<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
GENERAL NUTRITION COMPANIES, INC.
(Name of Registrant as Specified in its Charter)
(Names of Persons Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------
5) Total fee paid: $125
-------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identifying the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------
3) Filing Party:
--------------------------------------------------
4) Date Filed:
----------------------------------------------------
<PAGE> 2
[LOGO]
GENERAL NUTRITION COMPANIES, INC.
921 PENN AVENUE
PITTSBURGH, PENNSYLVANIA 15222
TO OUR STOCKHOLDERS:
We are pleased to invite you to attend the General Nutrition Companies,
Inc. 1996 Annual Meeting of Stockholders, which will be held on Thursday, June
27, 1996, in the Urban Room at the Westin William Penn Hotel, 530 William Penn
Place, Pittsburgh, PA 15219. The meeting will begin at 10:00 a.m. local time.
The matters to be acted on at the meeting are described in detail in the
attached notice of meeting and proxy statement. The meeting will also provide an
opportunity to review with you the business and affairs of the Company and its
consolidated subsidiaries and give you an opportunity to meet your directors.
Please complete and sign the enclosed proxy card and return it promptly in
the accompanying envelope. This will ensure that your shares are represented at
the meeting.
Please read the proxy materials carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
I look forward to seeing you at the meeting.
Very truly yours,
WILLIAM E. WATTS
President and
Chief Executive Officer
Pittsburgh, Pennsylvania
May 24, 1996
<PAGE> 3
GENERAL NUTRITION COMPANIES, INC.
921 PENN AVENUE
PITTSBURGH, PENNSYLVANIA 15222
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 27, 1996
TO ALL STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of General
Nutrition Companies, Inc., a Delaware corporation, will be held on Thursday,
June 27, 1996, at 10:00 a.m. Eastern Daylight Time, in the Urban Room at the
Westin William Penn Hotel, 530 William Penn Place, Pittsburgh, PA 15219.
Pursuant to the By-Laws, the Board of Directors fixed the close of business
on May 8, 1996 as the record date for determination of stockholders of the
Company entitled to receive notice of and to vote at the Annual Meeting. The
following items, described in the attached proxy statement, will be on the
agenda:
1. Election of two Class III directors to the Board of Directors for a
three-year term expiring in 1999;
2. Ratification of the appointment of the Company's independent auditors
for the current fiscal year; and
3. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
So far as management is aware, no business will properly come before the
Annual Meeting other than the matters described above.
By Order of the Board of Directors,
JAMES M. SANDER
Vice President - Law,
Chief Legal Officer and Secretary
Pittsburgh, Pennsylvania
May 24, 1996
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD APPOINTING ROBERT V. DUNN,
EDWIN J. KOZLOWSKI AND LOUIS MANCINI AS YOUR PROXIES, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING.
<PAGE> 4
GENERAL NUTRITION COMPANIES, INC.
921 PENN AVENUE
PITTSBURGH, PENNSYLVANIA 15222
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 27, 1996
The following statement is made in connection with solicitation of the
enclosed proxy by the Board of Directors of General Nutrition Companies, Inc.
(the "Company") for use at the Annual Meeting of Stockholders. The approximate
mailing date of this proxy material is May 24, 1996.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of the Company's outstanding Common Stock (the "Common Stock")
have voting rights in connection with the proposals discussed herein. The close
of business on May 8, 1996 has been fixed by the Board of Directors as the
record date for the determination of stockholders of the Company entitled to
receive notice of and to vote at the Annual Meeting. On May 8, 1995, there were
89,992,354 shares of Common Stock outstanding and entitled to vote. Each share
entitles the holder to one vote on each matter presented for stockholder
approval.
Shares represented by a properly executed proxy in the accompanying form
will be voted at the meeting as specified in the proxy. If signed proxies are
returned without specification, such proxies will be voted according to the
recommendations of the Board of Directors. Those recommendations are described
later in this statement.
You may revoke your proxy at any time before its exercise by sending
written notice of revocation to the Secretary of the Company, or by signing and
delivering a proxy which is dated later, or, by attending the meeting and voting
in person.
At the date of this statement, the only matters that management intends to
present at the meeting are (1) the election of two Class III directors for a
three-year term expiring in 1999 and (2) the ratification of the appointment of
independent auditors for the current fiscal year.
If any other matters are properly brought before the meeting, the enclosed
proxy permits the stockholder to give discretionary authority to the persons
named in such proxy to vote the shares in their best judgment.
Under Delaware law and the Company's Restated Certificate of Incorporation,
if a quorum is present at the meeting (i) the two nominees for election as
directors who receive the greatest number of votes cast for the election of
directors at the meeting by the shares present in person or by proxy and
entitled to vote shall be elected directors and (ii) proposal 2 must be approved
by the affirmative vote of the majority of shares present in person or by proxy
and entitled to vote on the matter. In the election of directors, any action
other than a vote for a nominee will have the practical effect of voting against
the proposals since it is one less vote in favor. Broker non-votes will have no
impact on such matter since they are not considered "shares present" for voting
purposes.
