INTERCREDITOR AGREEMENT

Exhibit 10.8

 

 

INTERCREDITOR AGREEMENT

 

dated November 15, 2005

 

among

 

VITAMIN SHOPPE INDUSTRIES INC.

VS DIRECT INC.

VS HOLDINGS, INC.,

the other Pledgors from time to time party hereto,

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Agent under the Loan and Security Agreement and as

Priority Lien Agent hereunder

 

and

 

WILMINGTON TRUST COMPANY, not in its individual capacity but solely

as Trustee under the Indenture and as Parity Lien Collateral Agent hereunder

 

 

 

INTERCREDITOR AGREEMENT

 

This Intercreditor Agreement (this “ Agreement ” ) is dated November 15, 2005 and is by and among Vitamin Shoppe Industries Inc., a New York corporation ( “ Vitamin Shoppe ” ), VS Direct Inc., a Delaware corporation ( “ VS Direct ” ), VS Holdings, Inc., a Delaware corporation ( “ Holdings ” ), the other Pledgors (as hereinafter defined) from time to time party hereto, Wachovia Bank, National Association, as Agent (in such capacity and together with its successors and assigns in such capacity, the “ Priority Lien Agent ” ), Wilmington Trust Company, as Trustee (as hereinafter defined), and Wilmington Trust Company, not in its individual capacity but solely as Collateral Agent (in such capacity and together with its successors in such capacity, the “ Parity Lien Collateral Agent ” ).

 

RECITALS

 

Vitamin Shoppe, VS Direct and Holdings have entered or are about to enter into financing arrangements with Priority Lien Agent and the holders of the Priority Lien Obligations (as hereinafter defined) as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Vitamin Shoppe, VS Direct, Holdings, Priority Lien Agent and the holders of the Priority Lien Obligations (as the same now exists or may hereafter from time to time be amended, modified, supplemented, extended, renewed, restated, replaced or restructured in one or more instances the “ Loan and Security Agreement ” ), pursuant to which the holders of the Priority Lien Obligations may, upon certain terms and conditions, make revolving loans and provide other financial accommodations to Vitamin Shoppe and VS Direct.

 

Pursuant to the Loan and Security Agreement and the other Priority Lien Security Documents (as hereinafter defined), the Pledgors granted to Priority Lien Agent a security interest in substantially all of the assets and properties of the Pledgors, including without limitation the Collateral (as hereinafter defined).

 

Vitamin Shoppe has issued or is about to issue Floating Rate Second Priority Senior Secured Notes (including any related exchange notes, the “ Notes ” ) in an aggregate principal amount of $165,000,000 pursuant to the Indenture, dated of even date herewith (as amended, supplemented, amended and restated as otherwise modified and in effect from time to time, the “ Indenture ” ) among Vitamin Shoppe, Holdings, as guarantor, VS Direct, as guarantor (Holdings and VS Direct are sometimes collectively referred to herein as the “Note Guarantors” ), and Wilmington Trust Company, not in its individual capacity but solely as trustee (in such capacity and together with its successors in such capacity, the “ Trustee ” ).

 

Pursuant to the Parity Lien Security Documents (as hereinafter defined), the Pledgors granted to the Parity Lien Collateral Agent a security interest in the Collateral.

 

AGREEMENT

 

In consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

SECTION 1.1 Defined Terms. The following terms will have the following meanings:

 

“ 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 purposes of this

definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

 

“ Agreement ” has the meaning set forth in the preamble.

 

“ Asset Sale ” has the meaning set forth in the Indenture.

 

“ Board of Directors ” means:

 

(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

 

(2) with respect to a partnership, the Board of Directors of the general partner of the partnership;

 

(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

 

(4) with respect to any other Person, the board or committee of such Person serving a similar function.

 

“ Borrowing Base ” has the meaning set forth in the Indenture.

 

“ Business Day ” means any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or the State of Delaware or at a place of payment are authorized by law, regulation or executive order to remain closed.

