<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
GENERAL NUTRITION COMPANIES, INC.
(Name of Subject Company)
GENERAL NUTRITION COMPANIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
37047F103
(CUSIP Number of Class of Securities)
------------------------
JAMES M. SANDER
VICE PRESIDENT AND CHIEF LEGAL OFFICER
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PA 15222
(412) 288-4600
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
WITH A COPY TO:
ROBERT I. TOWNSEND, III, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule
14D-9") relates to an offer by Numico Investment Corp., a Delaware corporation
(the "Purchaser") and an indirect wholly owned subsidiary of Koninklijke Numico
N.V. ("Numico"), a company organized under the laws of The Netherlands, to
purchase all of the outstanding shares of Common Stock (as defined below) of
General Nutrition Companies, Inc., a Delaware corporation (the "Company").
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name and address of the principal executive offices of the Company is
General Nutrition Companies, Inc., 300 Sixth Avenue, Pittsburgh, PA 15222. This
Schedule 14D-9 relates to the Company's Common Stock, par value $0.01 per share
(the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer made by the Purchaser,
disclosed in a Tender Offer Statement on Schedule 14D-1 dated July 9, 1999 (as
amended or supplemented from time to time, the "Schedule 14D-1"), to purchase
all the outstanding shares of Common Stock at a price (the "Offer Price") of
$25.00 per share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated July 9,
1999 (as amended or supplemented from time to time, the "Offer to Purchase"),
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and incorporated
herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of July 5, 1999, among the Company, the Purchaser and Numico (the "Merger
Agreement"), which provides for (i) the making of the Offer by the Purchaser,
subject to the conditions set forth in the Offer and to the conditions and upon
the terms of the Merger Agreement and (ii) the subsequent merger of the
Purchaser with and into the Company (the "Merger"). In the Merger, each share of
Common Stock outstanding at the Effective Time (as defined in the Merger
Agreement) (other than shares held in the treasury of the Company or held by
Numico or the Purchaser, or shares held by stockholders validly exercising
appraisal rights pursuant to Section 262 of the Delaware General Corporation
Law) will, by virtue of the Merger and without any action by the holder thereof,
be converted into the right to receive, without interest, an amount in cash
equal to $25.00 per share or such greater amount per share which may be paid
pursuant to the Offer (the "Merger Consideration"). The Merger Agreement, a copy
of which is filed as Exhibit (c)(1) hereto, is summarized in Sections 11 and 12
of the Offer to Purchase and incorporated herein by reference.
Five senior executives have entered into a tender agreement dated July 5,
1999 with Numico and the Purchaser (the "Tender Agreement") which, among other
things, and subject to certain exceptions, requires each such executive to
tender his shares of Common Stock into the Offer. The Tender Agreement, a copy
of which is filed as Exhibit (c)(2) hereto, is summarized in Section 11 of the
Offer to Purchase and incorporated herein by reference.
The Offer to Purchase states that the principal executive offices of the
Purchaser are located at 1209 Orange Street, Wilmington, Delaware 19801 and that
the principal executive offices of Numico are located at Rokkeveenseweg 49, 2712
PJ Zoetermeer, P.O. Box 1,2700, MA Zoetermeer, The Netherlands.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above, which information is incorporated
herein by reference.
2
<PAGE>
(b)(1) GENERAL. The information contained in Section 11 of the Offer to
Purchase is incorporated herein by reference. Certain contracts, agreements,
arrangements and understandings between the Company and certain of its executive
officers are described in the Information Statement dated July 9, 1999, included
as Annex A to this Schedule 14D-9 and incorporated herein by reference. The
Information Statement will be furnished to the Company's stockholders pursuant
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 issued under the Exchange Act in connection with
Purchaser's right (after consummation of the Offer) to designate persons to be
appointed to the Board of Directors of the Company (the "Board") other than at a
meeting of the stockholders of the Company. Other such contracts, arrangements
and understandings known to the Company are described below or are summarized in
Section 11 of the Offer to Purchase, which is incorporated herein by reference.
Reference is also made to the Tender Agreement, which is summarized in Section
11 of the Offer to Purchase and incorporated herein by reference.
(2) CERTAIN EXECUTIVE COMPENSATION AND OTHER EMPLOYEE-RELATED MATTERS IN
CONNECTION WITH THE MERGER.
NEW EMPLOYMENT AGREEMENTS.
Prior to the execution of the Merger Agreement, the Company had entered into
an employment agreement with William E. Watts and established a change in
control retention bonus program for the benefit of its officers and those of its
subsidiaries including each of the ten officers of the Company named below.
These arrangements provided for payment of a bonus equal to one times each
officer's annual base salary (three times annual base salary in the case of
William E. Watts) upon a change in control of the Company, with such bonus to be
paid in two equal installments within 30 days following the change in control
and within 30 days following the first anniversary of such change in control,
provided that the officer remained in employment with the Company during such
one year period. These retention bonuses have been incorporated into the ten
senior executives' new employment agreements described below. In connection with
the transactions contemplated by the Merger Agreement, the Company and Numico
have entered into individual employment agreements (the "Employment Agreements")
with ten of the Company's senior executives, each effective as of the Effective
Time, as follows:
(A) WILLIAM E. WATTS. The current employment agreement for William E.
Watts, President and Chief Executive Officer of the Company, which was
scheduled to expire on January 31, 2002, will be replaced, effective as of
the Effective Time, by a new agreement with Numico and the Company with a
term expiring December 31, 2002 (the "Watts Agreement"). Under the Watts
Agreement, Mr. Watts will continue to serve in his current positions with
the Company. Mr. Watts will also be appointed to the Board of Managing
Directors of Numico. Mr. Watts will receive an annual base salary of
$954,965, subject to annual review for potential increase each subsequent
January 1 during the term. Mr. Watts will not be eligible for an annual
bonus or incentive compensation; HOWEVER, he will receive at least 15% of
all stock options to acquire Numico's stock which are issued to the
employees of the Company and its subsidiaries in any year during the
employment term (excluding the initial grant immediately following the
Effective Time of up to 500,000 options in which he will not be eligible to
participate). As provided under his current employment agreement, Mr. Watts
will (1) be entitled to personal use of the Company's airplane for up to 100
hours per year plus up to $35,000 per year in airplane-related expenses and
(2) receive a retention bonus equal to three times his current annual base
salary, payable 50% within 30 days following the Effective Time and 50% one
year later (the "First Anniversary Payment"). If, following the Effective
Time, Mr. Watts should be involuntarily terminated other than for "cause" or
resign for "good reason" (as each term is respectively defined in the Watts
Agreement), Mr. Watts will be entitled to receive an amount equal to the
First Anniversary Payment within 30 days of his employment termination. If,
after the Effective Time, a change of control of the Company (as defined in
the Watts Agreement) should occur, Mr. Watts will receive a retention bonus
equal to two times his then current annual base salary, payable in equal
installments with the first such installment payable within 30 days after
the change of control and the second installment one year later provided
3
<PAGE>
that he remains in employment with the Company through the earliest of (x)
the first anniversary of the change of control, (y) December 31, 2002, and
(z) the date of his involuntary termination of employment without "cause" or
his resignation for "good reason". Mr. Watts is also entitled to a gross-up
payment to fully offset all excise taxes which may be imposed by reason of
section 4999 of the Internal Revenue Code of 1986, as amended (the "Code").
Mr. Watts is subject to a noncompetition and nonsolicitation covenant which
extends through December 31, 2002.
(B) GREGORY T. HORN. At the Effective Time, Gregory T. Horn will
continue to serve as Executive Vice President of Marketing and Development
and Chief Operating Officer of the Company. In addition, Mr. Horn will serve
as a Group Director of Numico. Mr. Horn's new employment agreement with
Numico and the Company is similar to the Watts Agreement, except that (1)
the term of employment automatically extends for one-year periods unless
notice is given by either party at least one year in advance of the end of
the employment term, (2) his annual base salary will be increased by
$100,000 to $400,000 from the Effective Time through December 31, 2000, with
$50,000 additional increases for each of the next two calendar years
thereafter and he will be eligible for a maximum annual bonus opportunity of
$250,000 (as compared to an existing bonus opportunity of $150,000), (3) Mr.
Horn will receive a retention bonus of $180,000 payable 50% within 30 days
after the Effective Time and 50% one year later, (4) there is no provision
for aircraft usage or reimbursement and (5) Mr. Horn is subject to a
non-competition and non-solicitation agreement (the "Noncompetition
Agreement") which extends for one year following his termination of
employment or, if longer, through the end of the scheduled employment term
(including any one-year extensions), in consideration for which he will
receive a payment of $120,000 within 30 days following the Effective Time.
(C) OTHER EXECUTIVES. Eight other Company executives, Russell L. Cooper,
Senior Vice President and General Manager of GNC Franchising Inc., John A.
DiCecco, Senior Vice President Logistics/Manufacturing of General Nutrition,
Incorporated ("GNI"), David R. Heilman, Vice President, Strategic Planning
and Corporate Development of GNI, Edwin J. Kozlowski, Executive Vice
President and Chief Financial Officer of GNI, Michael Locke, Senior Vice
President and General Manager of GNI, Michael K. Meyers, Executive Vice
President and General Manager of General Nutrition Corporation ("GNC"),
Donald G. Smith, Senior Vice President, Sales of GNC, and Reginald L.
Steele, Vice President, International Franchising of General Nutrition
International, Inc. have entered into employment agreements with Numico and
the Company substantially on the same terms and conditions as Mr. Horn's
agreement, except that (1) in the case of Messrs. Cooper, Heilman, Locke,
Smith and Steele, the initial term expires on December 31, 2001 (but subject
to the same automatic one-year extensions), (2) base salary shall be the
executive's current base salary, subject to annual reviews for possible
increase, (3) the retention bonus payable in two installments within 30 days
after the Effective Time and one year later shall equal one times the
executive's base salary in effect immediately prior to the Effective Time
and (4) the noncompetition covenant (which contains a less expansive
definition of "competing business" than under Mr. Horn's Noncompetition
Agreement) terminates on the last day of the scheduled employment period
(including any one-year extensions) without regard to any earlier
termination of employment for any reason.
Copies of the Employment Agreements and the Noncompetition Agreement are
filed as Exhibits (c)(3) through (c)(13) and incorporated herein by reference,
and the foregoing summary is qualified in its entirety by reference to these
agreements.
4
<PAGE>
EFFECT OF THE MERGER ON EMPLOYEE BENEFIT AND STOCK PLANS.
Pursuant to the terms of a letter agreement supplementing the Merger
Agreement (the "Benefits Letter") (which is filed as Exhibit (c)(14) hereto and
the terms thereof are incorporated by reference herein), Numico and the Company
have agreed as follows:
(1) Numico shall honor all employee benefit plans, including individual
agreements, to the extent disclosed on a schedule to the Merger Agreement
and, for the period from the Effective Time through at least December 31,
2000, shall maintain (or cause the Company to maintain) (i) employee pension
and welfare benefits no less favorable in the aggregate than those in effect
immediately prior to the Effective Time (subject, however, to such
alterations as may be made with the prior written consent of Mr. Watts), and
(ii) severance benefits which are no less favorable than under the Company's
existing severance policy, and, with respect to officers of the Company and
its subsidiaries who are not entering into employment agreements, which are
in accordance with past practices of the Company prior to the Effective
Time.
(2) At the Effective Time, the Company shall pay a pro rata bonus to all
employees who are otherwise eligible for an annual bonus tied to earnings
per share performance criteria for the Company's fiscal year ending in
February 2000, assuming the maximum bonus potential had been achieved
(including, for this purpose, a pro rata performance-based matching
contribution to certain of the Company's savings and incentive plans). The
Chief Executive Officer of the Company (Mr. Watts) shall establish
appropriate performance criteria for the remainder of the Company's current
fiscal year from the Effective Time through the end of such year.
(3) All stock options outstanding immediately prior to the Effective
Time, whether or not then vested, shall be canceled in exchange for a
payment equal to the difference, if any, between the Merger Consideration
and the exercise price thereof. In accordance with the terms of the
Company's Management and Director Stock Purchase Plan and the matching stock
purchase loans awarded thereunder, all such loans will be forgiven at the
time that the Offer is consummated. As of the date of the Merger Agreement,
loans aggregating approximately $4,500,000 were owed by 54 individuals,
including approximately $200,000 by Jerry D. Horn, Chairman of the Board,
$700,000 by Mr. Watts, and balances ranging from $22,000 to $27,500 by each
of Edward G. Beimfohr, W. Harrison Wellford, Ronald L. Rossetti, Thomas R.
Shepherd and David Lucas (who are each members of the Board).
(4) The Company's 1999 Deferred Compensation Plan shall be terminated as
of the Effective Time and all amounts credited to participants' accounts
under such plan or the Company's 1993 Deferred Compensation Plan (which was
terminated in early 1999), and any earnings thereon, will be immediately
distributed to the participants entitled thereto.
(5) In accordance with the Company's retention bonus policy adopted on
March 22, 1997, retention bonuses equal to one times salary will be paid to
all vice presidents of the Company and above in two installments, with the
first installment paid within 30 days following the Effective Time and the
second installment one year later, except as otherwise provided under the
Employment Agreements. If the officer's employment is involuntarily
terminated without "cause" or the officer resigns for "good reason" (as each
term is respectively defined in the Benefits Letter), such officer will
receive the amount otherwise payable on the first anniversary of the
Effective Time upon such employment termination.
(6) As of the Effective Time, Numico will establish a new Management
Stock Purchase Plan (the "Purchase Plan") and Numico Stock Option Program
("Stock Option Program") for employees of the Company and its subsidiaries.
The Purchase Plan will enable officers and key employees to purchase Numico
stock (depositary receipts) up to a maximum of 200% (150% for designated
officers and 100% for designated non-officer employees) of annual base
salary, with the Company providing a matching loan to buy two additional
shares for every share purchased by the employee. Under the
5
<PAGE>
Purchase Plan, 50% of the loan will be forgiven three years after the loan
is made if the participant remains in continuous employment during such
three-year period (subject to ratable forgiveness of this 50% component of
the loan if the employee is "involuntarily terminated without cause" (as
defined in the Benefits Letter) or terminates due to death or disability
during such three-year period) and 50% of the loan will be forgiven if the
Company achieves a specified cumulative operating earnings target for the
three-year period (subject to ratable forgiveness of this 50% component of
the loan if the employee is involuntarily terminated without cause or
terminates due to death or disability, but only to the extent that annual
operating earnings targets have been achieved prior to the date of
termination). Shares so purchased will be held in an account and may not be
sold until the loan maturity date or, if earlier, the participant's
termination of employment. Numico will also offer a Stock Option Program for
designated employees of the Company and its subsidiaries to purchase 500,000
options immediately following the Effective Time (the "Initial Grant") and
at least 250,000 options in each twelve-month period following the first
anniversary of the Effective Time. With respect to the Initial Grant,
options will be granted to all employees identified by Mr. Watts, other than
(i) officers who are parties to the Employment Agreements, and (ii) any
individual eligible to participate in the Purchase Plan unless such
individual participates at the maximum level permitted thereunder. Options
will become exercisable three years following their grant (subject to
ratable exercisability if the optionee is involuntarily terminated without
cause during such three-year period) and will expire five years following
their grant to the extent not then exercised. If options cannot be granted
under the Stock Option Program due to applicable legal restrictions, an
equivalent cash-based program will be substituted. The purchase price to be
paid for the shares under the Purchase Plan and for the initial 500,000
options under the Stock Option Program will be determined by reference to
the 15-day average closing price for Numico shares on the Amsterdam Stock
Exchange immediately prior to the date of the Merger Agreement.
(7) As provided under the existing employment agreement of Jerry D.
Horn, the Company will pay to Mr. Horn, following the Effective Time, a
$1,000,000 change in control payment in a lump sum in accordance with the
terms of his employment agreement. In addition, because Mr. Horn's
termination of employment as of the Effective Time will be without cause, he
will receive his base salary at the annual rate of $200,000 from the
Effective Time through the end of the Company's current fiscal year ending
in February 2000 and $150,000 for the Company's fiscal year ending in
February 2002, payable in accordance with normal payroll practices of the
Company unless he elects to receive a discounted lump sum payment of such
salary in accordance with the terms of his employment agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
At a meeting held on July 3, 1999, the Board unanimously (i) approved the
Merger Agreement, the Offer and the Merger, (ii) determined that the Offer and
the Merger are fair to, and in the best interests of, holders of shares of
Common Stock and (iii) voted to recommend that holders of shares of Common Stock
tender their shares of Common Stock pursuant to the Offer. Accordingly, the
Board unanimously recommends that the stockholders of the Company tender their
shares of Common Stock pursuant to the Offer. Copies of the Company's press
release announcing the Merger Agreement and the transactions contemplated
thereby and a letter to the stockholders of the Company communicating the
Board's recommendation are filed as Exhibits (a)(3) and (a)(4) hereto,
respectively, and are incorporated herein by reference.
(b)(1) BACKGROUND.
The information contained in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(2) REASONS FOR RECOMMENDATION.
6
<PAGE>
In making the determinations and recommendations set forth in subparagraph
(a) above, the Board considered a number of factors, including, without
limitation, the following:
(i) the amount and form of consideration to be received by the
Company's stockholders in the Offer and the Merger;
(ii) the Company's prospects if it were to remain independent,
including the risks and benefits inherent in remaining independent,
including the risk arising from the dietary supplements industry becoming
increasingly competitive and dependent on proprietary products;
(iii) the possible alternatives to the Offer and the Merger (including
the possibility of continuing to operate the Company as an independent
entity), the range of possible benefits to the Company's stockholders of
such alternatives and the timing and likelihood of accomplishing the goal of
any of such alternatives;
(iv) information with regard to the financial condition, results of
operations, business and prospects of the Company, the regulatory approvals
required to consummate the Offer and the Merger as well as current economic
and market conditions (including current conditions in the industry in which
the Company competes);
(v) the historical and recent market prices of shares of Common Stock
and the fact that the Offer and the Merger will enable the holders of shares
of Common Stock to realize a premium over the prices at which such shares
traded prior to the negotiation and execution of the Merger Agreement;
(vi) the financial analysis and presentation of Morgan Stanley & Co.
Incorporated ("Morgan Stanley") to the Board on June 30, 1999, and the oral
opinion of Morgan Stanley (which opinion was subsequently confirmed by
delivery of a written opinion dated July 3, 1999, the date the Board adopted
the Merger Agreement) to the effect that, as of such date, and based upon
and subject to certain matters stated in such opinion, the $25.00 per share
cash consideration to be received by holders of shares of Common Stock in
the Offer and the Merger was fair, from a financial point of view, to such
holders. The full text of Morgan Stanley's written opinion, dated July 3,
1999, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Morgan Stanley, is attached hereto
as Exhibit (a)(6) and is incorporated herein by reference. Morgan Stanley's
opinion is directed only to the fairness, from a financial point of view, of
the cash consideration to be received in the Offer and the Merger by holders
of shares of Common Stock and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder should tender
shares of Common Stock pursuant to the Offer. Holders of shares of Common
Stock are urged to read such opinion carefully in its entirety;
(vii) the high likelihood that the proposed acquisition would be
consummated, in light of the fact that the Offer and Merger are not subject
to any financing contingencies; and
(viii) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations.
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it. In addition, it is possible that different
members of the Board assigned different weights to the various factors described
above.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Morgan Stanley as its financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of Morgan
Stanley's engagement, the Company has agreed to pay Morgan Stanley for its
services an aggregate financial advisory fee equal to $10,000,000, payable in
7
<PAGE>
connection with the Offer and the Merger. The Company also has agreed to
indemnify Morgan Stanley and certain related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of Morgan Stanley's engagement.
Morgan Stanley has in the past provided investment banking services to the
Company unrelated to the Offer and the Merger, for which services Morgan Stanley
has received compensation. In the ordinary course of business, Morgan Stanley
and its affiliates may actively trade or hold the securities of the Company and
Numico for their own account and those of their customers and, accordingly, may
at any time hold a long or short position in such securities.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any person to make solicitations or recommendations
to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, neither the Company nor any subsidiary of the
Company nor, to the best of the Company's knowledge, any executive officer,
director or affiliate of the Company has effected a transaction in shares of
Common Stock.
(b) To the best of the Company's knowledge, its executive officers,
directors and affiliates currently intend to tender their shares of Common Stock
to the Purchaser pursuant to the Offer. Certain senior executives of the Company
have entered into the Tender Agreement with Numico and the Purchaser pursuant to
which such executives have agreed to tender shares of Common Stock beneficially
owned by them into the Offer. Reference is made to Items 2 and 3 above.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than as set forth in Item 3(b) or 4, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in:
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
(4) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described above or in Item 3(b) of this Schedule 14D-9, there
are no transactions, board resolutions, agreements in principle or signed
contracts in response to the Offer which relate to or would result in one or
more of the matters referred to in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, which are attached as Exhibits (a)(1) and (a)(2) hereto,
respectively, and are incorporated herein by reference in their entirety.
8
<PAGE>
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
*+ (a)(1) Offer to Purchase dated July 9, 1999.
*+ (a)(2) Letter of Transmittal.
+ (a)(3) Text of press release dated July 5, 1999.
* (a)(4) Letter to stockholders of the Company dated July 9, 1999.
+ (a)(5) Form of Summary Advertisement dated July 9, 1999.
* (a)(6) Opinion of Morgan Stanley & Co. Incorporated.
+ (a)(7) Text of press release dated July 9, 1999.
(b) Not applicable.
+ (c)(1) Agreement and Plan of Merger dated as of July 5, 1999.
+ (c)(2) Tender Agreement dated as of July 5, 1999.
+ (c)(3) Employment Agreement of Mr. William E. Watts dated as of July 5, 1999.
+ (c)(4) Employment Agreement of Mr. Gregory T. Horn dated as of July 5, 1999.
+ (c)(5) Employment Agreement of Mr. Russell L. Cooper dated as of July 5, 1999.
+ (c)(6) Employment Agreement of Mr. John A. DiCecco dated as of July 5, 1999.
+ (c)(7) Employment Agreement of Mr. David R. Heilman dated as of July 5, 1999.
+ (c)(8) Employment Agreement of Mr. Edwin J. Kozlowski dated as of July 5, 1999.
+ (c)(9) Employment Agreement of Mr. Michael Locke dated as of July 5, 1999.
+ (c)(10) Employment Agreement of Mr. Mike K. Meyers dated as of July 5, 1999.
+ (c)(11) Employment Agreement of Mr. Donald G. Smith dated as of July 5, 1999.
+ (c)(12) Employment Agreement of Mr. Reginald W. Steele dated as of July 5, 1999.
+ (c)(13) Non-Competition and Non-Solicitation Agreement of Gregory T. Horn dated as of
July 5, 1999.
+ (c)(14) Benefits Letter dated July 5, 1999.
</TABLE>
- ------------------------
* Included in materials delivered to stockholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule
14D-1 dated July 9, 1999, and incorporated herein by reference.
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
GENERAL NUTRITION COMPANIES, INC.
By: /s/ WILLIAM E. WATTS
-----------------------------------------
Name: William E. Watts
Title: President and Chief Executive
Officer
</TABLE>
July 9, 1999
10
<PAGE>
ANNEX A
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PA 15222
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about July 9, 1999, as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of General Nutrition Companies, Inc. (the "Company") to the
holders of record of shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"). You are receiving this Information Statement in
connection with the possible election of persons designated by the Purchaser (as
defined below) to a majority of the seats on the Board of Directors of the
Company (the "Board"). Capitalized terms used herein and not otherwise defined
herein shall have the meaning set forth in the Schedule 14D-9.
On July 5, 1999, the Company, Koninklijke Numico N.V., a company organized
under the laws of The Netherlands ("Numico"), and Numico Investment Corp., a
Delaware corporation and an indirect wholly owned subsidiary of Numico (the
"Purchaser"), entered into an Agreement and Plan of Merger dated as of July 5,
1999 (the "Merger Agreement"), in accordance with the terms and subject to the
conditions of which the Purchaser commenced the Offer. The Offer is scheduled to
expire at 12:00 Midnight, New York City time, on Thursday, August 5, 1999,
unless the Offer is extended.
The Merger Agreement requires the Company to cause the directors designated
by the Purchaser to be elected to the Board under the circumstances described
therein following consummation of the Offer.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time.
The information contained in the Information Statement (including
information incorporated by reference) concerning Numico, the Purchaser and the
Purchaser Designees (as defined herein) has been furnished to the Company by
Numico and the Purchaser, and the Company assumes no responsibility for the
accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
The shares of Common Stock are the only class of voting securities of the
Company outstanding. As of June 30, 1999, there were 67,997,138 shares of Common
Stock outstanding. The Board currently consists of seven members and is divided
into three classes serving staggered three-year terms. Each share of Common
Stock is entitled to one vote. The officers of the Company serve at the
discretion of the Board.
INFORMATION WITH RESPECT TO NUMICO DESIGNEES
Pursuant to the Merger Agreement, immediately following the acceptance for
payment of, and payment for, any shares of Common Stock by the Purchaser
pursuant to and subject to the conditions (including the Minimum Condition (as
defined in the Merger Agreement), which condition may not be waived by the
Purchaser) of the Offer, the Company shall take all necessary actions to cause
such number
A-1
<PAGE>
of such persons designated by the Purchaser to become members of the Board (the
"Purchaser Designees") as is at least equal to the product of (x) the number of
directors on the Board (including the Purchaser Designees appointed pursuant to
this sentence) and (y) the percentage of outstanding shares of Common Stock
accepted for payment, but not less than a majority, subject to compliance with
Section 14(f) of the Exchange Act; PROVIDED, HOWEVER, that prior to the
Effective Time the Board shall always have at least two directors (the
"Independent Directors") who are neither officers of Numico nor designees,
stockholders or affiliates of Numico or Numico's affiliates; and, PROVIDED
FURTHER that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, the remaining Independent Director
shall be entitled to designate a person to fill such vacancy who shall be deemed
to be an Independent Director for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors of the Company shall
designate two persons to fill such vacancies who shall not be officers or
affiliates of Numico or any of its affiliates, and such persons shall be deemed
to be Independent Directors for purposes of the Merger Agreement.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the persons listed below. The Purchaser has informed the Company
that each of the Purchaser Designees has consented to act as a director, if so
designated. Biographical information concerning each of the Purchaser Designees
is presented below.
A-2
<PAGE>
Unless otherwise indicated below, each occupation set forth opposite an
individual's name refers to employment with Numico.
<TABLE>
<CAPTION>
AGE; POSITION WITH NUMICO OR AFFILIATE;
NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Johannes C.T. van der Wielen ........................... Age 55; President and Chief Executive Officer since
Rokkeveenseweg 49 January 1992 and a member of the Board of Managing
2712 PJ Zoetermeer, P.O. Box 1,2700, Directors since January 1989; Member of the Supervisory
MA Zoetermeer Board of each of Maxeres Holding N.V., Gouda Vuurvast
The Netherlands Holding N.V. and Benckiser N.V.; Member of "Rand van
Bestuur" Telindus B.V., Member of the Advisory Board of
ABN AMRO and Chairman of "Stichting Continuiteit Wolters
Kluwer."
Ton J. Brittijn ........................................ Age 54; Manager of Corporate Business Control since
Rokkeveenseweg 49 January 1997; Various financial related positions since
2712 PJ Zoetermeer, P.O. Box 1,2700, January 1994.
MA Zoetermeer
The Netherlands
Philip van Randwijk .................................... Age 46; Treasurer since May 1994.
Rokkeveenseweg 49
2712 PJ Zoetermeer, P.O. Box 1,2700,
MA Zoetermeer
The Netherlands
Henk Dekker ............................................ Age 53; Secretary since October 1994; Corporate
Rokkeveenseweg 49 secretary for Unigro N.V. prior to 1994.
2712 PJ Zoetermeer, P.O. Box 1,2700,
MA Zoetermeer
The Netherlands
Julitte van der Ven .................................... Age 58; General Counsel since July 1989; President and
Rokkeveenseweg 49 sole director of each of Numico Inc. and Numico
2712 PJ Zoetermeer, P.O. Box 1,2700, Investment Corp. since their inception on June 30, 1999,
MA Zoetermeer and July 2, 1999, respectively.
The Netherlands
Albert Eenink .......................................... Age 55; Director of Corporate Research since December
Rokkeveenseweg 49 1996; Director of Research for the Agricultural
2712 PJ Zoetermeer, P.O. Box 1,2700, Institute in Wageningen, The Netherlands, prior to 1996.
MA Zoetermeer
The Netherlands
Jos van de Schraaf ..................................... Age 45; Director of Corporate Control and Acccounting
Rokkeveenseweg 49 since August 1995; Partner with Moret Ernst & Young from
2712 PJ Zoetermeer, P.O. Box 1,2700, 1990 to 1995.
MA Zoetermeer
The Netherlands
Diederick van Berckelaer ............................... Age 52; Manager of Business Economics and
Rokkeveenseweg 49 Re-engineering since 1993.
2712 PJ Zoetermeer, P.O. Box 1,2700,
MA Zoetermeer
The Netherlands
</TABLE>
A-3
<PAGE>
Numico has advised the Company that all of the Purchaser Designees are
citizens of The Netherlands. Numico has also advised the Company that none of
the Purchaser Designees (i) has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was, or is, subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws, (ii) is currently a director of, or holds any position with, the
Company, (iii) beneficially owns any securities (or rights to acquire any
securities) of the Company or (iv) has been involved in any transaction with the
Company or any of its directors, executive officers or affiliates which is
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"), except as may be disclosed herein or in the
Schedule 14D-9.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Biographical information concerning the Company's current directors and
executive officers as of June 30, 1999, is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
William E. Watts.......................... 46 President, Chief Executive Officer and Director
Jerry D. Horn............................. 62 Chairman of the Board
Thomas R. Shepherd........................ 69 Director
Ronald L. Rossetti........................ 56 Director
David Lucas............................... 51 Director
W. Harrison Wellford...................... 59 Director
Edward G. Beimfohr........................ 66 Director
Edwin J. Kozlowski........................ 50 Executive Vice President of Administration
and Chief Financial Officer
Gregory T. Horn........................... 33 Chief Operating Officer and Executive Vice President
of Business Development
Michael K. Meyers......................... 39 Executive Vice President and General Manager
of General Nutrition Corporation
John A. DiCecco........................... 46 Senior Vice President--
Logistics/Manufacturing/Wholesale of General Nutrition,
Incorporated
James M. Sander........................... 42 Vice President--Law, Chief Legal Officer and Secretary
David R. Heilman.......................... 46 Vice President--Strategic Planning & Corp. Development
Curtis J. Larrimer........................ 44 Vice President--Controller
Eileen D. Scott........................... 46 Vice President--Human Resources
Joseph Fortunato.......................... 46 Senior Vice President--Store Development
J. Kenneth Fox............................ 48 Vice President--Treasurer
</TABLE>
Mr. Watts has served as a director of the Company since October 1991 and as
a director of General Nutrition, Incorporated ("GNI") since January 1986. Mr.
Watts has served as President and Chief Executive Officer of the Company since
October 1991, 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 as Senior Vice President-Retailing of
GNI between August 1985 and January 1988. Mr. Watts was Vice President-Retail
Operations of General Nutrition Corporation ("GNC") from February 1984 to August
1985 and prior thereto served as Director of Retail Operations. Mr. Watts is
also a director of CT Farm & Country, Inc.
A-4
<PAGE>
Mr. Jerry Horn has served as Chairman of the Board of the Company and GNC
since October 1991 and as Chairman of the Board of GNI since November 1985. Mr.
Horn served as Chief Executive Officer of GNI from May 1985 to December 1990 and
also served as President of GNI from May 1985 to September 1988. Mr. Horn is
also a director of CT Farm & Country, Inc., Universal Hospital Services Inc. and
Chevys Inc. From April 1983, Mr. Horn was President and from April 1994 to May
1995, he was Chief Executive Officer of Thousand Trails, Inc. From September
1979 to April 1983, he was President and Chief Executive Officer of Recreational
Equipment, Inc.
Mr. Shepherd has served as a director of the Company since October 1991, and
as a director of GNI since October 1989. He is Chairman of The Shepherd Group
and 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 Duro-Test Corporation,
Health o meter Products, Inc., Anchor Advanced Products, Inc., Sneaker Stadium,
Inc., Computer Assisted Marketing, Inc., and PNC New England. He is Executive
Vice President of Thomas H. Lee Advisors I and T.H. Lee Mezzanine II. Previously
Mr. Shepherd was Chairman of Amerace Corporation from 1986 to 1998. He was
Executive Vice President of GTE (Sylvania) Lighting Products Group from 1983 to
1986, 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. Rossetti has served as a director of the Company and of GNI since
September 1994. He is currently President of Riverside Capital Partners, Inc., a
director of Tier Corporation, Inc., a director of City Sports, Inc., and a
director of the Hamilton Companies, Inc. 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. Lucas has served as a director of the Company and GNI since July 1996.
Mr. Lucas received a B.S. in Industrial Management at Purdue University in 1969.
He also received an MBA in Marketing from Harvard Business School in 1971. From
1983 to 1984 he was employed as President of Margos, in Dallas, TX. Mr. Lucas
has been employed by Bonita Bay Properties, Inc. since 1984 and currently holds
a position as Chairman.
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 the firm's
International Chairman. He is a Vice Chairman and a member of the Executive
Committee of Sithe Energies (one of the world's leading independent power
companies), and is a Founder of the National Independent Energy Producers. He is
director and treasurer of the Friends of Art and Preservation in Embassies, and
a director of APBI Interactive Systems. Mr. Wellford was a partner at the law
firm of Olwine, Chase, O'Donnell & Weyher, from 1989 through 1991. 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
President's Reorganization Project and Executive Associate Director of the
Office of Management and Budget in the Executive Office of the President from
1977 to 1981. Mr. Wellford also served as a White House transition advisor to
Presidents-elect Carter (1976) and Clinton (1992) and Executive Branch
transition director in the Carter--Reagan Presidential transition (1980-1981).
Mr. Beimfohr has served as a director of the Company and GNI since January
1999. He is a Senior Partner with Lane & Mittendorf Attorneys, New York, NY and
has been employed by that firm since 1965. Mr. Beimfohr received an A.B. from
Washington University in 1953.
Mr. Kozlowski became Executive Vice President of Administration in September
1998 and served as Executive Vice President of the Company and GNI in February
1996 and as Chief Financial Officer and Treasurer since October 1991. He became
Chief Financial Officer of both Companies in February 1990 and has served as
Senior Vice President of both Companies since August 1991 and served as
Controller of GNI from February 1987 until February 1993 and as Treasurer of GNI
since October 1989 and as Vice
A-5
<PAGE>
President since June 1989. He served as Assistant Controller from April 1985 to
February 1987. Prior to April 1985, Mr. Kozlowski was Director of Accounting,
Budgets and Taxes of GNI.
Mr. Gregory Horn became Chief Operating Officer and Executive Vice President
of Business Development in September 1998 and had previously served as Chief
Marketing Officer since January 1997 and as Senior Vice President-Retail Sales
and Marketing of GNC since February 1996. He served as Vice President-Retail
Sales of GNC from February 1995 to February 1996 and was Divisional Vice
President of GNC from April 1994 to February 1995. Mr. Horn joined GNC in June
1991 and served in various positions with GNC. Mr. Horn is also a director of
Jillian's Entertainment, Sweetwater Flatbread Co., Inc., Beyond Massage, Inc.
and Sewickley Development, Inc.
Mr. Meyers became Executive Vice President and General Manager in September
1998. Mr. Meyers began his employment with GNI in 1981 as a store manager in
Florida and has held various positions of increasing responsibility within the
Company, including regional manager, divisional merchandising head and
divisional vice president.
Mr. DiCecco became Senior Vice President of
Logistics/Manufacturing/Wholesale of GNI in October 1990. He served as Vice
President of Distribution and Procurement of GNC from February 1988 to September
1990, and as Director of Distribution of GNI from July 1985 to January 1988 and
as Manager of Distribution from July 1981 to June 1985. Mr. DiCecco joined GNI
in October 1978 as an Industrial Engineer.
Mr. Sander became Vice President-Law, Chief Legal Officer and Secretary of
the Company and its subsidiaries in February 1993. Mr. Sander began his
employment with GNI in October 1988 as Assistant General Counsel and became
Assistant Secretary in June 1989. From December 1985 to October 1988, Mr. Sander
was Assistant Vice President and Counsel of Equimark Corporation, a bank holding
company. From October 1983 until December 1985, Mr. Sander was an attorney with
the law firm Meyer Unkovic & Scott.
Mr. Heilman joined the Company in December 1994 and became the Vice
President of Strategic Planning and Corporate Development of the Company in
February 1995. Prior to joining the Company, Mr. Heilman was a consultant with
the Meridian Group, a private investment banking concern. From January 1990 to
December 1993, Mr. Heilman served as the President of First Westinghouse Capital
Corporation, a subsidiary of Westinghouse Financial Services. Prior to 1990, he
served as a Vice President for Westinghouse in a variety of capacities.
Mr. Larrimer became Vice President-Controller of the Company in February
1995. Mr. Larrimer began his employment with GNI in the Budgets and Tax
Department in 1980 and has held various positions of increasing responsibility
within the Company including Controller of the Manufacturing/Wholesale and
Retail divisions and Assistant Corporate Controller.
Mrs. Scott became Vice President of Human Resources in May 1996. Mrs. Scott
began her employment in August 1988 and has held various positions of increasing
responsibility within the Company, including Assistant Director and Director of
Human Resources.
Mr. Fortunato became Senior Vice President-Store Development in September
1998 and previously served as Vice President-Financial Operations from November
1997 to August 1998. Mr. Fortunato began his employment with GNI in October 1990
and has held various positions of increasing responsibility within the Company,
including Director of Financial Operations and Manager of the Credit Department.
Prior to 1990, Mr. Fortunato served as the Controller for Motor Coils
Manufacturing Company.
Mr. Fox became Vice President-Treasurer of the Company in June 1997. Mr. Fox
began his employment with GNI as Manager of Corporate Accounting in July 1985,
and has served in various Accounting
A-6
<PAGE>
and Finance positions including Manager Accounting/Budgets, Assistant Corporate
Controller and Assistant Treasurer. Prior to 1985, Mr. Fox was employed by
Wheeling Pittsburgh Steel Corporation, holding various accounting and budgeting
positions.
BOARD MEETINGS AND COMMITTEES
During 1998, there were five meetings of the Board. All of the directors
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board and (ii) the total number of meetings held by committees of the Board
on which they served. Each non-employee director receives compensation in the
amount of $5,000 for each fiscal quarter and $500 per meeting for attending
meetings of the Board.
The Board has established standing Audit, Compensation and Executive
Committees. The membership of each committee is usually determined at the
organizational meeting of the Board. The Board does not have a nominating
committee.
AUDIT COMMITTEE
Messrs. Rossetti, Shepherd and Wellford serve as the Audit Committee of the
Board. 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 of 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 once during the fiscal year ending February 6, 1999.
COMPENSATION COMMITTEE
Messrs. Lucas and Shepherd serve as the Compensation Committee of the Board.
The Compensation Committee's functions include administering the Company's
Executive Retirement Arrangement and Deferred Compensation Plan, approving the
compensation of key employees of the Company and administering the Company's
stock option plans. The Compensation Committee did not hold any formal meetings
during the fiscal year ending February 6, 1999.
EXECUTIVE COMMITTEE
Messrs. Watts, Horn and Shepherd serve as the Executive Committee of the
Board. The Executive Committee may exercise the authority of the Board between
meetings, except to the extent the Board has delegated authority to another
committee and except as limited by Delaware law. The Executive Committee did not
hold any formal meetings during the fiscal year ending February 6, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Lucas and Shepherd served as members of the Compensation Committee
during the fiscal year ending February 6, 1999. None of the named individuals
were officers or employees of the Company or any of its subsidiaries during the
fiscal year ending February 6, 1999.
A-7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for 1998,
1997 and 1996 for services in all capacities to the Company and its subsidiaries
by persons who, as of February 6, 1999, were the Chief Executive Officer and
four most highly compensated executive officers of the Company other than the
Chief Executive Officer (collectively, the "Senior Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------------------------------
----------------------------------- OPTION ALL OTHER
SALARY BONUS(1) OTHER ANNUAL SHARES COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(2)* GRANTED(3) ($)
- ------------------------------------------- --------- ------------ ---------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts........................... 1998 $ 1,004,684 $ 0 $ 96,403 550,000 $ 125,535
President & CEO 1997 957,558 0 349,750 250,000 397,988
1996 714,752 0 382,347 500,000 516,341
Jerry D. Horn.............................. 1998 331,539 0 6,557 130,000 24,108
Chairman 1997 322,405 0 28,151 30,000 178,608
1996 359,672 0 171,657 100,000 21,386
Gregory T. Horn............................ 1998 280,576 0 29,335 370,000 41,076
Executive Vice President of Business 1997 222,552 105,500 53,803 160,000 106,323
Development and COO 1996 186,301 6,000 96,029 200,000 99,284
Edwin J. Kozlowski......................... 1998 283,365 0 29,335 415,000 39,657
Executive Vice President and CFO 1997 240,000 60,000 46,303 160,000 127,131
1996 227,000 28,000 115,636 195,000 19,608
John A. DiCecco............................ 1998 220,019 7,500 29,839 227,500 19,273
Senior Vice President--Logistics/ 1997 190,179 121,115 6,318 62,500 60,630
Mfg. 1996 172,000 83,785 52,005 80,000 25,408
</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 1998 are
based on performance in 1998 and are measured and paid in 1999.
(2) For 1998, 1997 and 1996, includes amounts attributable as compensation for
the discount from the market price on Common Stock purchased under the
Company's 1996 Management and Director Stock Purchase Plan by the persons
listed in the table, respectively in the following amounts: Mr. Watts
$11,480, $281,140 and $299,916; Mr. Jerry Horn, for 1997 and 1996
respectively, $21,869 and $165,628; Mr. Gregory Horn $22,460, $47,496 and
$90,000; Mr. Kozlowski $22,460, $39,997 and $109,999; and Mr. DiCecco
$22,699 for 1996. For 1998, 1997 and 1996, also includes Mr. Watts, $78,048,
$62,303 and $76,402, respectively, related to personal use of the Company
aircraft.
(3) For 1998, the following aggregate numbers of options originally granted
during 1995, 1996, 1997 or 1998 with exercise prices in excess of $17.50 per
share were repriced to $17.50 per share effective September 11, 1998, and
are reflected here as new grants to the named persons for purposes of this
table: Mr. Watts 400,000 shares; Mr. Jerry Horn 80,000 shares; Mr. Gregory
Horn 225,000 shares; Mr. Kozlowski 270,000 shares; and Mr. DiCecco 147,500
shares. The current market price on the date of repricing was $13.50 per
share.
(4) Includes amounts received by the persons listed in this table for (a)
"matching contributions" under the Company's Executive Retirement
Arrangement for 1998, 1997 and 1996, respectively, in the
A-8
<PAGE>
following amounts: Mr. Watts $11,900, $9,734 and $11,683; Mr. Jerry Horn
$10,202, $7,721 and $10,034; Mr. Kozlowski $11,900, $9,734 and $11,683; Mr.
Gregory Horn $10,464, $4,763 and $9,209; and Mr. DiCecco $12,200, $9,194 and
$11,683 and (b) the dollar value of life insurance premiums for 1998, 1997
and 1996, respectively, for the benefit of persons listed in this table paid
by the Company in the following amounts: Mr. Watts $696, $696 and $408; Mr.
Jerry Horn $2,808, $2,808 and $1,800; Mr. Kozlowski $1,152, $696 and $696;
Mr. Gregory Horn $200, $81 and $75; and Mr. DiCecco $696, $696 and $408.
Also includes loan forgiveness in 1998 and 1997, respectively, in the
following amounts, on Company loans matching 50% of such executive's stock
purchase pursuant to the 1996 Management and Director Stock Purchase Plan,
with loan forgiveness occurring because the market price of the Company's
stock appreciated by at least 25% over the base market price of the stock
during such fiscal year: Mr. Watts $112,939 and $387,558; Mr. Jerry Horn
$11,098 and $168,079; Mr. Kozlowski $26,605 and $116,701; Mr. Gregory Horn
$30,412, $101,479; and Mr. DiCecco $6,377 and $25,408. Under the Stock
Purchase Plan, matching purchase loans were extended to plan participants
with interest at 6% per annum and paid quarterly. The largest aggregate
amount of indebtedness outstanding during 1998 and the latest outstanding
balance, respectively, for each of the following named Executive Officers is
as follows: Mr. Watts $734,418, $700,020; Mr. Jerry Horn $198,436, $198,436;
Mr. DiCecco $75,271, $68,953; Mr. Kozlowski $195,000, $223,750; Mr. Gregory
Horn $186,250, $250,000; and the following directors: Mr. Lucas $27,500,
$27,500; Mr. Rossetti $27,500, $27,500; Mr. Shepherd $27,500, $27,500; Mr.
Wellford $27,500, $27,500. For 1996, includes for Mr. Watts a one-time
payment of $486,000 made in connection with the amendment of his employment
agreement.
STOCK BASED PLANS
The following is a brief summary of the Company's stock-based plans in
effect during the fiscal year ending February 6, 1999, under which directors,
officers and certain employees of the Company received benefits.
PERFORMANCE-BASED STOCK OPTION PLANS
The Company has two performance-based plans covering both employees and
non-employees.
Under the 1996 Stock Option Plan, the Company is authorized to grant stock
options to selected officers and key employees. Options vest at the rate of 25%
per year over a four-year period commencing on the date of grant, provided that
the market price per share of Common Stock achieves specified levels of
appreciation during such four-year period. Under the plan, such appreciation
must equal or exceed 20% in each year commencing with the date of grant of each
option. No more than 25% of the shares available for issuance can vest in any
one year. If, in a given year, the market price per share of Common Stock fails
to achieve the specified level, the shares which fail to vest in that year may
vest in a subsequent year within such four-year period commencing on the date of
grant, assuming that the market price per share of Common Stock achieves in such
subsequent year the level which was not met in a previous year. If an option the
vesting of which is dependent upon the achievement of specified levels of stock
price appreciation has not been fully vested by the close of the four-year
period commencing on the date of grant, such option shall be exercisable for a
thirty-day period commencing with the close of such four-year period and
thereafter shall terminate to the extent not exercised.
Under a new 1998 Management and Director Stock Option Plan (the "1998
Plan"), 2.5 million options have been reserved. The terms of the 1998 Plan are
essentially the same as the 1996 Stock Option Plan.
A-9
<PAGE>
EMPLOYEE STOCK PURCHASE PLANS
The Company sponsors an Employee Stock Purchase Plan ("ESPP") under which it
is authorized to issue up to 2.0 million shares of Common Stock to all employees
with a minimum of three months of service. The ESPP allows eligible employees to
contribute through payroll deductions up to 10% of their annual salary toward
stock purchases. Stock purchases are made monthly on the first day of each month
at 90% of the closing price from the previous day.
On October 25, 1996, the Company's stockholders approved the adoption of the
Company's 1996 Long Term Incentive Program, which included the 1996 Management
and Director Stock Purchase Plan (the "Stock Purchase Plan"). Under the Stock
Purchase Plan, the Company has established a minimum stockholding requirement
for members of senior management. In order to participate in the Stock Purchase
Plan, all officers of the Company must own Common Stock with a market value
equal to at least one times their annual salary, or 50% for other non-officer
participants.
Participants are permitted to purchase shares of Common Stock at a price
equal to 80% of the average market price of the Common Stock during certain
specified periods. The Company recognizes compensation expense in the periods in
which shares are purchased under the Stock Purchase Plan in the amount by which
the fair market value per share of Common Stock at the time of such purchase
exceeds the exercise price per share under the plan. The maximum number of
shares which participants are permitted to purchase under the Stock Purchase
Plan is 2.5 times their annual compensation or director fees. Non-officer
participants may participate up to 1.25 times their annual compensation. The
Company may extend loans to participants for up to 50% of the amount necessary
to purchase the shares under the Stock Purchase Plan and the applicable
withholding tax, provided that no participant shall borrow more than an amount
equal to 1.25 times such participant's annual base salary. Any such loans bear
interest at 6% per annum and are secured by the shares of Common Stock purchased
by the participant. The Company will forgive the loan in the event the market
price of Common Stock appreciates by at least 25% or more over the base market
price of Common Stock in each of the four years commencing from the date of
grant of such loan. The Company will record compensation expense for the amount
of loans forgiven in each fiscal year in which stock appreciation hurdles are
attained. To the extent that such loans are not forgiven, they are required to
be repaid at the earlier of termination of employment or expiration of the
four-year period. In connection with the Merger, all loans outstanding will be
forgiven and the Company's equity based plans will be terminated as more fully
described in Item 3 to the Schedule 14D-9, to which this Information Statement
is attached, which Item 3 is incorporated herein by reference.
The following table summarizes activity under the Company's option plans
during the fiscal year ending February 6, 1999:
OPTION GRANTS IN FISCAL YEAR ENDING FEBRUARY 6, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------- VALUE AT ASSUMED
% OF ANNUAL RATES OF
TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED EXERCISE OPTION TERM (3)
GRANTED TO OR BASE EXPIRATION --------------------
NAME (#) (1) EMPLOYEES PRICE ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------------------ ---------- --------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts................................ 150,000(2) 15% $ 17.50 1/23/08 $614,519 $2,547,388
100,000(2) 16 17.50 5/02/07 339,021 1,476,761
75,000(2) 12 17.50 6/25/07 260,794 1,127,738
75,000(2) 11.9 17.50 11/13/07 293,845 1,231,123
Jerry D. Horn................................... 50,000(2) 5 17.50 1/23/08 204,840 849,129
30,000(2) 4.8 17.50 5/02/07 101,706 443,028
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------- VALUE AT ASSUMED
% OF ANNUAL RATES OF
TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED EXERCISE OPTION TERM (3)
GRANTED TO OR BASE EXPIRATION --------------------
NAME (#) (1) EMPLOYEES PRICE ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------------------ ---------- --------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregory T. Horn................................. 10,000(2) 1 17.50 1/23/08 40,968 169,826
75,000(2) 7.5 17.50 1/23/08 307,259 1,273,694
60,000 15 11.063 9/30/08 429,472 1,133,100
20,000(2) 23.8 17.50 1/26/06 39,291 210,437
40,000(2) 7.1 17.50 11/14/06 115,020 528,010
40,000(2) 6.4 17.50 5/02/07 135,609 590,704
40,000(2) 6.4 17.50 6/25/07 139,090 601,460
40,000(2) 6.4 17.50 11/13/07 156,718 656,599
Edwin J. Kozlowski.............................. 10,000(2) 1 17.50 1/23/08 40,968 169,826
75,000(2) 7.5 17.50 1/23/08 307,259 1,273,694
60,000 15 11.063 9/30/08 429,472 1,133,100
20,000(2) 23.8 17.50 1/26/06 39,291 210,437
45,000(2) 8.0 17.50 11/14/06 129,397 594,012
40,000(2) 6.4 17.50 6/25/07 139,090 601,460
40,000(2) 6.4 17.50 5/02/07 135,609 590,704
40,000(2) 6.4 17.50 11/13/07 156,716 656,599
John A. DiCecco................................. 5,000(2) .5 17.50 1/23/08 20,484 84,913
50,000(2) 5 17.50 1/23/08 204,840 849,129
15,000 3.7 11.063 9/30/08 107,368 283,275
30,000(2) 5.3 17.50 11/14/06 86,265 396,008
20,000(2) 3.2 17.50 5/02/07 67,804 295,352
17,500(2) 3.2 17.50 6/25/07 60,852 263,139
25,000(2) 4.0 17.50 11/13/07 162,215 418,242
</TABLE>
- ------------------------
(1) Fifty percent of the shares subject to the options granted to the executive
officers and employees vest in equal daily increments over four years, and
the vesting of the options to purchase the remaining fifty percent of such
shares is dependent upon the achievement of the foregoing performance
objectives over four years. The options have a ten year term; but the
options which vest on the basis of performance objectives become fully
vested for a 30 day period following the close of the sixth fiscal year
after the date of grant, if the performance objectives have not been met.
(2) These options were originally granted during 1995, 1996, 1997 or 1998 with
exercise prices in excess of $17.50 per share, were repriced to $17.50 per
share effective September 11, 1998, retained their existing vesting
schedules and are reflected here as new grants for purposes of this table.
The current market price on the date of repricing was $13.50 per share.
(3) The dollar amounts under these columns are the results of calculations at
assumed rates of appreciation of 5% and 10% by the SEC and, therefore, are
not intended to forecast possible future appreciation, if any, in the price
of Common Stock. No gain to the optionees is possible without an increase in
price of Common Stock, which will benefit all stockholders proportionately.
A-11
<PAGE>
During 1998, the Company approved the resetting of the strike prices on all
options issued from the 1992, 1993, 1995, 1996 and 1998 stock option plans for
current active employees. The new strike price was set at $17.50 for all shares
of Common Stock that had strike prices in excess of $17.50. Options under the
1996 and 1998 stock option plans that vested based on stock price appreciation
hurdles had the remaining vesting schedule restarted with the revised stock
price hurdles. The following table contains certain information with respect to
the repricing of such options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES EXERCISE LENGTH OF
UNDERLYING MARKET PRICE OF PRICE ORIGINAL OPTION
OPTIONS STOCK AT TIME AT TIME OF NEW TERM REMAINING AT
REPRICED OR OF REPRICING OR REPRICING OR EXERCISE DATE OF REPRICING
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) OR AMENDMENT
(A) (B) (C) (D) (E) (F) (G)
- ------------------------------------------ --------- ----------- --------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts.......................... 4/25/92 120,000 $ 1.25 $ 2.50 $ 1.25 7 yrs. 4 mo.
President and CEO 4/25/92 80,000 1.25 2.50 1.25 7 yrs. 8 mo.
4/25/92 180,000 1.25 2.50 1.25 8 yrs. 6 mo.
4/25/92 17,004 1.25 2.50 1.25 8 yrs. 11 mo.
9/11/98 100,000 13.50 22.32 17.50 8 yrs. 9 mo.
9/11/98 75,000 13.50 26.78 17.50 8 yrs. 10 mo.
9/11/98 75,000 13.50 32.14 17.50 9 yrs. 3 mo.
9/11/98 150,000 13.50 34.625 17.50 9 yrs. 3 mo.
Jerry D. Horn............................. 4/25/92 120,000 1.25 2.50 1.25 7 yrs. 4 mo.
Chairman 4/25/92 80,000 1.25 2.50 1.25 7 yrs. 8 mo.
4/25/92 180,000 1.25 2.50 1.25 8 yrs. 6 mo.
4/25/92 17,004 1.25 2.50 1.25 8 yrs. 11 mo.
9/11/98 30,000 13.50 22.32 17.50 8 yrs. 9 mo.
9/11/98 50,000 13.50 34.625 17.50 9 yrs. 5 mo.
Gregory T. Horn........................... 4/25/92 8,000 1.25 2.50 1.25 9 yrs. 4 mo.
Executive Vice President of Business 9/11/98 20,000 13.50 19.375 17.50 7 yrs. 4 mo.
Development and COO 9/11/98 40,000 13.50 18.60 17.50 8 yrs. 3 mo.
9/11/98 40,000 13.50 22.32 17.50 8 yrs. 9 mo.
9/11/98 40,000 13.50 26.78 17.50 8 yrs. 10 mo.
9/11/98 40,000 13.50 32.14 17.50 9 yrs. 3 mo.
9/11/98 10,000 13.50 34.625 17.50 9 yrs. 3 mo.
9/11/98 75,000 13.50 34.625 17.50 9 yrs. 5 mo.
Edwin J. Kozlowski........................ 4/25/92 16,000 1.25 2.50 1.25 7 yrs. 4 mo.
Executive Vice President & CFO 4/25/92 16,000 1.25 2.50 1.25 7 yrs. 8 mo.
4/25/92 28,000 1.25 2.50 1.25 7 yrs. 10 mo.
4/25/92 3,232 1.25 2.50 1.25 8 yrs. 2 mo.
4/25/92 26,000 1.25 2.50 1.25 8 yrs. 6 mo.
4/25/92 3,992 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 6,632 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 12,000 1.25 2.50 1.25 9 yrs. 4 mo.
4/25/92 11,112 1.25 2.50 1.25 9 yrs. 11 mo.
9/11/98 20,000 13.50 19.375 17.50 7 yrs. 4 mo.
9/11/98 45,000 13.50 18.60 17.50 8 yrs. 3 mo.
9/11/98 40,000 13.50 22.32 17.50 8 yrs. 9 mo.
9/11/98 40,000 13.50 26.78 17.50 8 yrs. 10 mo.
9/11/98 40,000 13.50 32.14 17.50 9 yrs. 3 mo.
9/11/98 10,000 13.50 34.625 17.50 9 yrs. 5 mo.
9/11/98 75,000 13.50 34.625 17.50 9 yrs. 5 mo.
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES EXERCISE LENGTH OF
UNDERLYING MARKET PRICE OF PRICE ORIGINAL OPTION
OPTIONS STOCK AT TIME AT TIME OF NEW TERM REMAINING AT
REPRICED OR OF REPRICING OR REPRICING OR EXERCISE DATE OF REPRICING
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) OR AMENDMENT
(A) (B) (C) (D) (E) (F) (G)
- ------------------------------------------ --------- ----------- --------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John A. DiCecco........................... 4/25/92 16,000 $ 1.25 $ 2.50 $ 1.25 7 yrs. 4 mo.
Senior Vice President--Logistics/Mfg. 4/25/92 16,000 1.25 2.50 1.25 7 yrs. 8 mo.
4/25/92 2,672 1.25 2.50 1.25 8 yrs. 2 mo.
4/25/92 25,000 1.25 2.50 1.25 8 yrs. 6 mo.
4/25/92 2,672 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 6,684 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 27,104 1.25 2.50 1.25 9 yrs. 11 mo.
9/11/98 30,000 13.50 18.60 17.50 8 yrs. 3 mo.
9/11/98 20,000 13.50 22.32 17.50 8 yrs. 9 mo.
9/11/98 17,500 13.50 26.78 17.50 8 yrs. 10 mo.
9/11/98 25,000 13.50 32.14 17.50 9 yrs. 3 mo.
9/11/98 5,000 13.50 34.625 17.50 9 yrs. 5 mo.
9/11/98 50,000 13.50 34.625 17.50 9 yrs. 5 mo.
Michael Meyers............................ 4/25/92 12,000 1.25 2.50 1.25 7 yrs. 4 mo.
Executive Vice President and General 4/25/92 2,000 1.25 2.50 1.25 8 yrs. 6 mo.
Manager of GNC 4/25/92 624 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 16,000 1.25 2.50 1.25 9 yrs. 4 mo.
4/25/92 12,544 1.25 2.50 1.25 9 yrs. 11 mo.
4/25/92 68,000 1.25 2.50 1.25 8 yrs. 10 mo.
9/11/98 10,000 13.50 26.78 17.50 9 yrs. 3 mo.
9/11/98 7,000 13.50 32.14 17.50 9 yrs. 3 mo.
9/11/98 25,000 13.50 34.625 17.50 9 yrs. 5 mo.
Louis Mancini............................. 4/25/92 40,000 1.25 2.50 1.25 7 yrs. 4 mo.
Former President of GNC 4/25/92 40,000 1.25 2.50 1.25 7 yrs. 8 mo.
4/25/94 444 1.25 2.50 1.25 8 yrs. 2 mo.
4/25/92 42,000 1.25 2.50 1.25 8 yrs. 6 mo.
4/25/92 5,480 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 1,304 1.25 2.50 1.25 8 yrs. 11 mo.
4/25/92 12,988 1.25 2.50 1.25 9 yrs. 11 mo.
4/25/92 2,000 1.25 2.50 1.25 7 yrs. 4 mo.
4/25/92 1,363 1.25 2.50 1.25 7 yrs. 4 mo.
</TABLE>
A-13
<PAGE>
AGGREGATE OPTION EXERCISES IN THE FISCAL YEAR ENDING FEBRUARY 6, 1999
AND OPTION VALUES AS OF JANUARY 30, 1999
The following table sets forth certain information regarding options for the
purchase of shares of Common Stock that were exercised or held by the Senior
Officers during the fiscal year ending February 6, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT JANUARY 30, IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE 1999 JANUARY 30, 1999($)(1)
ON EXERCISE REALIZED ------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ------------ ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Watts....................... 160,000 $ 4,384,960 1,191,038 509,342 $ 3,276,612 $ 41,612
Jerry D. Horn.......................... 34,657 887,276 32,380 103,661 2,213 8,322
Gregory T. Horn........................ 14,290 279,835 193,515 296,395 72,667 282,187
Edwin J. Kozlowski..................... 27,895 762,022 198,126 297,995 70,368 277,737
John A. DiCecco........................ 20,000 548,120 159,296 138,472 359,479 70,474
</TABLE>
- ------------------------
(1) This amount is the aggregate of the number of options multiplied by the
difference between the closing price of Common stock on the Nasdaq National
Market on February 5, 1999 ($15.688 per share), minus the option exercise
price of $10.125 for shares granted under the 1992 stock option plan,
$10.844 for shares granted under the 1993 stock option plan, $11.875 for
shares granted under the 1995 stock option plan and $15.50 for shares
granted under the 1996 stock option plan.
OWNERSHIP OF STOCK BY DIRECTOR, SENIOR OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial
ownership of shares of Common Stock of the Company as of June 30, 1999, by all
stockholders of the Company known to be beneficial owners of more than 5% of
such Common Stock, by each director, by each Senior Officer 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>
Forstmann-Leff Associates, Inc........................................... 5,079,900(a) 7.47
590 Madison Avenue
New York, NY 10022
Pacific Financial Research............................................... 6,475,000(b) 9.52
9601 Wilshire Boulevard, Suite 800
Beverly Hills, CA 90210
Edward G. Beimfohr....................................................... 18,875 *
David Lucas.............................................................. 164,301(c) *
Ronald L. Rossetti....................................................... 99,101(d) *
Thomas R. Shepherd....................................................... 123,551(e) *
W. Harrison Wellford..................................................... 117,101(f) *
Jerry D. Horn............................................................ 233,110(g) *
William E. Watts......................................................... 1,576,614(h) 2.32
Gregory T. Horn.......................................................... 284,585(i) *
</TABLE>
A-14
<PAGE>
<TABLE>
<S> <C> <C>
Edwin J. Kozlowski....................................................... 336,982(j) *
John A. DiCecco.......................................................... 245,096(k) *
All directors and executive officers of the Company as a group (16
persons)................................................................ 3,570,408(l) 5.25
</TABLE>
- ------------------------
* