4.3(c)(iv) of the Employment Agreement is hereby amended to read in its entirety as follows:
(iv) Unless prohibited by law or, with respect to any insured
benefit, the terms of the applicable insurance contract, the Executive shall (A)
continue to participate in, and be covered under, the Company's group life,
disability, sickness, accident and health insurance programs on the same basis
as other executives of the Company and (B) continue to be entitled to the
perquisites available to the Executive immediately preceding his date of
termination as provided in the Perquisite Policy for Senior Executives (as such
policy may be amended by the Board of Directors of the Company from time to
time), in each case (x) through to the expiration of the Employment Period, or,
(y) in the event that Executive's Base Salary is being paid pursuant to clause
(ii) of this Section 4.3(c), for the two (2) year period the Executive is
entitled to such payment, without giving effect to any further extensions
pursuant to SECTION 2.2 hereof.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James M. Sander
------------------------------------ -------------------------------
Name: James M. Sander
|
Title: Senior Vice President
EXECUTIVE
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 5th day of December, 2003 (the "Effective Date"), by and between General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and DAVID HEILMAN (the "Executive").
WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES.
1.1 TITLE. During the "Employment Period" (as defined in SECTION 2 hereof), the Executive shall serve as the Executive Vice President and Chief Financial Officer of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions. During the Employment Period, in his capacity as Executive Vice President and Chief Financial Officer of the Company, the Executive shall report directly to the Board of Directors of the Company (the "Board").
1.2 DUTIES. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to him by the Board, commensurate with his serving as Executive Vice President and Chief Financial Officer. Except for sick leave, reasonable vacations, and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all his working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities of his positions in furtherance of the business affairs and activities of the Company, and its subsidiaries and affiliates and, except where the Company provides its written consent otherwise, shall maintain his principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as the Board may from time to time reasonably establish for senior executive officers of the Company.
2. TERM OF EMPLOYMENT.
2.1 EMPLOYMENT PERIOD. Subject to (i) the consummation of the transaction pursuant to that certain Purchase Agreement dated October 16, 2003 by and among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc. (the "Transaction"), and (ii) execution by the Executive of that certain Stockholders' Agreement by and among General Nutrition Centers Holding Company ("Holdings") and its Stockholders dated December 5, 2003 and (iii) the investment by Executive of $375,000 in common stock ("Common Stock") of Holdings on the closing of the Transaction, the employment of the Executive hereunder shall
continue until the later to occur of (i) December 31, 2005, or (ii) the
applicable expiration date of any extension of this Agreement as provided in
SECTION 2.2 hereof, unless terminated earlier in accordance with the provisions
of this Agreement (the "Employment Period").
2.2 EXTENSION. On October 31, 2004, and on each October 31st thereafter, the Employment Period shall be extended for an additional one-year period unless the Company or the Executive notifies the other in writing at least 30 days prior to such date of its or his election, in its or his sole discretion, not to extend the Employment Period.
3. COMPENSATION AND GENERAL BENEFITS.
3.1 BASE SALARY.
(a) During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to Three Hundred Fifty Thousand Dollars ($350,000) (such base salary, as adjusted from time to time pursuant to SECTION 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the practice of the Company in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.
(b) The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may increase Executive's Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.
3.2 BONUS. With respect to the 2004 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") based upon the Company's attainment of annual goals established by the Board or the Compensation Committee, which are based on the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and debt amortization goals. Executive's target Annual Bonus shall be forty percent (40%) of Executive's Base Salary with a maximum of one hundred percent (100%) of Executive's Base Salary if the Company exceeds the EBITDA and debt amortization goals based on levels to be determined by the Board or the Compensation Committee for the applicable year. Any Annual Bonus earned shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures. Any Annual Bonus payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.
3.3 EXPENSES. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3.3 or elsewhere herein, the Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable and necessary expenses incurred by him in performing his duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.
3.4 FRINGE BENEFITS. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its executives and key management employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy. The award of any additional fringe benefits under this SECTION 3.4 shall be separate and distinct from the right of the Executive to receive the Annual Bonus payment from the Company described in SECTION 3.2.
3.5 STOCK OPTIONS. Pursuant to the General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (the "Plan") and subject to SECTION 4 below and the approval of the Administrator of the Plan (as defined therein), Executive shall be granted an initial option to purchase a total of 300,000 shares of Common Stock, with a per share exercise price equal to $6 per share. Such option shall become vested and exercisable in four (4) equal annual installments on each anniversary of the Effective Date. The Administrator may grant additional options to purchase Common Stock to the Executive, pursuant to the terms of the Plan. Except as otherwise provided, the option shall be subject to the terms and conditions of the Plan and the form of option agreement approved by the Administrator. In the event of a Change of Control (as defined in SECTION 4.3(h) below), all of Executive's stock options granted pursuant to the Plan shall vest in full and become immediately exercisable, but in no event shall such options be exercisable following their expiration date.
4. TERMINATION.
4.1 GENERAL. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in SECTION 2, unless earlier terminated in accordance with the provisions of this SECTION 4.
4.2 DEATH OR DISABILITY OF THE EXECUTIVE.
(a) The employment of the Executive
hereunder (and the Employment Period) shall terminate upon (i) the death of the
Executive, and (ii) at the option of the Company, upon not less than fifteen
(15) days' prior written notice to the Executive or his personal representative
or guardian, if the Executive suffers a "Total Disability" (as defined in
SECTION 4.2(b) below). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the
case may be (reduced by any benefits paid or payable to the Executive, his
beneficiaries or estate under any Company-sponsored disability benefit plan;
provided, however, that no such reduction shall be made for any benefits paid
upon the Executive's death under the Company's life insurance policy), (i) the
Executive's current Base Salary for the remainder of the Employment Period
(without giving effect to any further extensions pursuant to SECTION 2.2 hereof)
and (ii) a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof
(based on the period of actual employment) that the Executive would have been
entitled to had he worked the full year during which the termination occurred,
provided that bonus targets are met for the year of such termination. The bonus
shall be payable in full within forty-five (45) days following the determination
of the amount thereof and in accordance with the Company's normal payroll
practices and procedures.
(b) For purposes of this Agreement,
"Total Disability" shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform,
with or without reasonable accommodation, the material duties of the Executive
required hereby, and that such disability has lasted for one hundred twenty days
(120) days during the immediately preceding twelve (12) month period or is, as
of the date of determination, reasonably expected to last six (6) months or
longer after the date of determination, in each case based upon medically
available reliable information, or (iii) Executive's qualifying for benefits
under the Company's long-term disability coverage, if any.
(c) In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (i) any examinations that the Board determines are relevant to a determination of whether he is mentally and/or physically disabled, or required by the Company physician, (ii) furnish such medical information as may be reasonably requested, and (iii) waive any applicable physician patient privilege that may arise because of such examination.
(d) With respect to outstanding stock options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180) day period following such date of termination.
(e) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.2(d) hereof), for the two hundred seventy
(270) day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive or his
beneficiary, as applicable, and the Executive or his beneficiary hereby agrees
to sell any or all such shares to the Company (or the Company's designee) for an
amount equal to the product of (x) the per share current fair market value of a
share of Common Stock (as determined by the Board in good faith) and (y) the
number of shares so purchased. Executive (or his beneficiary) shall have the
right to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.2(e), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON.
(a) The Company may terminate Executive's employment without "Cause" (as defined below), and thereby terminate Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice.
(b) The Executive may resign, and thereby terminate his employment (and the Employment Period), at any time for "Good Reason" (as defined below), upon not less than thirty (30) days' prior written notice to the Company specifying in reasonable detail the reason therefor; provided, however, that the Company shall have a reasonable opportunity to cure any such "Good Reason " (to the extent possible) within thirty (30) days after the Company's receipt of such notice.
(c) In the event the Executive's employment is terminated (i) by the Company without "Cause," or (ii) by the Executive for "Good Reason" then, subject to SECTION 4.3(d) hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period without giving effect to any further extensions pursuant to SECTION 2.2 hereof, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company.
(ii) If such termination occurs upon or within six (6) months following a Change of Control (as defined below), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) for a two (2) year period following such date of termination, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company, subject to SECTION 4.3(c)(vii) hereof.
(iii) The Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had he worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures, subject to SECTION 4.3(c)(vii) hereof.
(iv) Unless prohibited by law or, with respect to any insured benefit, the terms of the applicable insurance contract, the Executive shall continue to participate in, and be covered under, the Company's group life, disability, sickness, accident and health insurance programs on the same basis as other executives of the Company (A) through
the expiration of the Employment Period, or, (B) in the event that Executive's Base Salary is being paid pursuant to clause (ii) of this Section 4.3(c), for the two (2) year period the Executive is entitled to such payment, without giving effect to any further extensions pursuant to SECTION 2.2 hereof.
(v) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (x) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (y) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(vi) With respect to any
shares of Common Stock held by the Executive that are vested as of the date of
termination (or issued pursuant to the exercise of options following such date
of termination pursuant to SECTION 4.3(c)(v) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.3(c)(vi), shall be reduced by 10% excluding such other tax or withholding as
may be required by applicable law.
(vii) With respect to the amounts payable to the Executive under clauses (ii) and (iii) of this SECTION 4.3 following a Change of Control, the Executive may elect to receive the present value of such amounts in a lump sum based on a present value discount rate equal to six percent (6%) per year. Such election must be made in writing by the Executive within fifteen (15) days of his date of termination.
(d) The Executive agrees to release the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, representatives, and successors from and against any and all claims that the Executive may have against any such person relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.
(e) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a "Payment")
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code
of 1986, as amended (and any regulations issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right, in his sole discretion, to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.
(i) Subject to the provisions of SECTION 4.3(e)(ii), all determinations required to be made under this SECTION 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by PricewaterhouseCoopers LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to SECTIONS 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.
(ii) As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under the preceding clause (i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.
(iii) The Executive shall give written notice to the Company of any claim by the IRS that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the
Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.
(iv) This SECTION 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.
(f) For purposes of this Agreement, the Executive would be entitled to terminate his employment for "Good Reason" if without the Executive's prior written consent:
(i) The Company fails to comply with any material obligation imposed by this Agreement;
(ii) The Company assigns to the Executive duties or responsibilities that are materially inconsistent with the Executive's positions, duties, responsibilities, titles and offices in effect on the Effective Date;
(iii) The Company effects a reduction in the Executive's Base Salary; or
(iv) The Company requires the Executive to be based (excluding regular travel responsibilities) at any office or location more than 75 miles from the principal office of the Company on the Effective Date.
(g) For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events:
(i) a material failure by the Executive to comply with any material obligation imposed by this Agreement (including, without limitation, any violation of SECTIONS 5.1 or 5.2 hereof);
(ii) the Executive's being convicted of, or pleading guilty or nolo contendere to, or being indicted for any felony;
(iii) theft, embezzlement, or fraud by the Executive in connection with the performance of his duties hereunder;
(iv) the Executive's engaging in any activity that gives rise to a material conflict of interest with the Company that is not be cured following ten (10) days' written notice and a demand to cure such conflict; or
(v) the misappropriation by the Executive of any material business opportunity of the Company.
(h) For purposes of this Agreement, "Change of Control" shall be defined as set forth in Exhibit A, which is attached hereto.
4.4 TERMINATION FOR CAUSE AND VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON.
(a) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause" and the Executive may voluntarily resign and thereby terminate his employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice. Upon termination by the Company for Cause or resignation by the Executive other than for Good Reason, the following provisions shall apply:
(b) The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(d) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.4(c) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.4(d), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
(e) Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1 CONFIDENTIALITY; INTELLECTUAL PROPERTY.
(a) The Executive recognizes that the
Company's business interests require a confidential relationship between the
Company and the Executive and the fullest practical protection and confidential
treatment of all "Trade Secrets or Confidential or Proprietary Information" (as
defined in SECTION 5.3 hereof). Accordingly, the Executive agrees that, except
as required by law or court order, the Executive will keep confidential and will
not disclose to anyone (other than the Company or any Persons designated by the
Company), or publish, utter, exploit, make use of (or aid others in publishing,
uttering, exploiting or using), or otherwise "Misappropriate" (as defined in
SECTION 5.3 hereof) any Trade Secrets or Confidential or Proprietary Information
at any time. The Executive's obligations hereunder shall continue during the
Employment Period and thereafter for so long as such Trade Secrets or
Confidential or Proprietary Information remain Trade Secrets or Confidential or
Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the Company, and he is and will be intimately involved in the development and/or implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches SECTION 5.1 hereof with respect to any Trade Secrets or Confidential or Proprietary Information, such breach shall be deemed to be a Misappropriation of such Trade Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or Confidential or Proprietary Information will result in immediate and irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas, inventions, marketing, sales and business plans, formulae, designs, pricing, studies, programs, reviews and related materials, strategies and products, whether domestic or foreign, developed by him during the Employment Period, including, without limitation, any process, operation, technique, product, improvement or development which may be patentable or copyrightable, are and will be the property of the Company, and that he will do, at the Company's request and cost, whatever is reasonably necessary to secure the rights thereto by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period and at any other time upon request, the Executive further agrees to surrender to the Company all documents, writings, notes, business, marketing or strategic plans, financial information, customer, distributor and supplier lists, manuals, illustrations, models, and other such materials (collectively, "Company Documents") produced by the Executive or coming into his possession by or through employment with the Company during the Employment Period, within the scope of such employment, and agrees that all Company Documents are at all times the Company's
property, provided that the Executive may maintain a copy of any Company Documents that are not Trade Secrets or Confidential or Proprietary Information.