 

“ Capital Lease Obligation ” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared 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 prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

 

“ Capital Stock ” means:

 

(1) in the case of a corporation, corporate stock;

 

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

 

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

“ Class ” means (1) in the case of Parity Lien Debt, every Series of Parity Lien Debt, taken together, and (2) in the case of Priority Lien Debt, every Series of Priority Lien Debt, taken together.

 

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“ Collateral ” means all properties and assets at any time owned or acquired by Vitamin Shoppe or any of the other Pledgors, except:

 

(1) Excluded Assets;

 

(2) any properties and assets in which the Parity Lien Collateral Agent is required to release its Liens pursuant to Section 2.7; and

 

(3) any properties and assets that no longer secure the Notes or any Parity Lien Obligations in respect thereof;

 

provided that, in the case of clauses (2) and (3), if such Liens are required to be released as a result of the sale, transfer or other disposition of any properties or assets of Vitamin Shoppe or any other Pledgor, such assets or properties will cease to be excluded from the Collateral if Vitamin Shoppe or any other Pledgor thereafter acquires or reacquires such assets or properties.

 

“ Collateral Agency Agreement ” means the Collateral Agency Agreement dated of even date herewith, among Trustee, Parity Lien Collateral Agent and the Pledgors party thereto.

 

“ Credit Facilities ” means, one or more debt facilities (including the debt facility evidenced by the Loan and Security Agreement) or commercial paper facilities, in each case, with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time.

 

“ Default ” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

 

“ Discharge of Priority Lien Obligations ” means the occurrence of all of the following:

 

(1) termination or expiration of all commitments to extend credit that would constitute Priority Lien Debt;

 

(2) payment in full in cash of the principal of and interest and premium (if any) on all Priority Lien Debt (other than any undrawn letters of credit);

 

(3) discharge or cash collateralization (at the lower of (A) 105% of the aggregate undrawn amount and (B) the percentage of the aggregate undrawn amount required for release of liens under the terms of the applicable Priority Lien Document) of all outstanding letters of credit constituting Priority Lien Debt; and

 

(4) payment in full in cash of all other Priority Lien Obligations that are outstanding and unpaid at the time the Priority Lien Debt is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time).

 

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“ Equally and Ratably ” means, in reference to sharing of Liens or proceeds thereof as between holders of Secured Obligations within the same Class, that such Liens or proceeds:

 

(1) will be allocated and distributed first to the Secured Debt Representative for each outstanding Series of Secured Debt within that Class, for the account of the holders of such Series of Secured Debt, ratably in proportion to the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made under such letters of credit) on each outstanding Series of Secured Debt within that Class when the allocation or distribution is made, and thereafter

 

(2) will be allocated and distributed (if any remain after payment in full of all of the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit) on all outstanding Secured Obligations within that Class) to the Secured Debt Representative for each outstanding Series of Secured Obligations within that Class, for the account of the holders of any remaining Secured Obligations within that Class, ratably in proportion to the aggregate unpaid amount of such remaining Secured Obligations within that Class due and demanded (with written notice to the applicable Secured Debt Representative, the Priority Lien Agent and the Parity Lien Collateral Agent) prior to the date such distribution is made.

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

 

“Event of Default” has the meaning set forth in the Loan and Security Agreement or the Indenture, as the context may require.

 

“ Excluded Assets ” means each of the following:

 

(1) any lease, license, contract, property right or agreement to which Vitamin Shoppe or any other Pledgor is a party or any of its rights or interests thereunder if and only for so long as the grant of a Lien under the Parity Lien Security Documents will 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 term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law or principles of equity); provided that such lease, license, contract, property right or agreement will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Parity Lien Security Documents, immediately and automatically, at such time as such consequences will no longer result;

 

(2) real property owned by Vitamin Shoppe or any other Pledgor that has a Fair Market Value not exceeding $5.0 million in the aggregate, or any real property leased by Vitamin Shoppe or any other Pledgor;