1
<PAGE> 5
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of six people, two of whom are
members of management and four of whom are non-management directors. In
accordance with the Company's Restated Certificate of Incorporation, directors
are divided into three classes, each of which is composed as nearly as possible
of one-third of the directors. The terms of the Class I and Class II directors
and the term of the two Class III directors elected in 1996 will expire
respectively, on the date of the 1998, 1997 and 1999 Annual Meetings of
Stockholders, or until a successor has been elected and qualified. The nominees
for director are currently Board members. The names of the nominees for the
Board of Directors, as recommended by the Board of Directors, and the names of
directors whose terms will continue after the 1996 Annual Meeting, are listed
below. Shares represented by a properly executed proxy in the accompanying form
will be voted for such nominees unless authority is withheld. However,
discretionary authority is reserved to vote such shares in the best judgment of
the people named in the proxy in the event that any person or persons other than
the nominees listed below are to be voted on at the meeting due to the
unavailability of any nominees so listed. The nominees are not related to any
other director or Executive Officer of the Company or its subsidiaries.
NOMINEES FOR CLASS III DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
JERRY D. HORN, 58, Chairman of the Board and Director
Mr. Horn became Chairman of the Board of the Company in October 1991 and
has served as Chairman of the Board of GNI since November 1985 and as Chief
Executive Officer of GNI from May 1985 to December 1990. Mr. Horn also served as
President of GNI from May 1985 to September 1988. Mr. Horn is also a director of
Chadwick-Miller, Inc., Ghirardelli Chocolate Company, and Restaurants Unlimited,
Inc. From April 1983, Mr. Horn was President and from April 1984 to May 1985,
Chief Executive Officer of Thousand Trails, Inc. and from September 1979 to
April 1983, he was President and Chief Executive Officer of Recreational
Equipment, Inc.
THOMAS R. SHEPHERD, 66, Director
Mr. Shepherd has served as a Director of the Company since October 1991,
and as a Director of GNI since October 1989. He has been engaged as a consultant
to Thomas H. Lee Company, since 1986 and is currently a Managing Director. He is
also a Director of Health o meter Products, Inc., Anchor Advanced Products,
Inc., and PNC New England. He is Executive Vice President of Thomas H. Lee
Advisors I and II, L.P. Previously Mr. Shepherd was Chairman of Amerace
Corporation from 1986 to 1988, President of North American Phillips Commercial
Electronics Corporation from 1981 to 1983 and Senior Vice President and General
Manager of GTE (Sylvania) Entertainment Products Group from 1979 to 1981. Mr.
Shepherd is also a Trustee of Washington and Lee University and Treasurer of
Meetinghouse Foundation, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE DIRECTOR NOMINEES.
2
<PAGE> 6
CONTINUING DIRECTORS
CLASS II DIRECTORS
TERM EXPIRING AT 1997 ANNUAL MEETING
WILLIAM E. WATTS, 43, President, Chief Executive Officer and Director
Mr. Watts became President, Chief Executive Officer and a Director of the
Company in October 1991, has served as a Director of GNI since 1986, and has
served as President of GNI since September 1988 and as Chief Executive Officer
of GNI since December 1990. He served as Senior Vice President of GNI from
January 1988 to September 1988 and previously has served as Senior Vice
President-Retailing of GNI between August 1985 and January 1988. Mr. Watts was
Vice President-Retail Operations from February 1984 to August 1985 and prior
thereto served as Director of Retail Operations.
RONALD L. ROSSETTI, 53, Director
Mr. Rossetti has served as a Director of the Company and of GNI since
September 1994. He is currently a private investor and a consultant regarding
emerging growth companies. From 1976 through September 1994, Mr. Rossetti was
President, Chief Executive Officer and a Director of Nature Food Centres, Inc.,
which was acquired by the Company in 1994. Mr. Rossetti is also a Director of
City Sports, Tier Corporation and a Trustee of Northeastern University.
CLASS I DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
THOMAS H. LEE, 52, Director
Mr. Lee has served as a Director of the Company and of GNI since December
1992. Since 1974, Mr. Lee has been President of Thomas H. Lee Company, a firm
engaged in investment activities. He is a Director of Autotote Corporation,
Finlay Enterprises, inc., Finlay Fine Jewelry Corporation, Health o meter
Products, Inc., Livent Inc., and Playtex Products, Inc. Mr. Lee also is Chairman
and a Trustee of Thomas H. Lee Equity Advisors III Limited Partnership, the
General Partner of Thomas H. Lee Equity Fund III, L.P., both of which
participate in equity or equity-related investments of the companies acquired.
From November 20, 1990 to May 20, 1991, Mr. Lee served as Chief Executive
Officer of Hills Department Stores, Inc., the predecessor to Hills Stores
Company. Hills Department Stores, Inc. filed for protection under Chapter 11 of
the Federal Bankruptcy Code in February 1991 and emerged from such protection in
October 1993 as Hills Stores Company.
