Exhibit 10.2

FINAL VERSION

CONFIDENTIAL – SUBJECT TO FRE 408 AND APPLICABLE LAW EQUIVALENTS

THIS TERM SHEET AND THE INFORMATION CONTAINED HEREIN ARE STRICTLY PRIVATE AND
CONFIDENTIAL AND ARE NOT TO BE DISCLOSED OR RELIED UPON IN ANY MANNER WHATSOEVER
WITHOUT THE PRIOR WRITTEN CONSENT1 OF HARBIN PHARMACEUTICAL GROUP HOLDING CO.,
LTD. (“HAYAO”). THIS TERM SHEET IS FOR DISCUSSION AND SETTLEMENT PURPOSES AND IS
SUBJECT TO THE PROVISIONS AND PROTECTIONS OF RULE 408 OF THE FEDERAL RULES OF
EVIDENCE AND OTHER SIMILAR APPLICABLE STATUTES OR DOCTRINES PROTECTING AGAINST
THE DISCLOSURE OF CONFIDENTIAL INFORMATION AND INFORMATION EXCHANGED IN THE
CONTEXT OF SETTLEMENT DISCUSSIONS (IN EACH CASE, WHETHER LEGAL, EQUITABLE, OR
OTHERWISE AND WHETHER FEDERAL, STATE, OR OTHERWISE). NOTHING IN THIS TERM SHEET
IS (NOR SHALL IT BE CONSTRUED AS) AN ADMISSION OF FACT OR LIABILITY, A
STIPULATION OR A WAIVER, OR BINDING ON HAYAO. EACH STATEMENT CONTAINED HEREIN IS
MADE WITHOUT PREJUDICE, WITH A FULL RESERVATION OF ALL RIGHTS, REMEDIES, CLAIMS
AND DEFENSES. THIS TERM SHEET IS NOT (NOR SHALL IT BE CONSTRUED AS) (I) AN OFFER
OR A SOLICITATION OF AN OFFER WITH RESPECT TO ANY SECURITY, OPTION, COMMODITY,
FUTURE, LOAN OR CURRENCY, (II) A COMMITMENT TO UNDERWRITE ANY SECURITY, TO LOAN
ANY FUNDS OR TO MAKE ANY INVESTMENT, OR (III) A SOLICITATION OF ACCEPTANCE OR
REJECTION OF A CHAPTER 11 PLAN OF REORGANIZATION PURSUANT TO THE BANKRUPTCY
CODE. ANY SUCH OFFER OR SOLICITATION WILL BE MADE ONLY IN COMPLIANCE WITH ALL
APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, SECURITIES LAWS AND PROVISIONS
OF THE BANKRUPTCY CODE). THIS TERM SHEET AND THE TRANSACTIONS DESCRIBED HEREIN
ARE SUBJECT IN ALL RESPECTS TO, AMONG OTHER THINGS, NEGOTIATION, EXECUTION AND
DELIVERY OF DEFINITIVE DOCUMENTATION AND SATISFACTION OR WAIVER OF THE
CONDITIONS PRECEDENT SET FORTH HEREIN AND THEREIN.2

TermSheet

This term sheet (the “Term Sheet”) sets forth the principal terms of a
transaction in which Hayao, or its designee (the “Purchaser”), shall purchase
all or substantially all of the assets (the “Sale”) of GNC Holdings Inc.
(“Holdings”) and its subsidiaries (collectively, the “Company”) in connection
with the restructuring (the “Restructuring”) of the Company’s existing debt
obligations. To facilitate the Restructuring, Hayao is also prepared (subject to
all of the terms, conditions, and caveats described herein) to fund the chapter
11 cases necessary for the Company to implement the Sale. To the extent
possible, this Term Sheet is intended to be appended to and incorporated as an
exhibit to a restructuring support agreement (the “RSA”), to be executed by and
among the Company, Hayao, and certain supporting lenders (the “Consenting
Lenders”). Each element of this Term Sheet is being contemplated as (i) an
integral part of a comprehensive transaction and (ii) in consideration for the
other elements thereof.

 

 

1 

Any consent required or authorized to be given hereunder in writing may be given
by an electronic writing.

2 

Without limiting the generality of the foregoing, this Term Sheet is not, and
shall not be construed as: (i) an offer that is capable of acceptance, (ii) a
binding agreement of any kind, (iii) a commitment of, or offer by to enter into
any agreement, or (iv) an agreement or commitment (a) to commence any
restructuring, reorganization, liquidation, or other proceeding, (b) file any
restructuring, reorganization, liquidation or other plan, (c) enter into any
transaction, or (d) vote for or otherwise support any restructuring,
reorganization, liquidation, or other plan. This Term Sheet is not intended to
provide the sole basis for any decision on any transaction and is not a
recommendation with respect to any transaction. The recipient should make its
own independent business decision based on all other information, advice and the
recipient’s own judgment.