 

(3) any rights to any intellectual property, or license agreements that would be cancelled or rendered invalid or unenforceable under applicable law by the grant of a security interest created pursuant to the terms of the Parity Lien Security Documents, for so long as such prohibition or reason for invalidity under applicable law exists, except for the products and the proceeds thereof;

 

(4) all “securities” of any of Vitamin Shoppe’s “affiliates” (as the terms “securities” and “affiliates” are used in Rule 3-16 of Regulation S-X under the Securities Act); and

 

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(5) any other property or assets in which a Lien cannot be perfected by the filing of a financing statement under the Uniform Commercial Code of the relevant jurisdiction, so long as the aggregate Fair Market Value of all such property and assets does not at any one time exceed $5.0 million.

 

“ Existing Indebtedness ” means Indebtedness of Vitamin Shoppe and its Subsidiaries (other than Indebtedness under the Loan and Security Agreement) in existence on the date of the Indenture, until such amounts are repaid.

 

“ Fair Market Value ” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of Vitamin Shoppe (unless otherwise provided in the Indenture).

 

“ GAAP ” means generally accepted accounting principles 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 have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture.

 

“ Guarantee ” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

 

“ Hedging Obligations ” means, with respect to any specified Person, the obligations of such Person under:

 

(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

 

(2) other agreements or arrangements designed to manage interest rates or interest rate risk;

 

(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates; and

 

(4) other agreements or arrangements designed to manage fluctuations in commodity prices.

 

“ Indebtedness ” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

 

(1) in respect of borrowed money;

 

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

 

(3) in respect of banker’s acceptances;

 

(4) representing Capital Lease Obligations;

 

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(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed;

 

(6) representing any Hedging Obligations; or

 

(7) all monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise of Vitamin Shoppe or any Restricted Subsidiary arising out of any cash management, depositary or investment services provided by the Priority Lien Agent, any holder of Priority Lien Debt or their respective Affiliates,

 

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

 

“ Indenture ” has the meaning set forth in the recitals.

 

“ Insolvency or Liquidation Proceeding ” means:

 

(1) any case commenced by or against Vitamin Shoppe or any other Pledgor under Title 11, U.S. Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of Vitamin Shoppe or any other Pledgor, any receivership or assignment for the benefit of creditors relating to Vitamin Shoppe or any other Pledgor or any similar case or proceeding relative to Vitamin Shoppe or any other Pledgor or its creditors, as such, in each case whether or not voluntary;

 

(2) any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to Vitamin Shoppe or any other Pledgor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or

 

(3) any other proceeding of any type or nature in which substantially all claims of creditors of Vitamin Shoppe or any other Pledgor are determined and any payment or distribution is or may be made on account of such claims.

 

“ Intercreditor Agreement Joinder ” means an agreement substantially in the form of Exhibit A .

 

“ Issue Date ” means the date that the Notes are originally issued.

 

“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

 

“ Lien Sharing and Priority Confirmation ” means:

 

(1) as to any Series of Parity Lien Debt, the written agreement of the holders of such Series of Parity Lien Debt, as set forth in the Indenture, credit agreement or other agreement governing such

 

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Series of Parity Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Priority Lien Debt, each existing and future Priority Lien Representative and each existing and future holder of Permitted Prior Liens:

 

(a) that all Parity Lien Obligations will be and are secured Equally and Ratably by all Parity Liens at any time granted by Vitamin Shoppe or any other Pledgor to secure any Obligations in respect of such Series of Parity Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens will be enforceable by the Parity Lien Collateral Agent for the benefit of all holders of Parity Lien Obligations Equally and Ratably;

 

(b) that the holders of Obligations in respect of such Series of Parity Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens; and

 

(c) consenting to and directing the Parity Lien Collateral Agent to perform its obligations under this Agreement and the other Parity Lien Security Documents; and

 