W. HARRISON WELLFORD, 56, Director
Mr. Wellford has served as a Director of the Company and GNI since January
1994. Since November 1991, Mr. Wellford has been a partner in the Washington
D.C. office of the law firm of Latham & Watkins where he is chair of the firm's
International Practice Group. He is a Director of Sithe Energies, USA and is a
Founder of the National Independent Energy Producers. He also serves as
Vice-Chairman of the Friends of Art in Embassies. He holds a Ph.D. Degree in
Government from Harvard University and a Juris Doctor Degree from Georgetown
University. He is a Fellow of the National Academy of Public Administration. Mr.
Wellford was a partner at the law firm of Olwine, Chase, O'Donnell & Weyher from
1989 through 1991; and prior to that time period, he was a partner at the law
firm of Wellford, Wegman and Hoff from 1981 through 1988. In addition, Mr.
Wellford was Executive Director of the White House-Office of Management and
Budget and Executive Director of the President's Reorganization Project from
1977 to 1981. Mr. Wellford also served as a White House transition advisor to
Presidents-elect Carter and Clinton.
3
<PAGE> 7
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 1996, there were four meetings of the Board of Directors of
the Company. All of the Directors attended at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors, and (ii) the total
number of meetings held by committees of the Board of Directors on which they
served. Each non-employee Director not affiliated with the Thomas H. Lee
Company, except for Mr. Rossetti, receives compensation in the amount of $5,000
for each fiscal quarter and $500 per meeting for attending meetings of the Board
of Directors of the Company.
COMMITTEES
The Board of Directors has established standing Audit, Compensation and
Stock Option Committees. The membership of each committee is usually determined
at the organizational meeting of the Board. The Board of Directors does not have
a nominating committee.
AUDIT COMMITTEE
Messrs. Lee, Shepherd and Wellford serve as the Audit Committee of the
Board of Directors. The Audit Committee's functions include (i) reviewing the
Company's external and internal audit programs and the adequacy of the internal
accounting and financial controls, (ii) reviewing with the independent auditors
their report on the Company's financial statements, (iii) reviewing the
professional services proposed to be provided by the independent auditors to
consider the possible effect of such services on their independence, and (iv)
such other related services as the Board from time to time may request. The
Audit Committee met twice during the fiscal year ended February 3, 1996.
COMPENSATION COMMITTEE
Messrs. Lee, Shepherd and Wellford serve as the Compensation Committee of
the Board of Directors. The Compensation Committee's functions include
administering the Company's Executive Retirement Arrangement and Deferred
Compensation Plan, and approving the compensation of key employees of the
Company. The Compensation Committee met twice during the fiscal year ended
February 3, 1996.
STOCK OPTION COMMITTEE
Messrs. Shepherd and Wellford serve as the Stock Option Committee of the
Board of Directors. The Stock Option Committee's functions include administering
the Company's Stock Option Plans. The Stock Option Committee met three times
during the fiscal year ended February 3, 1996.
STOCK OWNERSHIP AND TRADING REPORTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Act") requires
the Company's officers and persons who own more than 10% of the Company's Common
Stock to file with the Securities and Exchange Commission reports concerning
their ownership of the Company's Common Stock and changes in such ownership.
Copies of such reports are required to be furnished to the Company. To the
Company's knowledge, based solely on a review of copies of such reports
furnished to the Company during or with respect to the Company's most recent
fiscal year, all Section 16(a) filing requirements applicable to persons who
were, during the most recent fiscal year, officers or directors of the Company
or greater than 10% beneficial owners of its Common Stock were complied with.
4
<PAGE> 8
OWNERSHIP OF STOCK BY DIRECTORS, NOMINEES FOR DIRECTOR,
EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following tables sets forth information with respect to the beneficial
ownership of shares of Common Stock of the Company as of March 31, 1996, by all
stockholders of the Company known to be beneficial owners of more than 5% of
such Common Stock, by each director and nominee, by each executive officer named
in the Summary Compensation Table below and by all directors and executive
officers as a group, as determined in accordance with Rule 13d-3(d) under the
Exchange Act:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF VOTING
OF COMMON STOCK* STOCK OUTSTANDING*
---------------- --------------------
<S> <C> <C>
FMR Corp. 7,749,810(a) 8.61%
82 Devonshire Street
Boston, MA 02109-3614
Thomas H. Lee 0 *
Ronald L. Rossetti 5,000(b) *
Thomas R. Shepherd 0 *
W. Harrison Wellford 23,000(c) *
Jerry D. Horn 60,967(d) *
William E. Watts 702,584(e) *
Louis Mancini 54,692(f) *
Edwin J. Kozlowski 125,400(g) *
John A. DiCecco 115,890(h) *
All Directors and Executive officers 1,174,028(i) 1.30%
of the Company as a group (13 persons)
</TABLE>
- - - - ---------
* Represents less than 1%.