(e) During the Employment Period, the Executive represents and agrees that he will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that he will not bring onto the premises of the Company such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.
5.2 NONCOMPETITION AND NONSOLICITATION. During the Employment Period and until the end of the Restricted Period (as defined below), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, owner, officer, director, stockholder, member, employee, agent or consultant of any other Person within the United States of America or in any other country or territory in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide services as a consultant to, or participate in the ownership, management, operation, or control of, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the nutritional supplements industry.
(b) solicit, hire, or otherwise attempt to establish for any Person, any employment, agency, consulting or other business relationship with any Person who is or was an employee of the Company or any of its Affiliates.
(c) The parties hereto acknowledge and agree that, notwithstanding anything in SECTION 5.2(a) hereof, (x) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in SECTION 5.2(a) as long as with respect to each such investment, the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and, such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (y) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (x) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend his name to, any such Person.
(d) The Executive acknowledges and agrees that, for purposes of this SECTION 5.2, an act by his spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling, or other member of his immediate family will be treated as an indirect act by the Executive.
5.3 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential or Proprietary Information by a Person who knows or has reason to know that the Trade Secret or Confidential or Proprietary Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means (each, an "Improper Means"); or
(ii) the disclosure or use of
any Trade Secret or Confidential or Proprietary Information without the express
consent of the Company by a Person who (x) used Improper Means to acquire
knowledge of the Trade Secret or Confidential or Proprietary Information; or (y)
at the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Trade Secret or Confidential or Proprietary Information was (i)
derived from or through a Person who had utilized Improper Means to acquire it,
(ii) acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use, or (iii) derived from or through a Person who owed a duty to
the Company to maintain its secrecy or limit its use; or (z) before a material
change of his or her position, knew or had reason to know that it was a Trade
Secret or Confidential or Proprietary Information and that knowledge of it had
been acquired by accident or mistake.
(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, or government or other agency or political subdivision thereof, or any other legal or commercial entity.
(d) "Restricted Period" shall mean the
longer of (i) the first anniversary of the date of termination of employment or
(ii) the period during which the Executive is receiving payments from the
Company pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary Information" shall mean:
(i) any and all information, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic or otherwise), arrangements, pricing and other data (collectively, "Information") that (a) derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts by the Company that are reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information (i) unique to the Company which has a significant business purpose and is not known or generally available from sources outside of such Persons or typical of industry practice, or (ii) the disclosure of which would have a material adverse effect on the business of the Company.
5.4 REMEDIES. The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of SECTION 5 hereof,
the Company may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have, the Company shall be entitled to seek
injunctive relief, specific performance or any other form of equitable relief to
remedy a breach or threatened breach of this Agreement (including, without
limitation, any actual or threatened Misappropriation) by the Executive and to
enforce the provisions of this Agreement. The Executive and the Company each
agrees (i) to submit to the jurisdiction of any competent court where the
Company may choose to seek equitable relief, (ii) to waive any and all defenses
the Executive may have on the grounds of lack of jurisdiction of such court; and
(iii) that neither party shall be required to post any bond, undertaking, or
other financial deposit or guarantee in seeking or obtaining such equitable
relief. The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company may
have at law or in equity.
5.5 INTERPRETATION; SEVERABILITY.
(a) The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions, and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision, or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common
law to enforce its rights with respect to any and all Trade Secrets or Confidential or Proprietary Information or unfair competition by the Executive.
6. MISCELLANEOUS.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION,
PROVIDED, HOWEVER, THAT THE PARTIES AGREE THAT ANY ARBITRATOR OR ARBITRATORS
SELECTED OR APPOINTED TO HEAR THE ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF
THE CIRCUIT OR APPELLATE COURTS OF NEW YORK OR A PRACTICING ATTORNEY WITH AT
LEAST FIFTEEN (15) YEARS OF EXPERIENCE IN MATTERS REASONABLY RELATED TO THE
ISSUE OR ISSUES IN DISPUTE. ANY RESULTING HEARING SHALL BE HELD IN THE NEW YORK
AREA. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE
BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION. COSTS AND FEES
INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL BE BORNE BY THE PARTIES AS
DETERMINED BY THE ARBITRATION.
6.2 ENTIRE AGREEMENT; WAIVER. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to principles of conflict of laws.
6.4 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation, or sale of all or substantially all of such Person's assets or equity interests.
6.5 REPRESENTATION BY COUNSEL. Each of the parties hereto acknowledges that (i) it or he has read this Agreement in its entirety and understands all of its terms and conditions, (ii) it or he has had the opportunity to consult with any individuals of its or his choice regarding its or his agreement to the provisions contained herein, including legal counsel of its or his choice, and any decision not to was his or its alone, and (iii) it or he is entering into this Agreement of its or his own free will, without coercion from any source.
6.6 INTERPRETATION. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that he, it, or his or its counsel was the drafter thereof.
6.7 SURVIVAL. The provisions of SECTIONS 5 AND 6 hereof shall survive the termination of this Agreement.
6.8 NOTICES. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Attn: Board of Directors
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Attention: Jeffrey Cohen, Esq.
Telephone: (213) 687-5000
Facsimile: (213) 687-5600
If to the Executive, to:
David Heilman
c/o General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
or to such other address as one party may provide in writing to the other party from time to time.
6.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
6.10 CAPTIONS. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.
6.11 NO THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.
6.12 WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James M. Sander
------------------------------------ -------------------------------
Name: James M. Sander
Title: Senior Vice President
EXECUTIVE
/s/ Thomasine Kiggins /s/ David Heilman
------------------------------------ -----------------------------------
David Heilman
|
EXHIBIT A
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
For purposes of this definition, the following terms shall have the meanings set forth below:
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
EXHIBIT 10.19
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment (the "Amendment") to that certain Employment Agreement dated as of December 5, 2003 (the "Employment Agreement") among David Heilman (the "Executive") and General Nutrition Centers, Inc., a Delaware corporation (the "Company") is entered into as of the 12th day of February 2004 among the Executive and the Company.
The Employment Agreement is hereby amended to the extent set forth below, such amendment to be effective upon the execution hereof by the Company and the Executive. All other provisions of the Employment Agreement shall remain in full force and effect.
1. Section 4.3(c)(iv) of the Employment Agreement is hereby amended to read in its entirety as follows:
(iv) Unless prohibited by law or, with respect to any insured
benefit, the terms of the applicable insurance contract, the Executive shall (A)
continue to participate in, and be covered under, the Company's group life,
disability, sickness, accident and health insurance programs on the same basis
as other executives of the Company and (B) continue to be entitled to the
perquisites available to the Executive immediately preceding his date of
termination as provided in the Perquisite Policy for Senior Executives (as such
policy may be amended by the Board of Directors of the Company from time to
time), in each case (x) through to the expiration of the Employment Period, or,
(y) in the event that Executive's Base Salary is being paid pursuant to clause
(ii) of this Section 4.3(C), for the two (2) year period the Executive is
entitled to such payment, without giving effect to any further extensions
pursuant to SECTION 2.2 hereof.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James M. Sander
----------------------------- ----------------------------
Name: James M. Sander
Title: Senior Vice President
|
EXECUTIVE
/s/ Thomasine Kiggins /s/ David Heilman
---------------------------- --------------------------------
David Heilman
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EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 5th day of December, 2003 (the "Effective Date"), by and between General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and JOSEPH FORTUNATO (the "Executive").
WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES.
1.1 TITLE. During the "Employment Period" (as defined in SECTION 2 hereof), the Executive shall serve as the Executive Vice President and Chief Operating Officer of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions. During the Employment Period, in his capacity as Executive Vice President and Chief Operating Officer of the Company, the Executive shall report directly to the Board of Directors of the Company (the "Board").
1.2 DUTIES. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to him by the Board, commensurate with his serving as Executive Vice President and Chief Operating Officer. Except for sick leave, reasonable vacations, and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all his working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities of his positions in furtherance of the business affairs and activities of the Company, and its subsidiaries and affiliates and, except where the Company provides its written consent otherwise, shall maintain his principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as the Board may from time to time reasonably establish for senior executive officers of the Company.
2. TERM OF EMPLOYMENT.
2.1 EMPLOYMENT PERIOD. Subject to (i) the consummation of the transaction pursuant to that certain Purchase Agreement dated October 16, 2003 by and among Royal Numico N.V., Numico USA, Inc. and Apollo GNC Holding, Inc. (the "Transaction"), and (ii) execution by the Executive of that certain Stockholders' Agreement by and among General Nutrition Centers Holding Company ("Holdings") and its Stockholders dated December 5, 2003 and (iii) the investment by Executive of $375,000 in common stock ("Common Stock") of Holdings on the closing of the Transaction, the employment of the Executive hereunder shall
continue until the later to occur of (i) December 31, 2005, or (ii) the
applicable expiration date of any extension of this Agreement as provided in
SECTION 2.2 hereof, unless terminated earlier in accordance with the provisions
of this Agreement (the "Employment Period").
2.2 EXTENSION. On October 31, 2004, and on each October 31st thereafter, the Employment Period shall be extended for an additional one-year period unless the Company or the Executive notifies the other in writing at least 30 days prior to such date of its or his election, in its or his sole discretion, not to extend the Employment Period.
3. COMPENSATION AND GENERAL BENEFITS.
3.1 BASE SALARY.
(a) During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to Three Hundred Fifty Thousand Dollars ($350,000) (such base salary, as adjusted from time to time pursuant to SECTION 3.1(B), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the practice of the Company in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.
(b) The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may increase Executive's Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.
3.2 BONUS. With respect to the 2004 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") based upon the Company's attainment of annual goals established by the Board or the Compensation Committee, which are based on the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and debt amortization goals. Executive's target Annual Bonus shall be forty percent (40%) of Executive's Base Salary with a maximum of one hundred percent (100%) of Executive's Base Salary if the Company exceeds the EBITDA and debt amortization goals based on levels to be determined by the Board or the Compensation Committee for the applicable year. Any Annual Bonus earned shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures. Any Annual Bonus payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.
3.3 EXPENSES. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3.3 or elsewhere herein, the Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable and necessary expenses incurred by him in performing his duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.
3.4 FRINGE BENEFITS. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its executives and key management employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy. The award of any additional fringe benefits under this SECTION 3.4 shall be separate and distinct from the right of the Executive to receive the Annual Bonus payment from the Company described in SECTION 3.2.
3.5 STOCK OPTIONS. Pursuant to the General Nutrition Centers Holding Company 2003 Omnibus Stock Incentive Plan (the "Plan") and subject to SECTION 4 below and the approval of the Administrator of the Plan (as defined therein), Executive shall be granted an initial option to purchase a total of 300,000 shares of Common Stock, with a per share exercise price equal to $6 per share. Such option shall become vested and exercisable in four (4) equal annual installments on each anniversary of the Effective Date. The Administrator may grant additional options to purchase Common Stock to the Executive, pursuant to the terms of the Plan. Except as otherwise provided, the option shall be subject to the terms and conditions of the Plan and the form of option agreement approved by the Administrator. In the event of a Change of Control (as defined in SECTION 4.3(H) below), all of Executive's stock options granted pursuant to the Plan shall vest in full and become immediately exercisable, but in no event shall such options be exercisable following their expiration date.
4. TERMINATION.
4.1 GENERAL. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in SECTION 2, unless earlier terminated in accordance with the provisions of this SECTION 4.