(2) as to any Series of Priority Lien Debt, the written agreement of the holders of such Series of Priority Lien Debt, as set forth in the credit agreement or other agreement governing such Series of Priority Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Parity Lien Debt, each existing and future Parity Lien Representative and each existing and future holder of Permitted Prior Liens:

 

(a) that all Priority Lien Obligations will be and are secured Equally and Ratably by all Priority Liens at any time granted by Vitamin Shoppe or any other Pledgor to secure any Obligations in respect of such Series of Priority Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Priority Lien Debt, and that all such Priority Liens will be enforceable by the Priority Lien Agent for the benefit of all holders of Priority Lien Obligations Equally and Ratably;

 

(b) that the holders of Obligations in respect of such Series of Priority Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Priority Liens and the order of application of proceeds from enforcement of Priority Liens; and

 

(c) consenting to and directing the Priority Lien Agent to perform its obligations under this Agreement and the other Priority Lien Security Documents.

 

“ Liquidated Damages ” has the meaning set forth in the Indenture.

 

“ Loan and Security Agreement ” has the meaning set forth in the recitals.

 

“ Net Proceeds ” has the meaning set forth in the Indenture.

 

“ Non-Recourse Debt ” has the meaning set forth in the Indenture.

 

“ Notes ” has the meaning set forth in the recitals.

 

“ Note Documents ” means the Indenture, the Notes, the Note Guarantees and the Parity Lien Security Documents.

 

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“Note Guarantee” means the Guarantee by each Note Guarantor of Vitamin Shoppe’s obligations under the Indenture and the Notes, executed pursuant to the provisions of the Indenture.

 

“ Note Guarantors ” has the meaning set forth in the recitals.

 

“ Obligations ” means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Priority Lien Documents or Parity Lien Documents, as the case may be, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding), premium (if any), fees, indemnifications, reimbursements, expenses and other liabilities (including attorney’s fees) payable under the documentation governing any Indebtedness.

 

“ Officers’ Certificate ” means a certificate with respect to compliance with a condition or covenant provided for in this Agreement, signed on behalf of Vitamin Shoppe by two officers of Vitamin Shoppe, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of Vitamin Shoppe, including:

 

(1) a statement that the Person making such certificate 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 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.

 

“ Parity Lien ” means a Lien granted by a Parity Lien Security Document to the Parity Lien Collateral Agent, at any time, upon any property of Vitamin Shoppe or any other Pledgor to secure Parity Lien Obligations or any judgment lien obtained in respect of a Parity Lien Obligation.

 

“ Parity Lien Collateral Agent ” means Wilmington Trust Company, not in its individual capacity but solely in its capacity as collateral agent under the Parity Lien Security Documents, together with its successors in such capacity.

 

“ Parity Lien Debt ” means:

 

(1) the Notes issued on the date hereof (including any related exchange notes); and

 

(2) any other Indebtedness (including additional Notes) that is secured Equally and Ratably with the Notes by a Parity Lien that was permitted to be incurred and so secured under each applicable Parity Lien Document provided that; the net proceeds are used to refund, refinance, replace, defease, discharge or otherwise acquire or retire Priority Lien Debt or other Parity Lien Debt.

 

“ Parity Lien Documents ” means, collectively, this Agreement, the Note Documents, and the Indenture, and any credit agreement or other agreement governing each other Series of Parity Lien Debt and the Parity Lien Security Documents.

 

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“ Parity Lien Security Documents ” means this Agreement, each Lien Sharing and Priority Confirmation, and all security agreements, pledge agreements, collateral assignments, mortgages, control agreements, deeds of trust or other grants or transfers for security executed and delivered by Vitamin Shoppe or any other Pledgor creating (or purporting to create) a Parity Lien upon Collateral in favor of the Parity Lien Collateral Agent, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time in accordance with their respective terms and Section 2.6.

 

“ Parity Lien Obligations ” means Parity Lien Debt and all other Obligations in respect thereof.