(a) Includes 6,845,510 shares beneficially owned by Fidelity Management &
Research Company, and 904,300 shares beneficially owned by Fidelity
Management Trust Company. FMR Corp. has sole voting power with respect to
431,500 shares and sole dispositive power with respect to 7,749,810 shares.
(b) Includes 5,000 option shares which Mr. Rossetti has the right to acquire
within 60 days.
(c) Includes 10,000 option shares which Mr. Wellford has the right to acquire
within 60 days.
(d) Includes 29,835 option shares which Mr. Horn has the right to acquire
within 60 days.
(e) Includes 702,584 option shares which Mr. Watts has the right to acquire
within 60 days.
(f) Includes 54,412 option shares which Mr. Mancini has the right to acquire
within 60 days.
(g) Includes 95,504 option shares which Mr. Kozlowski has the right to acquire
within 60 days.
(h) Includes 81,562 option shares which Mr. DiCecco has the right to acquire
within 60 days.
(i) Includes 1,045,392 option shares which such directors and executive
officers have the right to acquire within 60 days.
5
<PAGE> 9
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation program. The Committee is
composed exclusively of non-employee directors. In its deliberations, the
Committee takes into account the recommendations of appropriate Company
officials.
The goals of the Company's executive compensation program are to:
1. Pay competitively to attract, retain and motivate a highly competent
executive team;
2. Tie individual total compensation to individual and team performance and
the success of the Company; and
3. Align executives' financial interests with stockholder value.
The Company's program utilizes a combination of base salary, annual
incentive (bonus) awards based on the achievement of performance objectives and
stock options. In 1993 the Internal Revenue Code was amended to limit the
deduction a public company is permitted for compensation paid in 1994 and
thereafter to the chief executive officer and to the four most highly
compensated executive officers, other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered executive, other
than performance-based compensation, cannot be deducted. In order to qualify as
performance-based compensation under the new tax law, certain requirements must
be met, including approval of the performance measures by the stockholders. The
Committee intends to consider ways to maximize deductibility of executive
compensation, while retaining the discretion the Committee considers appropriate
to compensate executive officers at levels commensurate with their
responsibilities and achievements.
BASE SALARIES
Base salaries are targeted to be moderate, yet competitive in relation to
salaries commanded by those in similar positions with other companies. In the
course of its deliberations the Committee reviews management recommendations for
executive officers' salaries, and examines data assembled by the Company from
surveys of compensation paid to executives with similar responsibilities in
major U.S. retail companies, including specialty retailers. Individual salary
determinations are based on experience, levels of responsibility, sustained
performance and comparison to peers inside and outside the Company. The base
salaries of Messrs. Horn and Watts are specified in employment agreements
described below entered into in 1989 and amended in 1990, 1993, 1994 and 1995,
which provide for annual adjustments to a base salary for changes in the cost of
living.
ANNUAL INCENTIVE AWARDS
Annual incentive awards are designed to reward personal contributions to
the success of the organization. In conjunction with the approval of the
Company's annual operating plan by the President and Chief Executive Officer of
the Company, performance goals are established for individual officers based on
aspects of Company performance related to the particular officers'
responsibilities and in some cases, on individual achievements. These goals are
reviewed and approved by the Committee early in each fiscal year. At the end of
the year, the Committee evaluates actual performance and awards incentive
compensation in the form of cash bonuses (or, in some cases, stock options)
based on the achievement of the performance goals. Incentive awards to the
President and Chief Executive Officer, the Chairman and the other three most
highly compensated executive officers are shown in the "Bonus" column of the
Summary Compensation Table, which follows this report.
STOCK OPTIONS
Stock options accomplish the third compensation objective: to align the
interests of executive officers with stockholder value.
The number of stock options granted by the Stock Option Committee is
determined by the recipients' position, grade level and performance during the
previous year, with participants of higher positions and grade levels being
eligible to receive more options than those of lower positions and grade levels.
The determination
6
<PAGE> 10
as to the size of stock option grants to executive officers, including Mr.
Watts, reflect the subjective judgment of the Stock Option Committee. The
participant's right to exercise stock options vests over a period of years and
in some instances such vesting is tied to the achievement of specified
performance objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation paid to Mr. Watts as President and Chief Executive Officer
for fiscal year ending February 3, 1996 was based on the salary specified in his
employment contract described below, together with a cash incentive award in the
amount of $300,000 which was made by the Committee in recognition of the
Company's performance in fiscal 1996 and Mr. Watts' contributions to the
Company's success.
COMPENSATION COMMITTEE
Thomas H. Lee
Thomas R. Shepherd
W. Harrison Wellford
7
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the total amount and long-term compensation of
the Chief Executive Officer and the other four most highly compensated executive
officers of the Company.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
OTHER OPTION ALL OTHER
NAME AND BONUS ANNUAL SHARES COMPENSATION*
PRINCIPAL POSITION YEAR SALARY ($) ($)(1) COMPENSATION($)* GRANTED(2) ($)(3)
- - - - --------------------------- ---- ---------- -------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts 1995 $636,637 $300,000 $ 6,373 764,000 $ 9,478
President & CEO 1994 599,441 200,000 13,563 0 11,529
1993 546,028 250,000 6,434 800,000 11,223
Jerry D. Horn 1995 351,358 0 6,373 48,000 9,265
Chairman 1994 344,645 0 4,401 0 11,319
1993 334,251 0 6,255 114,000 11,053
Louis Mancini 1995 221,231 55,000 6,373 142,000 10,222
President of GNC 1994 200,346 35,000 6,358 4,000 11,817
1993 181,500 124,481 6,434 100,000 4,789
Edwin J. Kozlowski 1995 202,000 50,000 6,373 102,000 9,766
Executive Vice President 1994 181,500 37,500 6,358 2,000 11,817
of GNI 1993 163,500 50,000 6,434 60,000 12,830
John A. DiCecco 1995 171,423 14,500 6,373 60,000 9,478
Senior Vice President 1994 156,500 41,236 6,358 2,000 11,529
of GNI 1993 145,539 120,596 6,434 60,000 10,022
</TABLE>
- - - - ---------
* The above-named Executive Officers received other annual compensation in the
form of perquisites, the amount of which did not exceed reporting
thresholds.
(1) Incentive compensation is based on performance in the year shown but
determined and paid the following year. For example, bonuses for 1995 are
based on performance in 1995 and are measured and paid in 1996.
(2) The total number of options held by the persons listed in this table as of
the close of the fiscal year ended February 3, 1996 is as follows and
reflects the adjustment in the number of shares and exercise price relating
to the Company's 2 for 1 stock split on October 17, 1995: Mr. Watts
1,576,048 shares; Mr. Horn 172,233 shares; Mr. Mancini 221,712 shares; Mr.
Kozlowski 214,652 shares; and Mr. DiCecco 157,852 shares.
(3) Includes amounts received by the persons listed in this table for (a)
"matching contributions" under the Company's Executive Retirement
Arrangement for 1995, 1994 and 1993, respectively, in the following amounts:
Mr. Watts $9,070, $11,121 and $10,815; Mr. Horn $7,465, $9,519 and $9,253;
Mr. Mancini $9,070, $11,121 and $10,815; Mr. Kozlowski $9,070, $11,121 and
$12,134; and Mr. DiCecco $9,070, $11,121 and $9,614; and (b) the dollar
value of life insurance premiums for 1995, 1994 and 1993, respectively, for
the benefit of the persons listed in this table paid by the Company in the
following amounts: Mr. Watts $408, $408, $408, Mr. Horn $1,800, $1,800 and
$1,800; Mr. Mancini $1,152, $696 and $696; Mr. Kozlowski $696, $696 and
$408; and Mr. DiCecco $408, $408 and $408.
OPTIONS GRANTS IN 1995
Information concerning 1995 grants to the President and Chief Executive
Officer and the other four most highly compensated executive officers is
provided below.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES OF
----------------------------------------------------------------------- STOCK
% OF TOTAL EXERCISE PRICE APPRECIATION FOR
OPTIONS OPTIONS OR MARKET PRICE OPTION TERM (2)
GRANTED GRANTED TO BASE PRICE AT DATE EXPIRATION -------------------------
NAME (#)(1) EMPLOYEES ($/SH) OF GRANT DATE 0% ($) 5% ($)
- - - - ------------------ ------- ---------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Watts 64,000 82.3% $ 1.25 $ 21.15625 8/24/05 $1,274,000 $2,125,523
700,000 37.4 11.88 11.88 2/27/05 0 5,229,888
Jerry D. Horn 48,000 2.5 11.88 11.88 2/27/05 0 358,621
Louis Mancini 2,000 2.6 1.25 19.375 1/26/05 36,250 60,620
140,000 7.5 11.88 11.88 2/27/05 0 1,045,978
Edwin J. Kozlowski 2,000 2.6 1.25 19.375 1/26/05 36,250 60,620
100,000 5.3 11.88 11.88 2/27/05 0 747,127
John A. DiCecco 60,000 3.2 11.88 11.88 2/27/05 0 448,276
<CAPTION>
NAME 10% ($)
- - - - ------------------ -----------
<S> <C>
William E. Watts $ 3,431,927
13,253,562
Jerry D. Horn 908,816
Louis Mancini 98,008
2,650,712
Edwin J. Kozlowski 98,008
1,893,366
John A. DiCecco 1,136,020
</TABLE>
- - - - ---------
(1) These options are fully vested.
(2) The dollar amounts under these columns are the result of calculations at
assumed rates of appreciation of 5% and 10% by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. No gain to the
optionees is possible without an increase in price of the Common Stock,
which will benefit all shareholders proportionately.
AGGREGATED OPTION EXERCISES AND VALUES AT FISCAL YEAR-END
The following information is furnished for the fiscal year ended February
3, 1996 with respect to the stock options held by the Company's President and
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company and its subsidiaries.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FEBRUARY 3, 1996 FEBRUARY 2, 1996(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - - ------------------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts 290,000 $4,877,050 760,239 815,809 $ 8,106,395 $ 9,480,561
Jerry D. Horn 250,000 3,186,302 33,442 138,791 342,034 2,105,753
Louis Mancini 53,000 1,024,235 41,602 180,110 428,052 1,912,633
Edwin J. Kozlowski 35,957 644,178 104,793 109,859 1,091,463 1,361,438
John A. DiCecco 40,000 738,485 76,918 80,934 911,246 1,150,755
</TABLE>
- - - - ---------
(1) This amount is the aggregate of the number of options multiplied by the
difference between the closing price of the Common Stock on the NASDAQ
National Market on February 2, 1996 ($22 per share), minus the option
exercise price of $1.25 per share for shares granted under the 1989 and
1991 stock option plans, and $10.8438 for shares granted under the 1993
stock option plan.
EMPLOYMENT AGREEMENT
All officers of the Company, GNI and GNC serve at the discretion of the
Board of Directors. GNI has entered into employment agreements dated as of March
24, 1989 with each of Messrs. Horn and Watts. Mr. Horn's agreement, as amended
provides that he shall serve as the Chairman of the Board of GNI until January
31, 1998 at a base salary of $331,265 per annum (subject to adjustment for
future changes in the cost of living), and shall thereafter be retained by GNI
as a consultant for one year at an annual fee of $100,000, during which year Mr.
Horn shall be prohibited from competing with GNI by engaging in any capacity in
a business substantially similar to GNI's business, soliciting any customer of
GNI on behalf of a competitor or attempting to persuade any employee of GNI to
terminate his or her employment relationship in order to enter into competitive
employment. Mr. Watts' agreement, as amended, provides that he shall serve as
President
9
<PAGE> 13
and Chief Executive Officer of GNI until February 1, 2000 at a base salary of
$599,835 per annum (subject to adjustment for future changes in the cost of
living) and as part of his compensation Mr. Watts is entitled to personal use of
the Company's airplane for up to 75 hours per year. In addition, Mr. Watts will
receive a lump sum retention payment in the amount of $1.5 million for his
continued services through the term of his employment agreement. Under their
respective employment agreement, each of Messrs. Horn and Watts is required to
maintain the confidentiality of GNI information for two years following the
termination of his employment, and is entitled to certain other benefits and
reimbursement of expenses and to participate in the Company's 1989 Stock Option
Plan and 1995 Stock Option Plan.
Under such employment agreements, each of Messrs. Horn and Watts is
entitled to resign in his sole discretion at any time upon one month's written
notice, but will be entitled to certain severance benefits only if (i) GNI
terminates his employment other than for "cause" prior to the respective dates
set forth above, or (ii) there occurs a material diminution in such executive's
duties or responsibilities at GNI.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Messrs. Lee, Shepherd and Wellford served as members of the Compensation
Committee during fiscal 1996. None of the named individuals were officers or
employees of the Company or any of its subsidiaries during fiscal 1996.
The Company was formed by Thomas H. Lee Company ("THL") and certain members
of the Company's senior management to acquire General Nutrition, Incorporated
("GNI") in August 1989 (the "Acquisition"). In connection with the Acquisition,
the Company and THL entered to a five-year management agreement (the "THL
Management Agreement") pursuant to which THL was entitled to receive up to
$600,000 per year for management and other consulting services rendered to the
Company. After the initial five-year term, the THL Management Agreement was
automatically renewable on an annual basis. The THL Management Agreement was
terminated effective as of February 13, 1996. During 1995, GNI paid THL $250,000
pursuant to the THL Management Agreement.
10
<PAGE> 14
PERFORMANCE GRAPH
The graph set forth below compares the change in the Company's cumulative
total shareholder return on the Common Stock (as measured by dividing the
difference between the Company's share price at the end and the beginning of the
period indicated by the share price at the beginning of the period indicated)
with the cumulative total return of the NASDAQ Composite Market Index and the
Dow Jones World Industry Groups U.S. Specialty Retailers Index for the period
commencing with the Company's initial public offering on January 21, 1993. The
graph assumes $100 was invested on January 21, 1993 in the Company's Common
Stock and in the indexes and also assumes the reinvestment of dividends.
<TABLE>
<CAPTION>
General Nu- Dow Jones
Measurement Period trition Com- NASDAQ U.S. Spe-
(Fiscal Year Covered) panies, Inc. Composite cialty Retail
<S> <C> <C> <C>
1/21/93 100 100 100
2/5/93 142 100 102
2/4/94 353 111 89
2/5/95 314 110 96
2/3/96 550 153 88
</TABLE>
The Board of Directors and its Compensation Committee recognize that the
market price of stock is influenced by many factors, only one of which is
Company performance. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994 the Company acquired all of the outstanding Common Stock of Nature
Food Centres, Inc. ("NFC") for approximately $59.4 million. Ronald L. Rossetti,
President and Chief Executive Officer of NFC, received in the transaction
approximately $28 million for his NFC Common Stock and $2,323,000 in
consideration of the termination of various contractual relationships between
Mr. Rossetti and NFC. In addition, the Company entered into a consulting and
non-competition agreement with Mr. Rossetti pursuant to which, for a three-year
period ending in September 1997, Mr. Rossetti has agreed to serve as a
consultant to the Company's subsidiary, NFC, in consideration of a consulting
fee of approximately $176,000 per year; and pursuant to which, for a six year
period ending in September 2000, Mr. Rossetti has agreed not to compete with the
Company in consideration of an aggregate fee of $900,000, payable in seventy-two
equal installments of $12,500 per month. In addition, the consulting agreement
provides that Mr. Rossetti shall be entitled to serve as a member of the Board
of Directors of the Company for three years following the transaction and shall
be entitled to participate, as an independent director, in the 1994 Stock Option
Plan for Non-Employee Directors established by the Company. Mr. Rossetti became
a director of the Company in September 1994 and received an option covering
20,000 shares of the Company's Common Stock pursuant to the 1994 Stock Option
Plan for Non-employee Directors at an exercise price of $11.46875 per share, the
market price on the date of grant. Mr. Rossetti does not receive any additional
fees in connection with his services as a Director of the Company.
11
<PAGE> 15
The Company leased from a real estate trust whose principal beneficiary is
Mr. Rossetti, NFC's warehouse and executive offices facility located in
Wilmington, Massachusetts for a six month period ended in March 1995 for an
aggregate lease payment of $250,000. In March 1995 the Company purchased from
real estate trusts whose principal beneficiary is Mr. Rossetti, properties
occupied by NFC retail stores on Washington Street and Newbury Street, in
Boston, Massachusetts for an aggregate purchase price of $2.1 million. The
properties had previously been leased from the real estate trusts, and payments
under the leases aggregated $64,780 for the period from the date of acquisition
of NFC in 1994 to the purchase of the properties.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP and predecessor firms have served
continuously since 1964 as independent auditors of the Company and has been
appointed by the Board of Directors as the Company's independent auditors to
audit the financial statements of the Company for the fiscal year ending
February 1, 1997. Although the appointment of independent auditors is not
required to be approved by the stockholders, the Board of Directors believes
stockholders should participate in making the appointment by voting on the
subject. If the stockholders do not ratify the appointment of Deloitte & Touche
LLP, the selection of auditors will be reconsidered by the Board of Directors.
Representatives of that firm will be present at the Annual Meeting, where they
will be available to respond to appropriate questions and will also have the
opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
The Company's next Annual Meeting will be held on June 27, 1996. An
eligible stockholder who desires to have a qualified proposal considered for
inclusion in the proxy statement for that meeting must notify the Secretary of
the terms and content of the proposal no later than January 17, 1997.
The Company's By-Laws outline procedures, including minimum notice
provisions, for stockholder nomination of directors and other stockholder
business to be brought before stockholders at the Annual Meeting. A copy of the
pertinent By-Laws provisions is available on request to James M. Sander,
Secretary, General Nutrition Companies, Inc., 921 Penn Avenue, Pittsburgh,
Pennsylvania 15222.
SOLICITATION AND EXPENSES OF SOLICITATION
The enclosed proxy is solicited by the Board of Directors of the Company.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegram by officers or employees of the Company. The Company does not expect to
pay any compensation for the solicitation of proxies, but under arrangements
made with brokers, custodians, nominees and fiduciaries to send proxy material
to the beneficial owners of shares held by them, the Company may reimburse them
for their expenses in so doing.
12
<PAGE> 16
ANNUAL REPORT AND FORM 10-K
The Annual Report of the Company for the fiscal year ended February 3,
1996, was mailed to the stockholders together with this Proxy Statement.
Upon written request by any shareholder entitled to vote at the 1995 Annual
Meeting, the Company will furnish that person without charge a copy of the Form
10-K Annual Report for the fiscal year ended February 3, 1996, which it filed
with the Securities and Exchange Commission, including financial statements and
schedules. If the person requesting the report was not a shareholder of record
on May 8, 1996, the request must contain a good faith representation that the
person making the request was a beneficial owner of Company Stock at the close
of business on that date. Requests should be addressed to James M. Sander,
Secretary, General Nutrition Companies, Inc., 921 Penn Avenue, Pittsburgh,
Pennsylvania 15222.
The foregoing notice and proxy statement are sent by order of the Board of
Directors.
James M. Sander
Vice President - Law,
Chief Legal Officer and Secretary
May 24, 1996
13
<PAGE> 17
REVOCABLE PROXY GENERAL NUTRITION COMPANIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned holder of General Nutrition Companies, Inc. Common
Stock hereby constitutes and appoints Robert V. Dunn, Edwin J. Kozlowski and
Louis Mancini, or any one of them with full power of substitution, as attorneys
and proxies for the undersigned to appear and vote all of the shares of Common
Stock of General Nutrition Companies, Inc. (the "Company") standing on the
books of the Company in the name of the undersigned at the 1996 Annual Meeting
of Stockholders of the Company to be held in the Urban Room at the Westin
William Penn Hotel, 350 William Penn Place, Pittsburgh, Pennsylvania on June
27, 1996 at 10:00 a.m. Eastern Daylight Time, and at any adjournments of said
Annual Meeting. A majority of said attorneys and proxies as shall be present
and voting (or if only one shall be present and voting, then that one) in
person or by substitute or substitutes at said meeting or any adjournment
thereof, shall have and may exercise all of the powers of such said attorneys
and proxies hereunder. The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting and the Proxy Statement dated May 22, 1996 and
instructs its attorneys and proxies to vote as set forth on this Proxy. The
undersigned stockholder may revoke this proxy at any time before it is voted by
delivering to the Secretary of the Company either a written revocation of the
proxy or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person.
<TABLE>
<S> <C> <C>
1. ELECTION OF TWO CLASS I DIRECTORS to the Board of Directors, each for a three-year term expiring in 1999.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all nominees listed below
(except as marked to the contrary)
William E. Watts and Thomas R. Shepherd
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the following
space provided below.)
-----------------------------------------------------------------------------------------------------------------
2. To ratify the appointment of Deloitte & Touche as independent auditors of the Company for the fiscal year ending
February 1, 1997.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
(Continued and to be signed and dated on reverse side)
<TABLE>
<S> <C> <C>
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR
OF THE SPECIFIED NOMINEES IN PROPOSAL NO. 1, FOR PROPOSAL 2, AND IN THE DISCRETION OF THE PROXIES AS TO OTHER MATTERS. HOWEVER, THIS
PROXY CARD MUST BE PROPERLY COMPLETED. SIGNED, DATED AND RETURNED TO THE COMPANY IN ORDER TO HAVE YOUR SHARES VOTED. IF YOU DO NOT
RETURN THIS CARD, YOUR SHARES WILL NOT BE REPRESENTED UNLESS YOU ATTEND THE MEETING AND VOTE IN PERSON.
When signing as attorney, executor, administrator, trustee, Dated ..............................................., 1996
guardian, custodian, or the like, give title as such, if the Signature .................................................
signer is a corporation, sign in the corporate name by a duly Signature .................................................
authorized officer. (if held jointly)
</TABLE>
<PAGE> 18
REVOCABLE PROXY GENERAL NUTRITION COMPANIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
To General Nutrition Companies, Inc., Trustee
As a participant in the General Nutrition Companies, Inc. 1993 Employee
Stock Purchase Plan (the "Stock Purchase Plan"), I hereby instruct you to vote
the shares of Common Stock, par value $.01 per share ("Common Stock"), of
General Nutrition Companies, Inc. (the "Company") allocated to my Stock
Purchase Plan account at the 1996 Annual Meeting of Stockholders of the Company
to be held in the Urban Room at the Westin William Penn Hotel, 350 William Penn
Place, Pittsburgh, Pennsylvania on June 27, 1996 at 10:00 a.m. Eastern Daylight
Time, and at any adjournments of said Annual Meeting, (a) in accordance with
the following direction and (b) to grant a proxy to the proxies nominated by
the Company's Board of Directors authorizing them to vote in their discretion
upon such other matters as may properly come before the meeting. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting and the
Proxy Statement dated May 22, 1996 and instructs its attorneys and proxies to
vote as set forth on this Proxy. The undersigned plan participant may revoke
this proxy at any time before it is voted by delivering to the Secretary of the
Company either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
<TABLE>
<S> <C>
1. ELECTION OF TWO CLASS I DIRECTORS to the Board of Directors, each for a three-year term expiring in 1999.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all nominees listed below
(except as marked to the contrary)
William E. Watts and Thomas R. Shepherd
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the following
space provided below.)
------------------------------------------------------------------------------------------------------------------
2. To ratify the appointment of Deloitte & Touche as independent auditors of the Company for the fiscal year ending
February 1, 1997.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
(Continued and to be signed and dated on reverse side)
<TABLE>
<S> <C> <C>
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR
OF THE SPECIFIED NOMINEES IN PROPOSAL NO. 1, FOR PROPOSAL 2, AND IN THE DISCRETION OF THE PROXIES AS TO OTHER MATTERS. HOWEVER,
THIS PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED TO THE COMPANY IN ORDER TO HAVE YOUR SHARES VOTED. IF YOU
DO NOT RETURN THIS CARD, YOUR SHARES WILL NOT BE REPRESENTED UNLESS YOU ATTEND THE MEETING AND VOTE IN PERSON.
When signing as attorney, executor, administrator, trustee, Dated ................................................, 1996
guardian, custodian, or the like, give title as such, if the Signature ..................................................
signer is a corporation, sign in the corporate name by a duly Signature ..................................................
authorized officer. (if held jointly)
</TABLE>