4.2 DEATH OR DISABILITY OF THE EXECUTIVE.
(a) The employment of the Executive
hereunder (and the Employment Period) shall terminate upon (i) the death of the
Executive, and (ii) at the option of the Company, upon not less than fifteen
(15) days' prior written notice to the Executive or his personal representative
or guardian, if the Executive suffers a "Total Disability" (as defined in
SECTION 4.2(B) below). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the
case may be (reduced by any benefits paid or payable to the Executive, his
beneficiaries or estate under any Company-sponsored disability benefit plan;
provided, however, that no such reduction shall be made for any benefits paid
upon the Executive's death under the Company's life insurance policy), (i) the
Executive's current Base Salary for the remainder of the Employment Period
(without giving effect to any further extensions pursuant to SECTION 2.2 hereof)
and (ii) a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof
(based on the period of actual employment) that the Executive would have been
entitled to had he worked the full year during which the termination occurred,
provided that bonus targets are met for the year of such termination. The bonus
shall be payable in full within forty-five (45) days following the determination
of the amount thereof and in accordance with the Company's normal payroll
practices and procedures.
(b) For purposes of this Agreement,
"Total Disability" shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform,
with or without reasonable accommodation, the material duties of the Executive
required hereby, and that such disability has lasted for one hundred twenty days
(120) days during the immediately preceding twelve (12) month period or is, as
of the date of determination, reasonably expected to last six (6) months or
longer after the date of determination, in each case based upon medically
available reliable information, or (iii) Executive's qualifying for benefits
under the Company's long-term disability coverage, if any.
(c) In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (i) any examinations that the Board determines are relevant to a determination of whether he is mentally and/or physically disabled, or required by the Company physician, (ii) furnish such medical information as may be reasonably requested, and (iii) waive any applicable physician patient privilege that may arise because of such examination.
(d) With respect to outstanding stock options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180) day period following such date of termination.
(e) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.2(d) hereof), for the two hundred seventy
(270) day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive or his
beneficiary, as applicable, and the Executive or his beneficiary hereby agrees
to sell any or all such shares to the Company (or the Company's designee) for an
amount equal to the product of (x) the per share current fair market value of a
share of Common Stock (as determined by the Board in good faith) and (y) the
number of shares so purchased. Executive (or his beneficiary) shall have the
right to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.2(e), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON.
(a) The Company may terminate Executive's employment without "Cause" (as defined below), and thereby terminate Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice.
(b) The Executive may resign, and thereby terminate his employment (and the Employment Period), at any time for "Good Reason" (as defined below), upon not less than thirty (30) days' prior written notice to the Company specifying in reasonable detail the reason therefor; provided, however, that the Company shall have a reasonable opportunity to cure any such "Good Reason " (to the extent possible) within thirty (30) days after the Company's receipt of such notice.
(c) In the event the Executive's employment is terminated (i) by the Company without "Cause," or (ii) by the Executive for "Good Reason" then, subject to SECTION 4.3(d) hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period without giving effect to any further extensions pursuant to SECTION 2.2 hereof, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company.
(ii) If such termination occurs upon or within six (6) months following a Change of Control (as defined below), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) for a two (2) year period following such date of termination, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company, subject to SECTION 4.3(c)(viiI) hereof.
(iii) The Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had he worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures, subject to SECTION 4.3(c)(vii) hereof.
(iv) Unless prohibited by law or, with respect to any insured benefit, the terms of the applicable insurance contract, the Executive shall continue to participate in, and be covered under, the Company's group life, disability, sickness, accident and health insurance programs on the same basis as other executives of the Company through (A)
through the expiration of the Employment Period, or, (B) in the event that Executive's Base Salary is being paid pursuant to clause (ii) of this Section 4.3(c), for the two (2) year period the Executive is entitled to such payment, without giving effect to any further extensions pursuant to SECTION 2.2 hereof.
(v) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (x) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (y) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(vi) With respect to any
shares of Common Stock held by the Executive that are vested as of the date of
termination (or issued pursuant to the exercise of options following such date
of termination pursuant to SECTION 4.3(c)(v) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.3(c)(vi), shall be reduced by 10% excluding such other tax or withholding as
may be required by applicable law.
(vii) With respect to the amounts payable to the Executive under clauses (ii) and (iii) of this SECTION 4.3 following a Change of Control, the Executive may elect to receive the present value of such amounts in a lump sum based on a present value discount rate equal to six percent (6%) per year. Such election must be made in writing by the Executive within fifteen (15) days of his date of termination.
(d) The Executive agrees to release the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, representatives, and successors from and against any and all claims that the Executive may have against any such person relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.
(e) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a "Payment")
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code
of 1986, as amended (and any regulations issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right, in his sole discretion, to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.
(i) Subject to the provisions of SECTION 4.3(e)(ii), all determinations required to be made under this SECTION 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by PricewaterhouseCoopers LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to SECTIONS 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.
(ii) As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under the preceding clause (i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.
(iii) The Executive shall give written notice to the Company of any claim by the IRS that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the
Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.
(iv) This SECTION 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.
(f) For purposes of this Agreement, the Executive would be entitled to terminate his employment for "Good Reason" if without the Executive's prior written consent:
(i) The Company fails to comply with any material obligation imposed by this Agreement;
(ii) The Company assigns to the Executive duties or responsibilities that are materially inconsistent with the Executive's positions, duties, responsibilities, titles and offices in effect on the Effective Date;
(iii) The Company effects a reduction in the Executive's Base Salary; or
(iv) The Company requires the Executive to be based (excluding regular travel responsibilities) at any office or location more than 75 miles from the principal office of the Company on the Effective Date.
(g) For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events:
(i) a material failure by the Executive to comply with any material obligation imposed by this Agreement (including, without limitation, any violation of SECTIONS 5.1 or 5.2 hereof);
(ii) the Executive's being convicted of, or pleading guilty or nolo contendere to, or being indicted for any felony;
(iii) theft, embezzlement, or fraud by the Executive in connection with the performance of his duties hereunder;
(iv) the Executive's engaging in any activity that gives rise to a material conflict of interest with the Company that is not be cured following ten (10) days' written notice and a demand to cure such conflict; or
(v) the misappropriation by the Executive of any material business opportunity of the Company.
(h) For purposes of this Agreement, "Change of Control" shall be defined as set forth in Exhibit A, which is attached hereto.
4.4 TERMINATION FOR CAUSE AND VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON.
(a) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause" and the Executive may voluntarily resign and thereby terminate his employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice. Upon termination by the Company for Cause or resignation by the Executive other than for Good Reason, the following provisions shall apply:
(b) The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(d) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.4(c) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased. Executive shall have the right
to request, in writing, that the Board obtain a fairness opinion from a
nationally recognized accounting firm or investment bank chosen by the Company,
to review the Board's fair market value determination of the Common Stock. If
such fairness opinion validates the fair market determination of the Board, the
gross purchase price paid to the Executive for such shares under this SECTION
4.4(d), shall be reduced by 10% excluding such other tax or withholding as may
be required by applicable law.
(e) Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1 CONFIDENTIALITY; INTELLECTUAL PROPERTY.
(a) The Executive recognizes that the
Company's business interests require a confidential relationship between the
Company and the Executive and the fullest practical protection and confidential
treatment of all "Trade Secrets or Confidential or Proprietary Information" (as
defined in SECTION 5.3 hereof). Accordingly, the Executive agrees that, except
as required by law or court order, the Executive will keep confidential and will
not disclose to anyone (other than the Company or any Persons designated by the
Company), or publish, utter, exploit, make use of (or aid others in publishing,
uttering, exploiting or using), or otherwise "Misappropriate" (as defined in
SECTION 5.3 hereof) any Trade Secrets or Confidential or Proprietary Information
at any time. The Executive's obligations hereunder shall continue during the
Employment Period and thereafter for so long as such Trade Secrets or
Confidential or Proprietary Information remain Trade Secrets or Confidential or
Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the Company, and he is and will be intimately involved in the development and/or implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches SECTION 5.1 hereof with respect to any Trade Secrets or Confidential or Proprietary Information, such breach shall be deemed to be a Misappropriation of such Trade Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or Confidential or Proprietary Information will result in immediate and irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas, inventions, marketing, sales and business plans, formulae, designs, pricing, studies, programs, reviews and related materials, strategies and products, whether domestic or foreign, developed by him during the Employment Period, including, without limitation, any process, operation, technique, product, improvement or development which may be patentable or copyrightable, are and will be the property of the Company, and that he will do, at the Company's request and cost, whatever is reasonably necessary to secure the rights thereto by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period and at any other time upon request, the Executive further agrees to surrender to the Company all documents, writings, notes, business, marketing or strategic plans, financial information, customer, distributor and supplier lists, manuals, illustrations, models, and other such materials (collectively, "Company Documents") produced by the Executive or coming into his possession by or through employment with the Company during the Employment Period, within the scope of such employment, and agrees that all Company Documents are at all times the Company's
property, provided that the Executive may maintain a copy of any Company Documents that are not Trade Secrets or Confidential or Proprietary Information.
(e) During the Employment Period, the Executive represents and agrees that he will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that he will not bring onto the premises of the Company such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.
5.2 NONCOMPETITION AND NONSOLICITATION. During the Employment Period and until the end of the Restricted Period (as defined below), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, owner, officer, director, stockholder, member, employee, agent or consultant of any other Person within the United States of America or in any other country or territory in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide services as a consultant to, or participate in the ownership, management, operation, or control of, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the nutritional supplements industry.
(b) solicit, hire, or otherwise attempt to establish for any Person, any employment, agency, consulting or other business relationship with any Person who is or was an employee of the Company or any of its Affiliates.
(c) The parties hereto acknowledge and agree that, notwithstanding anything in SECTION 5.2(a) hereof, (x) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in SECTION 5.2(a) as long as with respect to each such investment, the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and, such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (y) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (x) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend his name to, any such Person.
(d) The Executive acknowledges and agrees that, for purposes of this SECTION 5.2, an act by his spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling, or other member of his immediate family will be treated as an indirect act by the Executive.
5.3 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential or Proprietary Information by a Person who knows or has reason to know that the Trade Secret or Confidential or Proprietary Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means (each, an "Improper Means"); or
(ii) the disclosure or use of
any Trade Secret or Confidential or Proprietary Information without the express
consent of the Company by a Person who (x) used Improper Means to acquire
knowledge of the Trade Secret or Confidential or Proprietary Information; or (y)
at the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Trade Secret or Confidential or Proprietary Information was (i)
derived from or through a Person who had utilized Improper Means to acquire it,
(ii) acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use, or (iii) derived from or through a Person who owed a duty to
the Company to maintain its secrecy or limit its use; or (z) before a material
change of his or her position, knew or had reason to know that it was a Trade
Secret or Confidential or Proprietary Information and that knowledge of it had
been acquired by accident or mistake.
(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, or government or other agency or political subdivision thereof, or any other legal or commercial entity.
(d) "Restricted Period" shall mean the
longer of (i) the first anniversary of the date of termination of employment or
(ii) the period during which the Executive is receiving payments from the
Company pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary Information" shall mean:
(i) any and all information, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic or otherwise), arrangements, pricing and other data (collectively, "Information") that (a) derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts by the Company that are reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information (i) unique to the Company which has a significant business purpose and is not known or generally available from sources outside of such Persons or typical of industry practice, or (ii) the disclosure of which would have a material adverse effect on the business of the Company.
5.4 REMEDIES. The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of SECTION 5 hereof,
the Company may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have, the Company shall be entitled to seek
injunctive relief, specific performance or any other form of equitable relief to
remedy a breach or threatened breach of this Agreement (including, without
limitation, any actual or threatened Misappropriation) by the Executive and to
enforce the provisions of this Agreement. The Executive and the Company each
agrees (i) to submit to the jurisdiction of any competent court where the
Company may choose to seek equitable relief, (ii) to waive any and all defenses
the Executive may have on the grounds of lack of jurisdiction of such court; and
(iii) that neither party shall be required to post any bond, undertaking, or
other financial deposit or guarantee in seeking or obtaining such equitable
relief. The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company may
have at law or in equity.
5.5 INTERPRETATION; SEVERABILITY.
(a) The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions, and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision, or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common
law to enforce its rights with respect to any and all Trade Secrets or Confidential or Proprietary Information or unfair competition by the Executive.
6. MISCELLANEOUS.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION,
PROVIDED, HOWEVER, THAT THE PARTIES AGREE THAT ANY ARBITRATOR OR ARBITRATORS
SELECTED OR APPOINTED TO HEAR THE ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF
THE CIRCUIT OR APPELLATE COURTS OF NEW YORK OR A PRACTICING ATTORNEY WITH AT
LEAST FIFTEEN (15) YEARS OF EXPERIENCE IN MATTERS REASONABLY RELATED TO THE
ISSUE OR ISSUES IN DISPUTE. ANY RESULTING HEARING SHALL BE HELD IN THE NEW YORK
AREA. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE
BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION. COSTS AND FEES
INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL BE BORNE BY THE PARTIES AS
DETERMINED BY THE ARBITRATION.
6.2 ENTIRE AGREEMENT; WAIVER. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to principles of conflict of laws.
6.4 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation, or sale of all or substantially all of such Person's assets or equity interests.
6.5 REPRESENTATION BY COUNSEL. Each of the parties hereto acknowledges that (i) it or he has read this Agreement in its entirety and understands all of its terms and conditions, (ii) it or he has had the opportunity to consult with any individuals of its or his choice regarding its or his agreement to the provisions contained herein, including legal counsel of its or his choice, and any decision not to was his or its alone, and (iii) it or he is entering into this Agreement of its or his own free will, without coercion from any source.
6.6 INTERPRETATION. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that he, it, or his or its counsel was the drafter thereof.
6.7 SURVIVAL. The provisions of SECTIONS 5 AND 6 hereof shall survive the termination of this Agreement.
6.8 NOTICES. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Attn: Board of Directors
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Attention: Jeffrey Cohen, Esq.
Telephone: (213) 687-5000
Facsimile: (213) 687-5600
If to the Executive, to:
Joseph Fortunato
c/o General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
or to such other address as one party may provide in writing to the other party from time to time.
6.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
6.10 CAPTIONS. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.
6.11 NO THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.
6.12 WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James M. Sander
----------------------------- -----------------------------------
Name: James M. Sander
Title: Senior Vice President
EXECUTIVE
/s/ Tracy Helfer /s/ Joseph Fortuanto
----------------------------- -----------------------------------
Joseph Fortunato
|
EXHIBIT A
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
For purposes of this definition, the following terms shall have the meanings set forth below:
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
EXHIBIT 10.21
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment (the "Amendment") to that certain Employment Agreement dated as of December 5, 2003 (the "Employment Agreement") among Joseph Fortunato (the "Executive") and General Nutrition Centers, Inc., a Delaware corporation (the "Company") is entered into as of the 12th day of February 2004 among the Executive and the Company.
The Employment Agreement is hereby amended to the extent set forth below, such amendment to be effective upon the execution hereof by the Company and the Executive. All other provisions of the Employment Agreement shall remain in full force and effect.
1. Section 4.3(c)(iv) of the Employment Agreement is hereby amended to read in its entirety as follows:
(iv) Unless prohibited by law or, with respect to any insured
benefit, the terms of the applicable insurance contract, the Executive shall (A)
continue to participate in, and be covered under, the Company's group life,
disability, sickness, accident and health insurance programs on the same basis
as other executives of the Company and (B) continue to be entitled to the
perquisites available to the Executive immediately preceding his date of
termination as provided in the Perquisite Policy for Senior Executives (as such
policy may be amended by the Board of Directors of the Company from time to
time), in each case (x) through to the expiration of the Employment Period, or,
(y) in the event that Executive's Base Salary is being paid pursuant to clause
(ii) of this Section 4.3(C), for the two (2) year period the Executive is
entitled to such payment, without giving effect to any further extensions
pursuant to SECTION 2.2 hereof.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Thomasine Kiggins By: /s/ James
--------------------------------- ----------------------------------
Name: M. Sander
Title: James M. Sander
|
Senior Vice President
EXECUTIVE
/s/ Tracy Helfer /s/ Joseph Fortuanto
--------------------------------- --------------------------------------
Joseph Fortuanto
|
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 5th day of December, 2003 (the "Effective Date"), by and between General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and SUSAN TRIMBO (the "Executive").
WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES.
1.1 TITLE. During the "Employment Period" (as defined in SECTION 2 hereof), the Executive shall serve as SENIOR VICE PRESIDENT OF SCIENTIFIC AFFAIRS of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.
1.2 DUTIES. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to him, commensurate with his serving as SENIOR VICE PRESIDENT OF SCIENTIFIC AFFAIRS. Except for sick leave, reasonable vacations, and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all his working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities of his positions in furtherance of the business affairs and activities of the Company, and its subsidiaries and affiliates and, except where the Company provides its written consent otherwise, shall maintain his principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as the Board may from time to time reasonably establish for senior executive officers of the Company.
2. TERM OF EMPLOYMENT.
2.1 EMPLOYMENT PERIOD. The employment of the Executive hereunder shall continue until the later to occur of (i) December 31, 2005, or (ii) the applicable expiration date of any extension of this Agreement as provided in SECTION 2.2 hereof, unless terminated earlier in accordance with the provisions of this Agreement (the "Employment Period").
2.2 EXTENSION. On October 31, 2004, and on each October 31st thereafter, the Employment Period shall be extended for an additional one-year period unless the Company or the Executive notifies the other in writing at least 30 days prior to such date of its or his election, in its or his sole discretion, not to extend the Employment Period.
3. COMPENSATION AND GENERAL BENEFITS.
3.1 BASE SALARY.
(a) During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $208,000 (such base salary, as adjusted from time to time pursuant to SECTION 3.1(B), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the practice of the Company in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.
(b) The Board of Directors of the Company (the "Board") or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may increase Executive's Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.
3.2 BONUS. With respect to the 2004 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") in an amount to be determined by the Compensation Committee in the exercise of its discretion for the applicable year. Any Annual Bonus earned shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures. Any Annual Bonus payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.
3.3 EXPENSES. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3.3 or elsewhere herein, the Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable and necessary expenses incurred by him in performing his duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.
3.4 FRINGE BENEFITS. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its executives and key management employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy. The award of any additional fringe benefits under this SECTION 3.4 shall be separate and distinct from the right of the Executive to receive the Annual Bonus payment from the Company described in SECTION 3.2.
3.5 STOCK OPTIONS. Subject to SECTION 4 below and the approval of the Compensation Committee, Executive shall be eligible to participate in and be granted awards under the General Nutrition Centers, Inc. 2003 Omnibus Stock Incentive Plan (the "Plan").
4. TERMINATION.
4.1 GENERAL. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in SECTION 2, unless earlier terminated in accordance with the provisions of this SECTION 4.
4.2 DEATH OR DISABILITY OF THE EXECUTIVE.
(a) The employment of the Executive
hereunder (and the Employment Period) shall terminate upon (i) the death of the
Executive, and (ii) at the option of the Company, upon not less than fifteen
(15) days' prior written notice to the Executive or his personal representative
or guardian, if the Executive suffers a "Total Disability" (as defined in
SECTION 4.2(b) below). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the
case may be (reduced by any benefits paid or payable to the Executive, his
beneficiaries or estate under any Company-sponsored disability benefit plan
program or policy for the period following such date of termination), (i) the
Executive's current Base Salary for the remainder of the Employment Period
(without giving effect to any further extensions pursuant to SECTION 2.2 hereof)
and (ii) subject to the discretion of the Compensation Committee, a prorated
share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of
actual employment) that the Executive would have been entitled to had he worked
the full year during which the termination occurred, provided that bonus targets
are met for the year of such termination. The bonus shall be payable in full
within forty-five (45) days following the determination of the amount thereof
and in accordance with the Company's normal payroll practices and procedures.
(b) For purposes of this Agreement,
"Total Disability" shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform,
with or without reasonable accommodation, the material duties of the Executive
required hereby, and that such disability has lasted for one hundred twenty days
(120) days during the immediately preceding twelve (12) month period or is, as
of the date of determination, reasonably expected to last six (6) months or
longer after the date of determination, in each case based upon medically
available reliable information, or (iii) Executive's qualifying for benefits
under the Company's long-term disability coverage, if any.
(c) In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (i) any examinations that the Compensation Committee determines are relevant to a determination of whether he is mentally and/or physically disabled, or required by the Company physician, (ii) furnish such medical information as may be reasonably requested, and (iii) waive any applicable physician patient privilege that may arise because of such examination.
(d) With respect to outstanding stock options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180) day period following such date of termination.
(e) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.2(D) hereof), for the two hundred seventy
(270) day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive or his
beneficiary, as applicable, and the Executive or his beneficiary hereby agrees
to sell any or all such shares to the Company (or the Company's designee) for an
amount equal to the product of (x) the per share current fair market value of a
share of Common Stock (as determined by the Board in good faith) and (y) the
number of shares so purchased.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON.
(a) The Company may terminate Executive's employment without "Cause" (as defined below), and thereby terminate Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice.
(b) The Executive may resign, and thereby terminate his employment (and the Employment Period), at any time for "Good Reason" (as defined below), upon not less than thirty (30) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such "Good Reason " (to the extent possible) within thirty (30) days after the Company's receipt of such notice.
(c) In the event the Executive's employment is terminated (i) by the Company without "Cause," or (ii) by the Executive for "Good Reason" then, subject to SECTION 4.3(d) hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period without giving effect to any further extensions pursuant to SECTION 2.2 hereof, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company.
(ii) If such termination occurs upon or within six (6) months following a Change of Control (as defined below), the Company shall continue to pay
the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) for a two (2) year period following such date of termination, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company, subject to SECTION 4.3(c)(vii) hereof.
(iii) Subject to the discretion of the Compensation Committee, the Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had he worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures, subject to SECTION 4.3(c)(vii) hereof.
(iv) Unless prohibited by law or,
with respect to any insured benefit, the terms of the applicable insurance
contract, the Executive shall continue to participate in, and be covered under,
the Company's group life, disability, sickness, accident and health insurance
programs on the same basis as other executives of the Company (A) through the
expiration of the Employment Period, or, (B) in the event that Executive's Base
Salary is being paid pursuant to clause (ii) of this Section 4.3(c), for the two
(2) year period the Executive is entitled to such payment, without giving effect
to any further extensions pursuant to SECTION 2.2 hereof.
(v) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (x) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (y) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(vi) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.3(C)(V) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased.
(vii) With respect to the amounts payable to the Executive under clauses (ii) and (iii) of this SECTION 4.3 following a Change of Control, the Executive may elect to receive the present value of such amounts in a lump sum based on a present value discount rate equal to six percent (6%) per year. Such election must be made in writing by the Executive within fifteen (15) days of his date of termination.
(d) The Executive agrees to release the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, representatives, and successors from and against any and all claims that the Executive may have against any such person relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.
(e) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a "Payment")
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (and any
regulations issued thereunder, any successor provision, and any similar
provision of state or local income tax law) (collectively, the "Excise Tax"),
then the amount of the Payment shall be reduced to the highest amount that may
be paid by the Company or other entity without subjecting such Payment to the
Excise Tax (the "Payment Reduction"). The Executive shall have the right, in his
sole discretion, to designate those payments or benefits that shall be reduced
or eliminated under the Payment Reduction to avoid the imposition of the Excise
Tax.
(i) Subject to the provisions of
SECTION 4.3(e)(ii), all determinations required to be made under this SECTION
4.3(e), including whether and when a Payment is subject to Section 4999 and the
assumptions to be utilized in arriving at such determination and in determining
an appropriate Payment Reduction, shall be made by PricewaterhouseCoopers LLP,
or any other nationally recognized accounting firm that shall be the Company's
outside auditors at the time of such determination (the "Accounting Firm"),
which Accounting Firm shall provide detailed supporting calculations to the
Executive and the Company within fifteen (15) business days of the receipt of
notice from the Company or the Executive that there will be a Payment that the
person giving notice believes may be subject to the Excise Tax. All fees and
expenses of the Accounting Firm shall be borne by the Company. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive in
determining whether a Payment Reduction is required and the amount thereof
(subject to SECTIONS 4.3(e)(ii) and (iii)), in the absence of material
mathematical or legal error.
(ii) As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under the preceding clause (i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the
Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.
(iii) The Executive shall give written notice to the Company of any claim by the IRS that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.
(iv) This SECTION 4.3(E) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.
(f) For purposes of this Agreement, the Executive would be entitled to terminate his employment for "Good Reason" if without the Executive's prior written consent:
(i) The Company fails to comply with any material obligation imposed by this Agreement;
(ii) The Company assigns to the Executive duties or responsibilities that are materially inconsistent with the Executive's positions, duties, responsibilities, titles and offices in effect on the Effective Date;
(iii) The Company effects a reduction in the Executive's Base Salary; or
(iv) The Company requires the Executive to be based (excluding regular travel responsibilities) at any office or location more than 75 miles from the principal office of the Company on the Effective Date.
(g) For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events:
(i) a material failure by the Executive to comply with any material obligation imposed by this Agreement (including, without limitation, any violation of SECTIONS 5.1 or 5.2 hereof);
(ii) the Executive's being convicted of, or pleading guilty or nolo contendere to, or being indicted for any felony;
(iii) theft, embezzlement, or fraud by the Executive in connection with the performance of his duties hereunder;
(iv) the Executive's engaging in any activity that gives rise to a material conflict of interest with the Company that is not be cured following ten (10) days' written notice and a demand to cure such conflict; or
(v) the misappropriation by the Executive of any material business opportunity of the Company.
(h) For purposes of this Agreement, "Change of Control" shall be defined as set forth in Exhibit A, which is attached hereto.
4.4 TERMINATION FOR CAUSE AND VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON.
(a) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause" and the Executive may voluntarily resign and thereby terminate his employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice. Upon termination by the Company for Cause or resignation by the Executive other than for Good Reason, the following provisions shall apply:
(b) The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(d) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.4(c) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased.
(e) Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1 CONFIDENTIALITY; INTELLECTUAL PROPERTY.
(a) The Executive recognizes that the
Company's business interests require a confidential relationship between the
Company and the Executive and the fullest practical protection and confidential
treatment of all "Trade Secrets or Confidential or Proprietary Information" (as
defined in SECTION 5.3 hereof). Accordingly, the Executive agrees that, except
as required by law or court order, the Executive will keep confidential and will
not disclose to anyone (other than the Company or any Persons designated by the
Company), or publish, utter, exploit, make use of (or aid others in publishing,
uttering, exploiting or using), or otherwise "Misappropriate" (as defined in
SECTION 5.3 hereof) any Trade Secrets or Confidential or Proprietary Information
at any time. The Executive's obligations hereunder shall continue during the
Employment Period and thereafter for so long as such Trade Secrets or
Confidential or Proprietary Information remain Trade Secrets or Confidential or
Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the Company, and he is and will be intimately involved in the development and/or implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches SECTION 5.1 hereof with respect to any Trade Secrets or Confidential or Proprietary Information, such breach shall be deemed to be a Misappropriation of such Trade Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or Confidential or Proprietary Information will result in immediate and irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas, inventions, marketing, sales and business plans, formulae, designs, pricing, studies, programs, reviews and related materials, strategies and products, whether domestic or foreign, developed by him during the Employment Period, including, without limitation, any process, operation, technique, product, improvement or development which may be patentable or copyrightable, are and will be the property of the Company, and that he will do, at the Company's request and cost, whatever is reasonably necessary to secure the rights thereto by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period and at any other time upon request, the Executive further agrees to surrender to the Company all documents, writings, notes, business, marketing or strategic plans, financial information, customer, distributor and supplier lists, manuals, illustrations, models, and other such materials (collectively, "Company Documents") produced by the Executive or coming into his possession by or through employment with the Company during the Employment Period, within the scope of such employment, and agrees that all Company Documents are at all times the Company's property, provided that the Executive may maintain a copy of any Company Documents that are not Trade Secrets or Confidential or Proprietary Information.
(e) During the Employment Period, the Executive represents and agrees that he will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that he will not bring onto the premises of the Company such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.
5.2 NONCOMPETITION AND NONSOLICITATION. During the Employment Period and until the end of the Restricted Period (as defined below), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, owner, officer, director, stockholder, member, employee, agent or consultant of any other Person within the United States of America or in any other country or territory in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide services as a consultant to, or participate in the ownership, management, operation, or control of, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the nutritional supplements industry.
(b) solicit, hire, or otherwise attempt to establish for any Person, any employment, agency, consulting or other business relationship with any Person who is or was an employee of the Company or any of its Affiliates.
(c) The parties hereto acknowledge and agree that, notwithstanding anything in SECTION 5.2(a) hereof, (x) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in SECTION 5.2(a) as long as with respect to each such investment, the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and, such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (y) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (x) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend his name to, any such Person.
(d) The Executive acknowledges and agrees that, for purposes of this SECTION 5.2, an act by his spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling, or other member of his immediate family will be treated as an indirect act by the Executive.
5.3 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential or Proprietary Information by a Person who knows or has reason to know that the Trade Secret or Confidential or Proprietary Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means (each, an "Improper Means"); or
(ii) the disclosure or use of any
Trade Secret or Confidential or Proprietary Information without the express
consent of the Company by a Person who (x) used Improper Means to acquire
knowledge of the Trade Secret or Confidential or Proprietary Information; or (y)
at the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Trade Secret or Confidential or Proprietary Information was (i)
derived from or through a Person who had utilized Improper Means to acquire it,
(ii) acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use, or (iii) derived from or through a Person who owed a duty to
the Company to maintain its secrecy or limit its use; or (z) before a material
change of his or her position, knew or had reason to know that it was a Trade
Secret or Confidential or Proprietary Information and that knowledge of it had
been acquired by accident or mistake.
(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, or government or other agency or political subdivision thereof, or any other legal or commercial entity.
(d) "Restricted Period" shall mean the
longer of (i) the first anniversary of the date of termination of employment or
(ii) the period during which the Executive is receiving payments from the
Company pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary Information" shall mean:
(i) any and all information, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic or otherwise), arrangements, pricing and other data (collectively, "Information") that (a) derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts by the Company that are reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information
(i) unique to the Company which has a significant business purpose and is not
known or generally available from sources outside of such Persons or typical of
industry practice, or (ii) the disclosure of which would have a material adverse
effect on the business of the Company.
5.4 REMEDIES. The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of SECTION 5 hereof,
the Company may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have, the Company shall be entitled to seek
injunctive relief, specific performance or any other form of equitable relief to
remedy a breach or threatened breach of this Agreement (including, without
limitation, any actual or threatened Misappropriation) by the Executive and to
enforce the provisions of this Agreement. The Executive and the Company each
agrees (i) to submit to the jurisdiction of any competent court where the
Company may choose to seek equitable relief, (ii) to waive any and all defenses
the Executive may have on the grounds of lack of jurisdiction of such court; and
(iii) that neither party shall be required to post any bond, undertaking, or
other financial deposit or guarantee in seeking or obtaining such equitable
relief. The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company may
have at law or in equity.
5.5 INTERPRETATION; SEVERABILITY.
(a) The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions, and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision, or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction
will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Trade Secrets or Confidential or Proprietary Information or unfair competition by the Executive.
6. MISCELLANEOUS.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION,
PROVIDED, HOWEVER, THAT THE PARTIES AGREE THAT ANY ARBITRATOR OR ARBITRATORS
SELECTED OR APPOINTED TO HEAR THE ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF
THE CIRCUIT OR APPELLATE COURTS OF NEW YORK OR A PRACTICING ATTORNEY WITH AT
LEAST FIFTEEN (15) YEARS OF EXPERIENCE IN MATTERS REASONABLY RELATED TO THE
ISSUE OR ISSUES IN DISPUTE. ANY RESULTING HEARING SHALL BE HELD IN THE NEW YORK
AREA. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE
BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION. COSTS AND FEES
INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL BE BORNE BY THE PARTIES AS
DETERMINED BY THE ARBITRATION.
6.2 ENTIRE AGREEMENT; WAIVER. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to principles of conflict of laws.
6.4 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation, or sale of all or substantially all of such Person's assets or equity interests.
6.5 REPRESENTATION BY COUNSEL. Each of the parties hereto acknowledges that (i) it or he has read this Agreement in its entirety and understands all of its terms and conditions, (ii) it or he has had the opportunity to consult with any individuals of its or his choice regarding its or his agreement to the provisions contained herein, including legal counsel of its or his choice, and any decision not to was his or its alone, and (iii) it or he is entering into this Agreement of its or his own free will, without coercion from any source.
6.6 INTERPRETATION. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that he, it, or his or its counsel was the drafter thereof.
6.7 SURVIVAL. The provisions of SECTIONS 5 AND 6 hereof shall survive the termination of this Agreement.
6.8 NOTICES. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Attn: Board of Directors
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Attention: Jeffrey Cohen, Esq.
Telephone: (213) 687-5000
Facsimile: (213) 687-5600
If to the Executive, to:
Susan Trimbo
General Nutrition Centers
300 Sixth Avenue
Pittsburgh, PA 15222
or to such other address as one party may provide in writing to the other party from time to time.
6.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
6.10 CAPTIONS. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.
6.11 NO THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.
6.12 WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Odessa M. Jones By: /s/ Lou Mancini
----------------------------- ----------------------------------
Odessa M. Jones Name: Lou Mancini
Title: CEO
EXECUTIVE
/s/ Odessa M. Jones /s/ Susan Trimbo
----------------------------- --------------------------------------
Odessa M. Jones Susan Trimbo
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EXHIBIT A
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"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
For purposes of this definition, the following terms shall have the meanings set forth below:
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 5th day of December, 2003 (the "Effective Date"), by and between General Nutrition Centers, Inc., a Delaware corporation (the "Company"), and REGINALD STEELE (the "Executive").
WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES.
1.1 TITLE. During the "Employment Period" (as defined in SECTION 2 hereof), the Executive shall serve as SENIOR VICE PRESIDENT OF INTERNATIONAL FRANCHISING of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.
1.2 DUTIES. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of his positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to him, commensurate with his serving as SENIOR VICE PRESIDENT OF INTERNATIONAL FRANCHISING. Except for sick leave, reasonable vacations, and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all his working time, attention, knowledge and skills faithfully and to the best of his ability, to the duties and responsibilities of his positions in furtherance of the business affairs and activities of the Company, and its subsidiaries and affiliates. The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions, and restrictions as the Board may from time to time reasonably establish for senior executive officers of the Company.
2. TERM OF EMPLOYMENT.
2.1 EMPLOYMENT PERIOD. The employment of the Executive hereunder shall continue until the later to occur of (i) December 31, 2005, or (ii) the applicable expiration date of any extension of this Agreement as provided in SECTION 2.2 hereof, unless terminated earlier in accordance with the provisions of this Agreement (the "Employment Period").
2.2 EXTENSION. On October 31, 2004, and on each October 31st thereafter, the Employment Period shall be extended for an additional one-year period unless the Company or the Executive notifies the other in writing at least 30 days prior to such date of its or his election, in its or his sole discretion, not to extend the Employment Period.
3. COMPENSATION AND GENERAL BENEFITS.
3.1 BASE SALARY.
(a) During the Employment Period, the
Company agrees to pay to the Executive an annual base salary in an amount equal
to $201,536.40 (such base salary, as adjusted from time to time pursuant to
SECTION 3.1(B), is referred to herein as the "Base Salary"). The Executive's
Base Salary, less amounts required to be withheld under applicable law, shall be
payable in equal installments in accordance with the practice of the Company in
effect from time to time for the payment of salaries to officers of the Company,
but in no event less frequently than monthly.
(b) The Board of Directors of the Company (the "Board") or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may increase Executive's Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.
3.2 BONUS. With respect to the 2004 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") in an amount to be determined by the Compensation Committee in the exercise of its discretion for the applicable year. Any Annual Bonus earned shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures. Any Annual Bonus payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.
3.3 EXPENSES. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3.3 or elsewhere herein, the Executive shall be entitled to receive prompt reimbursement from the Company for all reasonable and necessary expenses incurred by him in performing his duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.
3.4 FRINGE BENEFITS. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this SECTION 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its executives and key management employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy. The award of any additional fringe benefits under this SECTION 3.4 shall be separate and distinct from the right of the Executive to receive the Annual Bonus payment from the Company described in SECTION 3.2.
3.5 STOCK OPTIONS. Subject to SECTION 4 below and the approval of the Compensation Committee, Executive shall be eligible to participate in and be granted awards under the General Nutrition Centers, Inc. 2003 Omnibus Stock Incentive Plan (the "Plan").
4. TERMINATION.
4.1 GENERAL. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in SECTION 2, unless earlier terminated in accordance with the provisions of this SECTION 4.
4.2 DEATH OR DISABILITY OF THE EXECUTIVE.
(a) The employment of the Executive
hereunder (and the Employment Period) shall terminate upon (i) the death of the
Executive, and (ii) at the option of the Company, upon not less than fifteen
(15) days' prior written notice to the Executive or his personal representative
or guardian, if the Executive suffers a "Total Disability" (as defined in
SECTION 4.2(B) below). Upon termination for death or Total Disability, the
Company shall pay to the Executive, guardian or personal representative, as the
case may be (reduced by any benefits paid or payable to the Executive, his
beneficiaries or estate under any Company-sponsored disability benefit plan
program or policy for the period following such date of termination), (i) the
Executive's current Base Salary for the remainder of the Employment Period
(without giving effect to any further extensions pursuant to SECTION 2.2 hereof)
and (ii) subject to the discretion of the Compensation Committee, a prorated
share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of
actual employment) that the Executive would have been entitled to had he worked
the full year during which the termination occurred, provided that bonus targets
are met for the year of such termination. The bonus shall be payable in full
within forty-five (45) days following the determination of the amount thereof
and in accordance with the Company's normal payroll practices and procedures.