 

“ Parity Lien Representative ” means:

 

(1) in the case of the Notes, the Trustee; or

 

(2) in the case of any other Series of Parity Lien Debt, the trustee, agent or representative of the holders of such Series of Parity Lien Debt who maintains the transfer register for such Series of Parity Lien Debt and (A) is appointed as a Parity Lien Representative (for purposes related to the administration of the Parity Lien Security Documents) pursuant to the Indenture, credit agreement or other agreement governing such Series of Parity Lien Debt, together with its successors in such capacity, and (B) has become a party to this Agreement by executing only an Intercreditor Agreement Joinder.

 

“ Permitted Debt ” means:

 

(1) the incurrence by Vitamin Shoppe and any other Pledgor of Indebtedness and letters of credit under 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 Vitamin Shoppe and its Restricted Subsidiaries thereunder) not to exceed the greater of (x) $50.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by Vitamin Shoppe or any of its Restricted Subsidiaries since the date hereof to repay any Priority Lien Debt pursuant to Section 4.10 of the Indenture; or (y) the Borrowing Base as of the date of such incurrence; and

 

(2) the incurrence by Vitamin Shoppe and its Restricted Subsidiaries of the Existing Indebtedness;

 

(3) the incurrence by Vitamin Shoppe and the Note Guarantors of Indebtedness represented by the Notes and the Note Guarantees to be issued on the date of the Indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the registration rights agreement;

 

(4) the incurrence by Vitamin Shoppe or any of its Restricted Subsidiaries of Indebtedness represented by Capital 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, installation, lease or improvement of property, plant or equipment used in the business of Vitamin Shoppe or any of its Restricted Subsidiaries, within 365 days of such purchase, construction, installation, lease or improvement, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed $10.0 million at any time outstanding;

 

(5) the incurrence by Vitamin Shoppe or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph of this definition or clauses (2), (3), (4), (5) or (14) of this definition;

 

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(6) the incurrence by Vitamin Shoppe or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Vitamin Shoppe and any of its Restricted Subsidiaries; provided, however , that:

 

(a) if Vitamin Shoppe or any other Pledgor is the obligor on such Indebtedness and the payee is not Vitamin Shoppe or any other Pledgor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes, in the case of Vitamin Shoppe, or the Note Guarantee, in the case of a Note Guarantor; and

 

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Vitamin Shoppe or a Restricted Subsidiary of Vitamin Shoppe and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either Vitamin Shoppe or a Restricted Subsidiary of Vitamin Shoppe, will be deemed, in each case, to constitute an incurrence of such Indebtedness by Vitamin Shoppe or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

 

(7) the issuance by any of Vitamin Shoppe’s Restricted Subsidiaries to Vitamin Shoppe or to any of its Restricted Subsidiaries of shares of preferred stock; provided, however, that:

 

(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than Vitamin Shoppe or a Restricted Subsidiary of Vitamin Shoppe; and

 

(b) any sale or other transfer of any such preferred stock to a Person that is not either Vitamin Shoppe or a Restricted Subsidiary of Vitamin Shoppe,

 

will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

 

(8) the incurrence by Vitamin Shoppe or any of its Restricted Subsidiaries of Hedging Obligations in the ordinary course of business or in connection with the Credit Facilities;

 

(9) the guarantee by Vitamin Shoppe or any of the other Pledgors of Indebtedness of Vitamin Shoppe or a Restricted Subsidiary of Vitamin Shoppe that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu , as applicable, to the same extent as the Indebtedness guaranteed;

 

(10) the incurrence by Vitamin Shoppe or any of the other Pledgors of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, performance, surety bonds and other similar obligations in the ordinary course of business;

 

(11) the incurrence by Vitamin Shoppe or any of the other Pledgors of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five (5) Business Days;

 

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(12) Obligations from agreements to provide for indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing the performance of Vitamin Shoppe or any of its Restricted Subsidiaries incurred in connection with the acquisition or disposition of the assets of Vitamin Shoppe or the assets or Capital Stock of a Person that is or becomes a Restricted Subsidiary of Vitamin Shoppe; provided that the maximum aggregate liability in connection with any such disposition in respect of all such Indebtedness will at no time exceed the gross proceeds actually received by Vitamin Shoppe and its Subsidiaries in connection with such disposition;

 

(13) the incurrence of any unrealized losses or charges in respect of Hedging Obligations;

 

(14) the incurrence by Vitamin Shoppe or any of the other Pledgors of additional unsecured Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $10.0 million; and

 

(15) all monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise of Vitamin Shoppe or any Restricted Subsidiary arising out of any cash management, depository or other investment services provided by the Priority Lien Agent, any holder of Priority Lien Debt or any of their respective Affiliates.

 

“ Permitted Liens ” has the meaning set forth in the Indenture.

 

“ Permitted Prior Liens ” means:

 

(1) Liens described in clause (1) of the definition of Permitted Liens;

 

(2) Liens described in clauses (3), (5), (6), (7), (8), (9), (18), (19), (21) or (22) of the definition of Permitted Liens; and

 

(3) Permitted Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the Liens created by the Priority Lien Security Documents or the Parity Lien Security Documents.

 

“Permitted Refinancing Indebtedness ” means any Indebtedness of Vitamin Shoppe or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of Vitamin Shoppe or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

 

(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

 

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;

 

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(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted 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 renewed, refunded, refinanced, replaced, defeased or discharged; and

 

(4) such Indebtedness is incurred either by Vitamin Shoppe or by the Restricted Subsidiary who is the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged.

 

“ Person ” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

 

“ Pledgors ” means collectively, Vitamin Shoppe, Holdings, VS Direct and any other Person that at any time provides collateral security for any Secured Obligations.

 

“ Priority Lien ” means a Lien granted by a Priority Lien Security Document to the Priority Lien Agent, at any time, upon any property of Vitamin Shoppe or any other Pledgor to secure Priority Lien Obligations.

 

“ Priority Lien Agent ” means Wachovia Bank, National Association, in its capacity as Priority Lien Agent under the Priority Lien Security Documents, together with its successors in such capacity.

 

“ Priority Lien Cap ” means, as of any date, the principal amount of Indebtedness outstanding under the Loan and Security Agreement (including all fixed or contingent reimbursement obligations with respect to letters of credit whether or not drawn) and/or the Indebtedness outstanding under any other Credit Facility, in an aggregate principal amount not to exceed the sum of the amount provided by clause (1) of the definition of Permitted Debt, as of any date, plus the amount provided by clause (15) of the definition of Permitted Debt, less the amount of Parity Lien Debt incurred after the date of the Indenture the net proceeds of which are used to permanently repay Priority Lien Debt. For purposes of this definition, all Hedging Obligations will be valued at zero.

 

“ Priority Lien Debt ” means:

 

(1) Indebtedness of Vitamin Shoppe and its Subsidiaries under the Loan and Security Agreement that was permitted to be incurred and secured under the applicable Secured Debt Documents (or as to which the Priority Lien Agent obtained an Officers’ Certificate from Vitamin Shoppe at the time of incurrence to the effect that such Indebtedness was permitted to be incurred and secured by all applicable Secured Debt Documents);

 

(2) Indebtedness of Vitamin Shoppe under any other Credit Facility that is secured Equally and Ratably with the Loan and Security Agreement by a Priority Lien that was permitted to be incurred under the terms of the Loan and Security Agreement and so secured under each applicable Secured Debt Document; provided , in the case of any Indebtedness referred to in this clause (2), that:

 

(a) on or before the date on which such Indebtedness is incurred by Vitamin Shoppe, such Indebtedness is designated Vitamin Shoppe, in an Officers’ Certificate delivered to each Priority Lien Representative, the Priority Lien Agent and the Parity Lien Collateral Agent, as “Priority Lien Debt” for the purposes of the Secured Debt Documents; provided that no Series of Secured Debt may be designated as both Parity Lien Debt and Priority Lien Debt;

 

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(b) such Indebtedness is governed by a credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and

 

(c) all requirements set forth in this Agreement as to the confirmation, grant or perfection of the Priority Liens to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (c) will be conclusively established if Vitamin Shoppe delivers to the Priority Lien Agent and the Parity Lien Collateral Agent an Officers’ Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is “Priority Lien Debt”); and

 

(3) Hedging Obligations of Vitamin Shoppe incurred to hedge or manage interest rate risk with respect to Priority Lien Debt; provided that:

 

(a) such Hedging Obligations are secured by a Priority Lien on all of the assets and properties that secure Indebtedness under the Credit Facility in respect of which such Hedging Obligations are incurred; and

 

(b) such Priority Lien is senior to or on a parity with the Priority Liens securing Indebtedness under the Credit Facility in respect of which such Hedging Obligations are incurred.

 

“ Priority Lien Documents ” means this Agreement, the Loan and Security Agreement, the other Priority Lien Security Documents and any other agreements, documents and instruments related to any other Credit Facility pursuant to which any Priority Lien Debt is incurred.

 

“ Priority Lien Obligations ” means the Priority Lien Debt and all other Obligations in respect of Priority Lien Debt.

 

“ Priority Lien Representative ” means (1) the Priority Lien Agent and (2) in the case of any other Series of Priority Lien Debt, the trustee, agent or representative of the holders of such Series of Priority Lien Debt who maintains the transfer register for such Series of Priority Lien Debt and is appointed as a representative of the Priority Debt (for purposes related to the administration of the Priority Lien Security Documents) pursuant to the credit agreement or other agreement governing such Series of Priority Lien Debt.

 

“ Priority Lien Security Documents ” means the Loan and Security Agreement, each Lien Sharing and Priority Confirmation, and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements or other grants or transfers for security executed and delivered by Vitamin Shoppe or any other Pledgor creating (or purporting to create) a Priority Lien upon Collateral in favor of the Priority Lien Agent, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time in accordance with their respective terms.

 

“ Purchasers ” has the meaning set forth in Section 2.14.

 

“ Required Parity Lien Debtholders ” means, at any time, the holders of a majority in aggregate principal amount of all Parity Lien Debt then outstanding, calculated in accordance with the provisions described in Section 2.10. For purposes of this definition, Parity Lien Debt registered in the name of, or beneficially owned by, Vitamin Shoppe or any Affiliate of Vitamin Shoppe will be deemed not to be outstanding.

 

“ Restricted Subsidiary ” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

 

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“ Retained Secured Contingent Obligations ” means, at any time, all obligations for taxes, costs, indemnification or other like obligations of Vitamin Shoppe or any other Pledgor secured by Priority Liens under the Priority Lien Documents which are not due and payable at such time and in respect of which the Priority Lien Agent has notified the Parity Lien Collateral Agent that any legal proceeding or other claim is pending or has been overtly threatened against any holder of Priority Lien Obligations, or any other identifiable loss contingency exists, which may result in a liability becoming payable at a future time by Vitamin Shoppe or any other Pledgor under the provisions of the Priority Lien Documents.

 

“ Secured Debt ” means Parity Lien Debt and Priority Lien Debt.

 

“ Secured Debt Documents ” means the Parity Lien Documents and the Priority Lien Documents.

 

“ Secured Debt Representative ” means each Parity Lien Representative and each Priority Lien Representative.

 

“ Secured Obligations ” means Parity Lien Obligations and Priority Lien Obligations.

 

“ Security Documents ” means, collectively, the Priority Lien Security Documents and the Parity Lien Security Documents.

 

“ Series of Parity Lien Debt ” means, severally, the Notes and each other issue or series of Parity Lien Debt for which a single transfer register is maintained.

 

“ Series of Priority Lien Debt ” means, severally, the Indebtedness outstanding under the Loan and Security Agreement and any other Credit Facility that constitutes Priority Lien Debt.

 

“ Series of Secured Debt ” means, severally, each Series of Priority Lien Debt and each Series of Parity Lien Debt.

 

“ Specified Secured Contingent Obligations” means, at any time, obligations of Vitamin Shoppe or any other Pledgor under the Priority Lien Documents secured by Priority Liens consisting of (a) reimbursement obligations in respect of the amount that then is or thereafter may become available for funding under outstanding letters of credit issued for account of Vitamin Shoppe or any of its Subsidiaries, including without limitation any loss, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) in connection with any commissions, fees, costs or expenses owing to any issuing bank, confirming bank, advising bank or correspondent bank, in each case related to such reimbursement obligations, and (b) obligations to pay any Priority Lien Obligations that were provisionally credited from the proceeds of any check or other payment remittance received from any account debtor of Vitamin Shoppe or any other Pledgor which has not at such time been finally paid, to the extent (i) such proceeds are required to be returned to any depositary or intermediary bank or clearing house under banking industry rules governing revocation of provisional credits for returned items in process of collection or (ii) the remitting bank is entitled under any deposit account control agreement with the Priority Lien Agent to be indemnified for any such returned items.

 

“ Standstill Period ” has the meaning set forth in Section 2.2(a)(2).

 

“ 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

 

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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).

 

“ Surviving Unsecured Contingent Obligations ” means, at any time, all obligations for taxes, costs, indemnification or other like obligations of Vitamin Shoppe or any other Pledgor under the Priority Lien Documents which are not due and payable at such time or for which no claim or demand for payment has been made at such time, other than Specified Secured Contingent Obligations and Retained Secured Contingent Obligations.

 

“ Trustee ” has the meaning set forth in the recitals.

 

“ UCC ” means the Uniform Commercial Code as in effect in the State of New York or any other applicable jurisdiction.

 

“Unrestricted Subsidiary” means any Subsidiary of Vitamin Shoppe that is designated by the Board of Directors of Vitamin Shoppe as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary:

 

(1) has no Indebtedness other than Non-Recourse Debt;

 

(2) except as permitted by Section 4.11 of the Indenture, is not party to any agreement, contract, arrangement or understanding with Vitamin Shoppe or any Restricted Subsidiary of Vitamin Shoppe unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Vitamin Shoppe or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Vitamin Shoppe;

 

(3) is a Person with respect to which neither Vitamin Shoppe nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and

 

(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Vitamin Shoppe or any of its Restricted Subsidiaries.

 

“ Vitamin Shoppe ” has the meaning set forth in the preamble.

 

“ VS Direct ” has the meaning set forth in the preamble.

 

“ Voting Stock ” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

 

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at

 

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final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

 

(2) the then outstanding principal amount of such Indebtedness.

 

SECTION 1.2 Rules of Interpretation .

 

(a) All terms used in this Agreement that are defined in Article 9 of the UCC and not otherwise defined herein have the meanings assigned to them in Article 9 of the UCC.

 

(b) Unless otherwise indicated, any reference to any agreement or instrument will be deemed to include a reference to that agreement or instrument as assigned, amended, supplemented, amended and restated, or otherwise modified and in effect from time to time or replaced in accordance with the terms of this Agreement.

 

(c) The use in this Agreement or any of the other Security Documents of the word “include” or “including,” when following any general statement, term or matter, will not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but will be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The word “will” shall be construed to have the same meaning and effect as the word “shall.”

 

(d) References to “Sections,” “clauses,” “recitals” and the “preamble” will be to Sections, clauses, recitals and the preamble, respectively, of this Agreement unless otherwise specifically provided. References to “Articles” will be to Articles of this Agreement unless otherwise specifically provided. References to “Exhibits” and “Schedules” will be to Exhibits and Schedules, respectively, to this Agreement unless otherwise specifically provided.

 

(e) Notwithstanding anything to the contrary in this Agreement, any references contained herein to any section, clause, paragraph, definition or other provision of the Indenture (including any definitio