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ARTICLE I – SALE AND IMPLEMENTATION

 

Sale:   

The Purchaser will purchase all or substantially all of the assets of the
Company for $760 million, which amount shall be inclusive of the full amount of:

 

a)  the BOC Facility (as defined below in Article II);

 

b)  the Second Lien Take-Back Instrument (as described below in Article III);

 

c)  the DIP Financing (as defined below in Article IV); and

 

d)  draw of a revolver up to $75 million,

 

which amounts shall be subject to adjustment to take proper account of the
agreed upon DIP budget (including an allowance for permitted variances).

 

In addition, $475 million to the FILO lenders and Term Loan B lenders in amounts
to be agreed, and which amounts shall not be subject to reduction under any
circumstances.

Conditions to Closing:    The occurrence of the closing of the Sale shall be
subject to the satisfaction of the conditions precedent as set forth in the
Definitive Documents. Such conditions precedent shall be usual and customary for
transactions of this type, including (without limitation), that the Bankruptcy
Court shall have entered an order approving the Sale or confirming a chapter 11
plan (whichever is more efficient and expeditious) and such order shall not have
been stayed or modified or subject to an appeal. Implementation:   

The Sale shall be implemented pursuant to:

 

(a) a bid and auction process and approved under Section 363 of the Bankruptcy
Code; or

 

(b) in connection with confirmation of a chapter 11 plan; provided, however,
that for the avoidance of doubt the terms of the Sale shall be acceptable to
Hayao in its sole discretion.

Bid and Auction Process:   

In the case of a bid and auction process, motion seeking approval of bidding
procedures, authority to enter into the stalking horse asset purchase agreement,
and approval of the stalking horse bid protections shall be filed on the
petition date.

 

The bidding procedures and stalking horse bid protections shall be in form and
substance acceptable to Hayao, including the deadlines for qualified bids, the
auction, and the hearing for approval of the Sale or confirmation of a chapter
11 plan.

     The Purchaser shall be the stalking horse bidder and provided with
customary bid
protections including a break-up fee of 3% plus costs and advisors’ fees.
Requisite Approvals:    To the extent NDRC, MOC or other PRC approvals are
required, such approvals shall be obtained by closing of the Sale.

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ARTICLE II – BANK OF CHINA FACILITY

 

BOC Facility:   

Hayao will provide the Company with a new committed financing amounting to an
aggregate principal amount of $400 million with Bank of China (“BOC”) that is
guaranteed by Hayao (the “BOC Facility”).3

 

The terms of the BOC Facility shall be as set out in the term sheet and on such
other terms as are acceptable to the Ad Hoc Group of Crossover Lenders.

Requisite Approvals:    Hayao and IVC will obtain all requisite approvals prior
to closing. SAFE approvals for the BOC Facility should not be an issue since
funding occurs upon the filing for SAFE. Hayao anticipates the filing for SAFE
will occur prior to closing.

ARTICLE III – SECOND LIEN TAKE-BACK INSTRUMENT 4

 

Second Lien Take-Back Instrument:    In addition to the above, Hayao is prepared
to offer a take-back instrument to be issued by the Company or a new company
formed pursuant to a bid auction process, if applicable (the “Second Lien
Take-Back Instrument”) to Term Loan B lenders in an aggregate principal amount
not to exceed $210 million. The Second Lien Take-Back Instrument will be on the
terms set forth in this term sheet and such other terms acceptable to the Ad Hoc
Group of Crossover Lenders. Issuer:    The Company or a new company formed
pursuant to a bid auction process (the “Issuer”). Amount:    $210 million.
Interest Rate:    The Second Lien Take-Back Instrument shall PIK at a rate of
L+6% (the “PIK Interest Rate”).

 

3 

A portion of the proceeds of the BOC Facility shall be used for exit costs,
including cure costs.

4 

All terms shall be subject to definitive documentation.

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Periodic Fee:    A cash fee (a “Periodic Fee”) equal to 3% per annum of the
aggregate outstanding amount of Second Lien Take-Back Instrument paid in
semi-annual installments (each, a “Payment Date”). The Company will have 180
days past any Payment Date to cure any default in the payment of a Periodic Fee
(as described below under Events of Default). To the extent any Periodic Fee is
not paid on the applicable Payment Date, such Periodic Fee shall accrue interest
at L+6% per annum until such Periodic Fee (and such accrued interest) is paid in
full in cash. Maturity Date:   

The Second Lien Take-Back Instrument shall have a term of 6 years.

Rating:    The Company shall obtain a private corporate credit rating (but not a
specific rating) from either Standard & Poor’s, a division of S&P Global, Inc.,
or Moody’s Investors Service, Inc. in respect of the Second Lien Take-Back
Instrument. Priority:   

The obligations under the Second Lien Take-Back Instrument shall be secured by a
second lien on all of the Company’s assets and subordinated and rank junior to
the BOC Facility and any revolver for operating costs and other expenses, which
revolver shall be in an amount not to exceed $175 million.

 

Separately and to the fullest extent permitted by law, the Second Lien Take-Back
Instrument shall be secured by a first lien on (a) the right to receive the tax
refund for NOL carryback pursuant to the Cares Act and, to the extent received
by the Company, the tax refund (and the accounts into which such tax refund is
deposited) and (b) the Company’s intellectual property; provided that when
$75 million of proceeds from the Company’s intellectual property is paid in
respect of the Second Lien Take-Back Instrument, the Second Lien Take-Back
Instrument shall then be secured by a second lien on the remaining intellectual
property collateral.

Contingent Rights on IVC Proceeds

Refund:

   To the extent proceeds are received by the Company from IVC under the product
supply agreement or limited liability company agreement between the Company and
IVC, such proceeds shall be paid on a pro rata basis to the BOC Facility and the
Second Lien Take-Back Instrument (in proportion to outstanding balances on each
of the BOC Facility and the Second Lien Take-Back Instrument), with total
proceeds to the Second Lien Take-Back Instrument up to $27 million, which
proceeds paid to the holders of the Second Lien Take-Back Instrument shall
reduce the Second Lien Take-Back Instrument dollar for dollar.

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Contingent Rights on Tax Refund:    In the event the Company receives a tax
refund for NOL carrybacks pursuant to the CARES Act, the gross amount of such
refund (without any holdback or other reduction) shall, to the fullest extent
permitted by law, be promptly paid in cash to the holders of the Second Lien
Take-Back Instrument and, upon such payment, the principal balance of the Second
Lien Take-Back Instrument shall be reduced dollar for dollar. Optional
Prepayments:   

No restrictions on optional prepayment.

Mandatory Prepayment Requirements:    The Company shall sweep 15% of its pro
forma cash that is in excess of $50 million to pay off and reduce the Second
Lien Take-Back Instrument on a dollar for dollar basis; provided that such sweep
shall only occur if after giving effect to such sweep (a) there is no event of
default under BOC Facility; (b) the Company has a minimum cash balance of
$50 million; and (c) the Company has a net senior leverage of less than or equal
to 2x. Prepayment/Make Whole Premium:   

None.

Conditions Precedent:    The Second Lien Take-Back Instrument would be issued
upon satisfaction of conditions precedent acceptable to Hayao and the Company
including: (i) the closing of the Sale or (ii) the occurrence of the effective
date of a chapter 11 plan that consummates the Restructuring. Affirmative
Covenants:    Ordinary and customary, including but not limited to, quarterly
and annual financial reporting and earnings calls for the holders of the Second
Lien Take-Back Instrument. The Second Lien Take-Back Instrument would have no
affirmative covenants more restrictive than BOC Facility, and (a) if the Company
has a net senior leverage of less than or equal to 1.5x, the Company shall
undertake to commence the refinancing process to refinance the entire capital
structure of the Company with processes and milestones to be agreed in the
definitive documents and (b) as may be agreed by Hayao and the Company,
including information rights. Negative Covenants:    Ordinary and customary
negative covenants. The Second Lien Take-Back Instrument would have no negative
covenants more restrictive than those set forth in the BOC Facility (subject to
review of covenants in the BOC Facility), including without limitation a
prohibition on debt that is senior or pari with the Second Lien Take-Back
Instrument (other than the BOC Facility and the revolver set forth in this term
sheet). The Company will not amend the BOC Facility or enter into any agreement
that restricts the Company from performing its covenants under the Second Lien
Take-Back Instrument. Restricted Payments:    No dividends or other payments to
shareholders on account of their equity in the Company until the Second-Lien
Takeback Instrument is paid in full.

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Financial Covenants:   

None, including no leverage or other financial maintenance covenants.

Guarantee or Share Pledge:   

Guarantees and liens from all Issuer subsidiaries.

Subordination of Subrogation Rights:    Any subrogation or similar rights that
Hayao might otherwise acquire upon a repayment of the BOC Facility shall be
subordinate to the Second Lien Take-Back Instrument and Hayao shall be stayed
from seeking enforcement of any such rights, in each case unless and until the
Second Lien Take-Back Instrument is repaid in full. Such arrangement shall be
memorialized by a separate contractual agreement between the holders of the
Second Lien Take-Back Instrument, the Purchaser and Hayao. Events of Default:   
Ordinary and customary, including but not limited to, non-payment at the
maturity date, non-payment of Periodic Fee and other fees and interest,
non-payment of required prepayments, and for commencing an insolvency
proceeding, provided, that any failure to pay any Periodic Fee on the applicable
Payment Date shall not constitute an Event of Default if paid in full (including
all accrued interest on such Periodic Payment) within 180 days of such Payment
Date.

Governing Law and Submission to

Exclusive Jurisdiction:

  

State of New York

Professional Fees:   

The Company shall pay the fees and expenses of Hayao’s advisors.

Definitive Documentation:    The documentation governing the Second Lien
Take-Back Instrument and the BOC Facility, including credit agreement and
security documents, shall be in form and substance acceptable to Hayao.

ARTICLE IV– DIP FINANCING5

 

DIP Terms:    Hayao, together with IVC, will provide will provide a senior
secured superpriority debtor-in-possession delayed-draw term loan facility (the
“DIP Facility”) in an aggregate principal amount not to exceed $75 million with
a six-month maturity that will be secured by (a) perfected priming security
interests and liens on all unencumbered assets, (b) perfected junior security
interest and liens as to the ABL and perfected priming security interests and
liens as to the TLB with respect to the ABL Collateral, and (c) perfected junior
security interest and liens on the TLB Collateral (the “DIP Financing”).6

 

6 

Such DIP financing may be provided by or arranged by Hayao, its affiliates, or
its designees (the “DIP Lenders”).

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Proceeds of the DIP Financing shall be used to fund the chapter 11 cases
necessary to implement the Sale subject to a budget to be approved by the DIP
Lender in its sole discretion.

 

The documentation governing the DIP Financing, including credit agreement,
security documents and order shall contain customary terms (including as to
representations, covenants and events of default) and protections for the DIP
Lender and shall be subject to approval in the DIP Lender’s sole discretion.

 

The DIP Financing shall require and be conditioned on certain milestones (the
“DIP Milestones”) for completing the Sale (as described herein) and other
conditions, including (without limitations) stalking horse protections as
required by the DIP Lender in its sole discretion. DIP Milestones shall include
a sale timeline and other customary milestones.

 

The Company shall pay the fees and expenses of the DIP Lender’s advisors.

Adequate Protection    Existing Term Loans will be entitled to adequate
protection payments; provided that such payments shall reduce the cash
consideration paid to the Term Loan B Lenders under this term sheet on a dollar
for dollar basis. DIP Claims:    DIP claims shall be credit bid in connection
with the Sale or become a part of the revolver, in each case, at IVC’s sole
option. Requisite Approvals:    Hayao and IVC will obtain all requisite
approvals prior to funding of the DIP Financing.

ARTICLE V– ADDITIONAL TERMS

 

Consummation of Restructuring:    Unless otherwise agreed by the Parties,
post-petition financing shall be provided by the Term Loan B Lenders and the DIP
Claims shall be paid in full in cash pursuant to a chapter 11 plan.    To the
extent possible, the Company, Hayao, the ABL Lenders, and the Term Loan B
Lenders will execute a RSA with sufficient holdings to support the Sale (whether
under Section 363 of the Bankruptcy Code or through a chapter 11 plan). The RSA
shall include deadlines for court approval of the Sale, the closing of the Sale,
and the confirmation and effective date of a chapter 11 plan.    The Company,
Hayao, and the Consenting Lenders agree that the Company shall commence the
chapter 11 cases in the Bankruptcy Court for the District of Delaware.

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Tax Related Issues:    The Company and Hayao will work together in good faith
and will use reasonable best efforts to structure and implement the Sale and
Restructuring and the transactions related thereto in a tax efficient and cost
efficient manner. Securities Laws Issues:    The Company and Hayao will work
together in good faith and will use reasonable best efforts to structure and
implement the Sale and Restructuring and the transactions related thereto in a
manner that complies with applicable securities laws and does not require
registration thereunder. Sale Documentation:    This Term Sheet does not include
a description of all of the terms, conditions, and other provisions that will be
contained in the definitive documentation governing the Sale and the
Restructuring. The material documents implementing the Sale and the
Restructuring shall be materially consistent with this Term Sheet and shall be
in form and substance acceptable to Hayao (collectively, the “Definitive
Documents”). Choice of Forum:    The Company, Hayao, and the Consenting Lenders
agree that the Bankruptcy Court shall have exclusive jurisdiction over all
matters arising out of or in connection with the Sale, the issuance of the
Second Lien Take-Back Instrument, and Restructuring.