(b) For purposes of this Agreement,
"Total Disability" shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform,
with or without reasonable accommodation, the material duties of the Executive
required hereby, and that such disability has lasted for one hundred twenty days
(120) days during the immediately preceding twelve (12) month period or is, as
of the date of determination, reasonably expected to last six (6) months or
longer after the date of determination, in each case based upon medically
available reliable information, or (iii) Executive's qualifying for benefits
under the Company's long-term disability coverage, if any.
(c) In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (i) any examinations that the Compensation Committee determines are relevant to a determination of whether he is mentally and/or physically disabled, or required by the Company physician, (ii) furnish such medical information as may be reasonably requested, and (iii) waive any applicable physician patient privilege that may arise because of such examination.
(d) With respect to outstanding stock options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180) day period following such date of termination.
(e) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.2(D) hereof), for the two hundred seventy
(270) day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive or his
beneficiary, as applicable, and the Executive or his beneficiary hereby agrees
to sell any or all such shares to the Company (or the Company's designee) for an
amount equal to the product of (x) the per share current fair market value of a
share of Common Stock (as determined by the Board in good faith) and (y) the
number of shares so purchased.
4.3 TERMINATION BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON.
(a) The Company may terminate Executive's employment without "Cause" (as defined below), and thereby terminate Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice.
(b) The Executive may resign, and thereby terminate his employment (and the Employment Period), at any time for "Good Reason" (as defined below), upon not less than thirty (30) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such "Good Reason " (to the extent possible) within thirty (30) days after the Company's receipt of such notice.
(c) In the event the Executive's employment is terminated (i) by the Company without "Cause," or (ii) by the Executive for "Good Reason" then, subject to SECTION 4.3(D) hereof, the following provisions shall apply:
(i) The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period without giving effect to any further extensions pursuant to SECTION 2.2 hereof, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company.
(ii) If such termination occurs upon or within six (6) months following a Change of Control (as defined below), the Company shall continue to pay
the Executive the Base Salary to which the Executive would have been entitled pursuant to SECTION 3.1 hereof (at the Base Salary rate during the year of termination) for a two (2) year period following such date of termination, with all such amounts payable in accordance with the Company's payroll system in the same manner and at the same time as though the Executive remained employed by the Company, subject to SECTION 4.3(c)(vii) hereof.
(iii) Subject to the discretion of the Compensation Committee, the Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to SECTION 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had he worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable in full within forty-five (45) days following the determination of the amount thereof and in accordance with the Company's normal payroll practices and procedures, subject to SECTION 4.3(c)(vii) hereof.
(iv) Unless prohibited by law or,
with respect to any insured benefit, the terms of the applicable insurance
contract, the Executive shall continue to participate in, and be covered under,
the Company's group life, disability, sickness, accident and health insurance
programs on the same basis as other executives of the Company (A) through the
expiration of the Employment Period, or, (B) in the event that Executive's Base
Salary is being paid pursuant to clause (ii) of this SECTION 4.3(c), for the two
(2) year period the Executive is entitled to such payment, without giving effect
to any further extensions pursuant to SECTION 2.2 hereof.
(v) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (x) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (y) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(vi) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.3(c)(v) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased.
(vii) With respect to the amounts payable to the Executive under clauses (ii) and (iii) of this SECTION 4.3 following a Change of Control, the Executive may elect to receive the present value of such amounts in a lump sum based on a present value discount rate equal to six percent (6%) per year. Such election must be made in writing by the Executive within fifteen (15) days of his date of termination.
(d) The Executive agrees to release the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, representatives, and successors from and against any and all claims that the Executive may have against any such person relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.
(e) Anything in this Agreement to the
contrary notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other person or that any other event occurring with
respect to the Executive and the Company for the Executive's benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a "Payment")
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (and any
regulations issued thereunder, any successor provision, and any similar
provision of state or local income tax law) (collectively, the "Excise Tax"),
then the amount of the Payment shall be reduced to the highest amount that may
be paid by the Company or other entity without subjecting such Payment to the
Excise Tax (the "Payment Reduction"). The Executive shall have the right, in his
sole discretion, to designate those payments or benefits that shall be reduced
or eliminated under the Payment Reduction to avoid the imposition of the Excise
Tax.
(i) Subject to the provisions of
SECTION 4.3(E)(II), all determinations required to be made under this SECTION
4.3(E), including whether and when a Payment is subject to Section 4999 and the
assumptions to be utilized in arriving at such determination and in determining
an appropriate Payment Reduction, shall be made by PricewaterhouseCoopers LLP,
or any other nationally recognized accounting firm that shall be the Company's
outside auditors at the time of such determination (the "Accounting Firm"),
which Accounting Firm shall provide detailed supporting calculations to the
Executive and the Company within fifteen (15) business days of the receipt of
notice from the Company or the Executive that there will be a Payment that the
person giving notice believes may be subject to the Excise Tax. All fees and
expenses of the Accounting Firm shall be borne by the Company. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive in
determining whether a Payment Reduction is required and the amount thereof
(subject to SECTIONS 4.3(E)(II) and (III)), in the absence of material
mathematical or legal error.
(ii) As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under the preceding clause (i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the
Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.
(iii) The Executive shall give written notice to the Company of any claim by the IRS that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.
(iv) This SECTION 4.3(E) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.
(f) For purposes of this Agreement, the Executive would be entitled to terminate his employment for "Good Reason" if without the Executive's prior written consent:
(i) The Company fails to comply with any material obligation imposed by this Agreement;
(ii) The Company assigns to the Executive duties or responsibilities that are materially inconsistent with the Executive's positions, duties, responsibilities, titles and offices in effect on the Effective Date; or
(iii) The Company effects a reduction in the Executive's Base Salary.
(g) For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events:
(i) a material failure by the Executive to comply with any material obligation imposed by this Agreement (including, without limitation, any violation of SECTIONS 5.1 or 5.2 hereof);
(ii) the Executive's being convicted of, or pleading guilty or nolo contendere to, or being indicted for any felony;
(iii) theft, embezzlement, or fraud by the Executive in connection with the performance of his duties hereunder;
(iv) the Executive's engaging in any activity that gives rise to a material conflict of interest with the Company that is not be cured following ten (10) days' written notice and a demand to cure such conflict; or
(v) the misappropriation by the Executive of any material business opportunity of the Company.
(h) For purposes of this Agreement, "Change of Control" shall be defined as set forth in Exhibit A, which is attached hereto.
4.4 TERMINATION FOR CAUSE AND VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON.
(a) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause" and the Executive may voluntarily resign and thereby terminate his employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30) days' prior written notice. Upon termination by the Company for Cause or resignation by the Executive other than for Good Reason, the following provisions shall apply:
(b) The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.
(c) With respect to outstanding options and other equity based awards held by the Executive as of the date of termination, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity based awards that are not vested as of such date of termination shall immediately be forfeited, and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.
(d) With respect to any shares of
Common Stock held by the Executive that are vested as of the date of termination
(or issued pursuant to the exercise of options following such date of
termination pursuant to SECTION 4.4(c) hereof), for the one hundred eighty
(180)-day period following such date of termination, the Company (or its
designee) shall have the right to purchase from the Executive and the Executive
hereby agrees to sell any or all such shares to the Company (or the Company's
designee) for an amount equal to the product of (x) the per share current fair
market value of a share of Common Stock (as determined by the Board in good
faith) and (y) the number of shares so purchased.
(e) Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a) above, the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1 CONFIDENTIALITY; INTELLECTUAL PROPERTY.
(a) The Executive recognizes that the
Company's business interests require a confidential relationship between the
Company and the Executive and the fullest practical protection and confidential
treatment of all "Trade Secrets or Confidential or Proprietary Information" (as
defined in SECTION 5.3 hereof). Accordingly, the Executive agrees that, except
as required by law or court order, the Executive will keep confidential and will
not disclose to anyone (other than the Company or any Persons designated by the
Company), or publish, utter, exploit, make use of (or aid others in publishing,
uttering, exploiting or using), or otherwise "Misappropriate" (as defined in
SECTION 5.3 hereof) any Trade Secrets or Confidential or Proprietary Information
at any time. The Executive's obligations hereunder shall continue during the
Employment Period and thereafter for so long as such Trade Secrets or
Confidential or Proprietary Information remain Trade Secrets or Confidential or
Proprietary Information.
(b) The Executive acknowledges and agrees that:
(i) the Executive occupies a unique position within the Company, and he is and will be intimately involved in the development and/or implementation of Trade Secrets or Confidential or Proprietary Information;
(ii) in the event the Executive breaches SECTION 5.1 hereof with respect to any Trade Secrets or Confidential or Proprietary Information, such breach shall be deemed to be a Misappropriation of such Trade Secrets or Confidential or Proprietary Information; and
(iii) any Misappropriation of Trade Secrets or Confidential or Proprietary Information will result in immediate and irreparable harm to the Company.
(c) The Executive acknowledges and agrees that all ideas, inventions, marketing, sales and business plans, formulae, designs, pricing, studies, programs, reviews and related materials, strategies and products, whether domestic or foreign, developed by him during the Employment Period, including, without limitation, any process, operation, technique, product, improvement or development which may be patentable or copyrightable, are and will be the property of the Company, and that he will do, at the Company's request and cost, whatever is reasonably necessary to secure the rights thereto by patent, copyright or otherwise to the Company.
(d) Upon termination or expiration of the Employment Period and at any other time upon request, the Executive further agrees to surrender to the Company all documents, writings, notes, business, marketing or strategic plans, financial information, customer, distributor and supplier lists, manuals, illustrations, models, and other such materials (collectively, "Company Documents") produced by the Executive or coming into his possession by or through employment with the Company during the Employment Period, within the scope of such employment, and agrees that all Company Documents are at all times the Company's
property, provided that the Executive may maintain a copy of any Company Documents that are not Trade Secrets or Confidential or Proprietary Information.
(e) During the Employment Period, the Executive represents and agrees that he will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that he will not bring onto the premises of the Company such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.
5.2 NONCOMPETITION AND NONSOLICITATION. During the Employment Period and until the end of the Restricted Period (as defined below), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, owner, officer, director, stockholder, member, employee, agent or consultant of any other Person within the United States of America or in any other country or territory in which the businesses of the Company are conducted:
(a) own, manage, operate, control, be employed by, provide services as a consultant to, or participate in the ownership, management, operation, or control of, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the nutritional supplements industry.
(b) solicit, hire, or otherwise attempt to establish for any Person, any employment, agency, consulting or other business relationship with any Person who is or was an employee of the Company or any of its Affiliates.
(c) The parties hereto acknowledge and agree that, notwithstanding anything in SECTION 5.2(A) hereof, (x) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in SECTION 5.2(A) as long as with respect to each such investment, the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and, such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (y) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (x) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend his name to, any such Person.
(d) The Executive acknowledges and agrees that, for purposes of this SECTION 5.2, an act by his spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling, or other member of his immediate family will be treated as an indirect act by the Executive.
5.3 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings:
(a) An "Affiliate" of any Person shall mean any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
(b) "Misappropriate", or any form thereof, means:
(i) the acquisition of any Trade Secret or Confidential or Proprietary Information by a Person who knows or has reason to know that the Trade Secret or Confidential or Proprietary Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means (each, an "Improper Means"); or
(ii) the disclosure or use of any
Trade Secret or Confidential or Proprietary Information without the express
consent of the Company by a Person who (x) used Improper Means to acquire
knowledge of the Trade Secret or Confidential or Proprietary Information; or (y)
at the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Trade Secret or Confidential or Proprietary Information was (i)
derived from or through a Person who had utilized Improper Means to acquire it,
(ii) acquired under circumstances giving rise to a duty to maintain its secrecy
or limit its use, or (iii) derived from or through a Person who owed a duty to
the Company to maintain its secrecy or limit its use; or (z) before a material
change of his or her position, knew or had reason to know that it was a Trade
Secret or Confidential or Proprietary Information and that knowledge of it had
been acquired by accident or mistake.
(c) "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, or government or other agency or political subdivision thereof, or any other legal or commercial entity.
(d) "Restricted Period" shall mean the
longer of (i) the first anniversary of the date of termination of employment or
(ii) the period during which the Executive is receiving payments from the
Company pursuant to Section 4 hereof.
(e) "Trade Secrets or Confidential or Proprietary Information" shall mean:
(i) any and all information, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic or otherwise), arrangements, pricing and other data (collectively, "Information") that (a) derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts by the Company that are reasonable under the circumstances to maintain its secrecy; or
(ii) any and all other Information
(i) unique to the Company which has a significant business purpose and is not
known or generally available from sources outside of such Persons or typical of
industry practice, or (ii) the disclosure of which would have a material adverse
effect on the business of the Company.
5.4 REMEDIES. The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of SECTION 5 hereof,
the Company may suffer immediate and irreparable harm for which monetary damages
alone will not be a sufficient remedy, and that, in addition to all other
remedies that the Company may have, the Company shall be entitled to seek
injunctive relief, specific performance or any other form of equitable relief to
remedy a breach or threatened breach of this Agreement (including, without
limitation, any actual or threatened Misappropriation) by the Executive and to
enforce the provisions of this Agreement. The Executive and the Company each
agrees (i) to submit to the jurisdiction of any competent court where the
Company may choose to seek equitable relief, (ii) to waive any and all defenses
the Executive may have on the grounds of lack of jurisdiction of such court; and
(iii) that neither party shall be required to post any bond, undertaking, or
other financial deposit or guarantee in seeking or obtaining such equitable
relief. The existence of this right shall not preclude or otherwise limit the
applicability or exercise of any other rights and remedies which the Company may
have at law or in equity.
5.5 INTERPRETATION; SEVERABILITY.
(a) The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions, and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.
(b) The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision, or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common
law to enforce its rights with respect to any and all Trade Secrets or Confidential or Proprietary Information or unfair competition by the Executive.
6. MISCELLANEOUS.
6.1 ARBITRATION. SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE'S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION,
PROVIDED, HOWEVER, THAT THE PARTIES AGREE THAT ANY ARBITRATOR OR ARBITRATORS
SELECTED OR APPOINTED TO HEAR THE ARBITRATION SHALL BE EITHER A RETIRED JUDGE OF
THE CIRCUIT OR APPELLATE COURTS OF NEW YORK OR A PRACTICING ATTORNEY WITH AT
LEAST FIFTEEN (15) YEARS OF EXPERIENCE IN MATTERS REASONABLY RELATED TO THE
ISSUE OR ISSUES IN DISPUTE. ANY RESULTING HEARING SHALL BE HELD IN THE NEW YORK
AREA. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE
BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION. COSTS AND FEES
INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL BE BORNE BY THE PARTIES AS
DETERMINED BY THE ARBITRATION.
6.2 ENTIRE AGREEMENT; WAIVER. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of New York, without regard to principles of conflict of laws.
6.4 SUCCESSORS AND ASSIGNS; BINDING AGREEMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation, or sale of all or substantially all of such Person's assets or equity interests.
6.5 REPRESENTATION BY COUNSEL. Each of the parties hereto acknowledges that (i) it or he has read this Agreement in its entirety and understands all of its terms and conditions, (ii) it or he has had the opportunity to consult with any individuals of its or his choice regarding its or his agreement to the provisions contained herein, including legal counsel of its or his choice, and any decision not to was his or its alone, and (iii) it or he is entering into this Agreement of its or his own free will, without coercion from any source.
6.6 INTERPRETATION. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that he, it, or his or its counsel was the drafter thereof.
6.7 SURVIVAL. The provisions of SECTIONS 5 AND 6 hereof shall survive the termination of this Agreement.
6.8 NOTICES. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:
If to the Company, to:
General Nutrition Centers, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Attn: Board of Directors
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Attention: Jeffrey Cohen, Esq.
Telephone: (213) 687-5000
Facsimile: (213) 687-5600
If to the Executive, to:
Reginald Steele
10255 Buckland Bluff Cove
Collierville, TN 38017
or to such other address as one party may provide in writing to the other party from time to time.
6.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
6.10 CAPTIONS. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.
6.11 NO THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.
6.12 WITHHOLDING. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, as of the date first above written.
WITNESS/
ATTEST: GENERAL NUTRITION CENTERS, INC.
/s/ Odessa M. Jones By: /s/ Lou Mancini
---------------------------------- -----------------------------------
Odessa M. Jones Name: Lou Mancini
Title: CEO
|
EXECUTIVE
/s/ Thomesine Kiggins /s/ R. N. Steele -------------------------------- ------------------------------------ Thomesine Kiggins Reginald Steele |
EXHIBIT A
|
"Change of Control" means:
(1) any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of GNC or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of GNC; provided that the Permitted Holders or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors; provided further that the transfer of 100% of the Voting Stock of GNC to a Person that has an ownership structure identical to that of GNC prior to such transfer, such that GNC becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;
(2) after an initial public offering of Capital Stock of GNC, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors, together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of GNC was approved by a vote of a majority of the directors of GNC then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors then in office;
(3) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of GNC and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or
(4) the adoption of a plan relating to the liquidation or dissolution of GNC.
For purposes of this definition, the following terms shall have the meanings set forth below:
"Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.
"Board of Directors" means the Board of Directors of GNC or any committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Permitted Holder" means Apollo.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of earnings to fixed charges for the 27 days ending December 31, 2003, the period from January 1, 2003 to December 4, 2003, the years ending December 31, 2002, 2001, and 2000, the period from August 8, 1999 to December 31, 1999, and the period from February 7, 1999 to August 7, 1999. We have computed these ratios by dividing earnings available for fixed charges (income before income taxes and fixed charges) by fixed charges (interest cost, amortization of debt expense, and the portion of rental expenses deemed to be representative of the interest factor in those rentals).
COMPUTATION OF GENERAL NUTRITION CENTERS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions, except ratios)
PREDECESSOR SUCCESSOR
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
FEBRUARY 7, AUGUST 8, JANUARY 1, DECEMBER 5,
1999 TO 1999 TO 2003 TO 2003 TO
AUGUST 7, DECEMBER 31, DECEMBER 4, DECEMBER 31,
1999 1999 2000 2001 2002 2003 2003
--------------------------------------------------------------------------------------
Earnings (deficit) available for
fixed charges:
Income (deficit) before
income taxes............................ $ (12.8) $ (20.8) $ (175.4) $ (70.0) $ (70.2) $ (759.4) $ 0.6
Interest Expense and Amortization
of Debt Expense ........................ 24.8 56.8 143.2 141.8 138.0 122.5 2.8
Estimated interest component of net
rental expense.......................... 15.3 11.0 36.3 37.5 38.9 35.2 2.7
--------------------------------------------------------------------------------------
Earnings available for fixed charges... $ 27.3 $ 47.0 $ 4.1 $ 109.3 $ 106.7 $ (601.7) $ 6.1
======================================================================================
Fixed Charges:
Interest Expense and Amortization
of Debt Expense......................... $ 24.8 $ 56.8 $ 143.2 $ 141.8 $ 138.0 $ 122.5 $ 2.8
Estimated interest component of net
rental expense.......................... 15.3 11.0 36.3 37.5 38.9 35.2 2.7
-------------------------------------------------------------------------------------
Total fixed charges.................... $ 40.1 $ 67.8 $ 179.5 $ 179.3 $ 176.9 $ 157.7 $ 5.5
======================================================================================
Consolidated Ratio of Earnings to
Fixed Charges ............................. -- -- -- -- -- -- 1.1
Deficit (1).................................. $ 12.8 $ 20.8 $ 175.4 $ 70.0 $ 70.2 $ 759.4 $ -
|
(1) Earnings were insufficient to cover fixed charges in the period from February 7, 1999 to August 7, 1999, the period from August 8, 1999 to December 31, 1999, the years ended December 31, 2000, 2001, and 2002, and the period from January 1, 2003 to December 4, 2003.
.
.
.
Exhibit 21.1
Subsidiaries of General Nutrition Centers, Inc.
Subsidiary Name Jurisdiction of Incorporation/Organization
------------------------------------------- ------------------------------------------
DFC Thompson Australia PTY Limited New South Wales, Australia
General Nutrition Centres Company Nova Scotia, Canada
General Nutrition Companies, Inc. Delaware
General Nutrition Corporation Pennsylvania
General Nutrition Distribution Company Delaware
General Nutrition Distribution, L.P. Pennsylvania
General Nutrition Government Services, Inc. Delaware
General Nutrition International, Inc. Delaware
General Nutrition Investment Company Arizona
General Nutrition PTY Limited New South Wales, Australia
General Nutrition Sales Corporation Arizona
General Nutrition Systems, Inc. Delaware
General Nutrition, Incorporated Pennsylvania
GN Investment, Inc. Delaware
GNC (Canada) Holding Company Delaware
GNC Franchising Canada, LTD. New Brunswick, Canada
GNC Franchising, LLC Pennsylvania
GNC Puerto Rico, Inc. Puerto Rico
GNC US Delaware, Inc. Delaware
GNC, Limited Delaware
Informed Nutrition, Inc. Florida
Nutra Manufacturing, Inc. South Carolina
|
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of General Nutrition Centers, Inc and its Subsidiary Guarantors of our report dated March 1, 2004 relating to the financial statements and financial statement schedule of General Nutrition Companies, Inc. and its subsidiaries, which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania April 15, 2004 |
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of General Nutrition Centers, Inc and Subsidiary Guarantors of our report dated March 23, 2004 relating to the financial statements and financial statement schedule of General Nutrition Centers, Inc. and its subsidiaries, which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania April 15, 2004 |
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2)
U.S. BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
31-0841368
I.R.S. Employer Identification No.
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Frank Leslie
|
U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107 (651) 495-3913
(Name, address and telephone number of agent for service)
General Nutrition Centers, Inc.
And the Subsidiary Guarantors listed below
(Issuer with respect to the Securities)
Delaware 72-1575168
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 Sixth Avenue 15222
Pittsburgh, Pennsylvania
(Address of Principal Executive Offices) (Zip Code)
|
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
(TITLE OF THE INDENTURE SECURITIES)
TABLE OF ADDITIONAL REGISTRANTS
Primary Standard
Industrial I.R.S. Employer
State or Other Jurisdiction of Classification Code Identification No.
Name of Additional Registrant* Incorporation or Formation Number Identification No.
------------------------------------- ------------------------------ ------------------- ------------------
Subsidiary Guarantors
General Nutrition Companies, Inc. Delaware 5499 04-3056351
General Nutrition Corporation Pennsylvania 5499 25-1124574
General Nutrition Distribution
Company Delaware 5122 51-0343436
General Nutrition Distribution, L.P.
Delaware 5122 23-2946511
General Nutrition Government
Services, Inc. Delaware 5499 25-1797015
General Nutrition, Incorporated Pennsylvania 5499 25-1027307
General Nutrition Investment
Company Arizona 6794 51-0313878
General Nutrition International, Inc.
Delaware 6794 51-0314976
General Nutrition Sales Corporation
Arizona 5499 52-2103619
General Nutrition Systems, Inc. Delaware 5499 51-0393924
GNC (Canada) Holding Company Delaware 5499 25-1787452
GNC Franchising, LLC (f/k/a GNC
Franchising, Inc.) Pennsylvania 6794 25-1560212
GNC, Limited Delaware 5499 25-1787453
GNC US Delaware, Inc. Delaware 6794 36-4345801
GN Investment, Inc. Delaware 5499 52-2081543
Informed Nutrition, Inc. Florida 5499 52-2005781
Nutra Manufacturing, Inc. (f/k/a South Carolina 2834 52-1456779
Nutricia Manufacturing USA, Inc.)
|
* Address and telephone number of principal executive offices are the same as General Nutrition Centers, Inc.
FORM T-1
ITEM 1. GENERAL INFORMATION. Furnish the following information as
to the Trustee.
a) Name and address of each examining or supervising authority to which it is subject.
Comptroller of the Currency Washington, D.C.
b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate
of the Trustee, describe each such affiliation.
None
ITEMS 3-15 Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee.
ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as a part
of this statement of eligibility and qualification.
1. A copy of the Articles of Association of the Trustee.*
2. A copy of the certificate of authority of the Trustee to commence business.*
3. A copy of the certificate of authority of the Trustee to exercise corporate trust powers.*
4. A copy of the existing bylaws of the Trustee.*
5. A copy of each Indenture referred to in Item 4. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6.
7. Report of Condition of the Trustee as of December 31, 2003, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7.
* Incorporated by reference to Registration Number 333-67188.
NOTE
The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 7th of April, 2004.
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Frank P. Leslie III
--------------------------------------------
Frank P. Leslie III
Vice President
By: /s/ Richard H. Prokosch
-----------------------------------
Richard H. Prokosch
Vice President
|
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.
Dated: April 7, 2004
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Frank P. Leslie III
--------------------------------------------
Frank P. Leslie III
Vice President
By: /s/ Richard H. Prokosch
-----------------------------------
Richard H. Prokosch
Vice President
|
EXHIBIT 7
U.S. BANK NATIONAL ASSOCIATION
STATEMENT OF FINANCIAL CONDITION
AS OF 12/31/2003
($000'S)
12/31/2003
------------
ASSETS
Cash and Due From Depository Institutions $ 8,631,361
Federal Reserve Stock 0
Securities 42,963,396
Federal Funds 2,585,353
Loans & Lease Financing Receivables 114,718,888
Fixed Assets 1,911,662
Intangible Assets 10,254,736
Other Assets 8,093,654
------------
TOTAL ASSETS $189,159,050
LIABILITIES
Deposits $128,249,183
Fed Funds 5,098,404
Treasury Demand Notes 3,585,132
Trading Liabilities 213,447
Other Borrowed Money 21,664,023
Acceptances 123,996
Subordinated Notes and Debentures 5,953,524
Other Liabilities 5,173,011
------------
TOTAL LIABILITIES $170,060,720
EQUITY
Minority Interest in Subsidiaries $ 1,002,595
Common and Preferred Stock 18,200
Surplus 11,677,397
Undivided Profits 6,400,138
------------
TOTAL EQUITY CAPITAL $ 19,098,330
TOTAL LIABILITIES AND EQUITY CAPITAL $189,159,050
|
To the best of the undersigned's determination, as of the date hereof, the above financial information is true and correct.
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Frank P. Leslie III
----------------------------------
Vice President
Date: April 7, 2004
|
EXHIBIT 99.1
LETTER OF TRANSMITTAL
GENERAL NUTRITION CENTERS, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED , 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 2004, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
DELIVERY TO: U.S. BANK NATIONAL ASSOCIATION, EXCHANGE AGENT
By Hand, Overnight Delivery or by Mail:
60 Livingston Avenue
St. Paul, Minnesota 55107
Attention: Specialized Finance
By Facsimile Transmission:
651-495-8097
Confirm by Telephone:
800-934-6802
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus, dated , 2004 (the "Prospectus"), of General Nutrition Centers, Inc., a corporation incorporated in the State of Delaware (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $215,000,000 of the Company's 8 1/2% Senior Subordinated Notes due 2010 (the "New Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Company's issued and outstanding 8 1/2% Senior Subordinated Notes due 2010 (the "Old Notes") from the registered holders thereof (the "Holders").
For each Old Note accepted for exchange, the Holder of such Old Note will receive an New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from December 5, 2003. Accordingly, registered Holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from December 5, 2003. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer.
This Letter is to be completed by a holder of Old Notes either if certificates are to be forwarded herewith or if a tender of certificates for Old Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Company may enforce this Letter against such participant. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES 1 2 3
----------------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTAL
----------------------------------------------------------------------------------------------------------------------------
|
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________________
Account Number______________________ Transaction Code Number_______________
By crediting the Old Notes to the Exchange Agent's account at the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any)______________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution Which Guaranteed Delivery______________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number_________________Transaction Code Number_____________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:______________________________________________________________________
Address:___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it acquired the New Notes in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of the New Notes and it has no arrangements or understandings with any person to participate in a distribution of the New Notes. If the undersigned is a broker-dealer that will receive the New Notes for its own account in exchange for the Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact
with respect to such tendered Old Notes, with full power of substitution, among
other things, to cause the Old Notes to be assigned, transferred and exchanged.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes, and to
acquire New Notes issuable upon the exchange of such tendered Old Notes, and
that, when the same are accepted for exchange, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Company. The undersigned hereby further represents that: (i) any New
Notes received by the undersigned will be received in the ordinary course of
business, (ii) the undersigned will have no arrangement or understanding with
any person to participate in the distribution of the Old Notes or the New Notes
within the meaning of the Securities Act, (iii) the undersigned is not an
"affiliate" (as such term is defined in Rule 501(b) of Regulation D of the
Securities Act) of the Company and of the guarantors, or if the undersigned is
an affiliate, then the undersigned will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(iv) if the undersigned is not a broker-dealer, then it is not engaged in, and
does not intend to engage in, the distribution of the New Notes, and (v) if the
undersigned is a broker-dealer, then it will receive the New Notes for its own
account in exchange for the Old Notes that were acquired as a result of
market-making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of the New Notes.
The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any such Holder that is an "affiliate" of the Company within the meaning of Rule 501(b) of Regulation D of the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall
be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.
Issue New Notes and/or Old Notes to:
Name(s)_________________________________________________________________________
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address_________________________________________________________________________
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below.
BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above.
Mail New Notes and/or Old Notes to:
Name(s)_________________________________________________________________________
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address_________________________________________________________________________
(ZIP CODE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)
X __________________________________ _________________________________, 2004
X __________________________________ _________________________________, 2004
(SIGNATURE(S) OF OWNER) (DATE)
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Area Code and Telephone Number_________________________________________
If a holder is tendering any Old Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.
Name(s):_______________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity:______________________________________________________________
Address:_______________________________________________________________
Tax Identification No.:________________________________________________
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:_______________________________________________
(AUTHORIZED SIGNATURE)
Dated:___________________________________________________________, 2004
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010 OF GENERAL NUTRITION CENTERS, INC.
IN EXCHANGE FOR THE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010 OF GENERAL NUTRITION CENTERS, INC.
THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the (as defined below) Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes -- Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted.
Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm that is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program (each an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter.
5. TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION OF FOREIGN STATUS.
Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption from backup withholding, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition, the Exchange Agent may be required to withhold at the then applicable backup withholding rate on the amount of any reportable payments made after the exchange to such tendering holder of New Notes. If withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying, under penalties of perjury, that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the IRS that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the IRS has notified the holder that such holder is no longer subject to backup withholding.
If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If the box in Part 2 of the Substitute Form W-9 is checked, the
Exchange Agent will withhold at the then applicable backup withholding rate on
reportable payments made to a holder during the sixty (60) day period following
the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent
with his or her TIN within sixty (60) days of the Substitute Form W-9, the
Exchange Agent will remit such amounts withheld during such sixty (60) day
period to such holder and no further amounts will be withheld from payments made
to the holder thereafter. If, however, such holder does not provide its TIN to
the Exchange Agent within such sixty (60) day period, the Exchange Agent will
remit such previously withheld amounts to the IRS as backup withholding and will
withhold at the then applicable backup withholding rate on all reportable
payments to the holder thereafter until such holder furnishes its TIN to the
Exchange Agent.
If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8BEN, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.
10. WITHDRAWAL RIGHTS.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 P.M., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including certificate number or numbers and the principal amount of such Old Notes), (iii) contain a statement that such holder is withdrawing his election to have such Old Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer to have the Trustee with respect to the Old Notes register the transfer of such Old Notes in the name of the person withdrawing the tender and (v) specify the name in which such Old Notes are registered, if different from that of the Depositor. If Old Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus, any notice of
withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus, such Old Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time on or prior to 5:00 P.M., New York City time, on the Expiration Date.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above.
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: U.S. BANK NATIONAL ASSOCIATION
SUBSTITUTE
Form W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFICATION
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW.
TIN:_____________________________________
SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFICATION NUMBER
PART 2--TIN APPLIED FOR [ ]
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct TIN (or I am waiting for a number to be issued to me),
(2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding and
(3) I am a U.S. person (including a U.S. resident alien).
SIGNATURE OF U.S. PERSON___________________________ DATE________________
You must cross out item(2) of the above certification if you have been notified by the IRS that you are subject to backup with holding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, an amount equal to the then applicable backup withholding rate on all reportable payments made to me thereafter will be withheld until I provide a number.
SIGNATURE________________________________ DATE_____________________________
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
GENERAL NUTRITION CENTERS, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED , 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 2004, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
This form or one substantially equivalent hereto must be used to accept the Exchange Offer of General Nutrition Centers, Inc. (the "Company") made pursuant to the Prospectus, dated , 2004 (the "Prospectus"), if certificates for the outstanding 8 1/2% Senior Subordinated Notes due 2010 of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach U.S. Bank National Association, as exchange agent (the "Exchange Agent") prior to 5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal, or facsimile thereof or Agent's Message in lieu thereof, must also be received by the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. Capitalized terms not defined herein shall have the respective meanings ascribed to them in the Prospectus.
DELIVERY TO: U.S. BANK NATIONAL ASSOCIATION, EXCHANGE AGENT
By Hand, Overnight Delivery or by Mail:
60 Livingston Avenue
St. Paul, Minnesota 55107-2292
Attention: Specialized Finance
By Facsimile Transmission
(for Eligible Institutions only):
651-495-8097
Confirm by Telephone:
800-934-6802
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Medallion Signature Guarantor" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, receipt of which the undersigned hereby acknowledges, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus.
Aggregate Principal Amount of Old Notes Tendered (must be in integral multiples of $1,000)
Provide the following information for Old Notes certificates to be delivered to the Exchange Agent:
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
The Notice of Guaranteed Delivery must be signed by the registered holder(s) of the Old Notes, or if signed by a person other than the registered holder(s) of any certificate(s), such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case, signed exactly as its (their) name(s) appear(s) on certificate(s) or on a position listing, and security such certificate(s) must be guaranteed by an Eligible Institution. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below and, unless waived by the Company, submit proper evidence satisfactory to the Company of such person's authority to so act. Please print name(s) and address(es).
GUARANTEE
(Not to be Used for Signature Guarantees)
The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus, together with one or more properly and duly executed Letters of Transmittal, or facsimile thereof or Agent's Message in lieu thereof, and any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the Expiration Date.
_________________________________ ________________________________________
Name of Firm Authorized Signature
_________________________________ ________________________________________
Address Title
_________________________________ Name: __________________________________
Zip Code (Please Type of Print)
Area Code and Tel. No.___________ Dated: _________________________________
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NOTE: DO NOT SEND THE PHYSICAL CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. SUCH PHYSICAL CERTIFICATES SHOULD BE SENT TO THE EXCHANGE AGENT, TOGETHER WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
EXHIBIT 99.3
GENERAL NUTRITION CENTERS, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED , 2004
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated , 2004 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of General Nutrition Centers, Inc. (the "Company") to exchange its 8 1/2% Senior Subordinated Notes due 2010, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for its outstanding 8 1/2% Senior Subordinated Notes due 2010 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement, dated December 5, 2003, by and among the Company, as issuer, the guarantors referred to therein and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old Notes held by us for your account but not registered in your name. A TENDER OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M., New York City time, on , 2004, unless extended by the Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer -- Conditions to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 P.M., New York City time, on , 2004, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by General Nutrition Centers, Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal.
The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer all right, title and interest in the Old Notes and to acquire the New Notes, issuable upon the exchange of such Old Notes, and that, when such validly tendered Old Notes are accepted by the Company for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim.
By completing, executing and delivering these Instructions, the undersigned hereby (i) makes the acknowledgments, representations and warranties referred to above, (ii) instructs you to tender the Old Notes held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Prospectus and Letter of Transmittal and (iii) expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned.
Please tender the Old Notes held by you for my account as indicated below:
8 1/2 % SENIOR SUBORDINATED NOTES DUE 2010
OLD NOTES ARE
TO BE TENDERED
CERTIFICATE NUMBERS PRINCIPAL AMOUNT ("YES" OR "NO")*
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*Unless otherwise indicated, "yes" will be assumed.
[ ] Please do not tender any Old Notes held by you for my account.
Signature(s):___________________________________________________________________
Print Name(s) here:_____________________________________________________________
Print Address(es):______________________________________________________________
Area Code and Telephone Number(s):______________________________________________
Tax Identification or Social Security Number(s):________________________________
My Account Number With You:_____________________________________________________
Dated:_______________________, 2004
(Must be signed by the registered holder(s) of the Old Notes, or if signed by a person other than the registered holder(s) of any certificate(s), such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case, signed exactly as its (their) name(s) appear(s) on certificate(s) or on a security position listing, and such certificate(s) must be guaranteed by an Eligible Institution (as defined in the Letter of Transmittal). If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title next to his or her name above and,
unless waived by the Company, submit proper evidence satisfactory to the Company of such person's authority to so act. See Instruction 3 to the Letter of Transmittal.)
None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account.
EXHIBIT 99.4
GENERAL NUTRITION CENTERS, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2010
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED ________, 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 2004, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
To: BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES:
General Nutrition Centers, Inc. (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated , 2004 (the "Prospectus"), and the enclosed letter of transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 8 1/2% Senior Subordinated Notes due 2010, that have been registered under the Securities Act of 1933, as amended, for its outstanding 8 1/2% Senior Subordinated Notes due 2010 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement, dated December 5, 2003, by and among the Company, as issuer, the guarantors referred to therein and the initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents:
1. Prospectus dated , 2004;
2. The Letter of Transmittal for your use and for the information of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and
6. Return envelopes addressed to U.S. Bank National Association, the Exchange Agent, for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof or Agent's Message (as defined in the Letter of Transmittal) in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus.
If a registered holder of Old Notes desires to tender Old Notes, but such Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the procedure for tendering Old Notes pursuant to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to U.S. Bank National Association, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
GENERAL NUTRITION CENTERS, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures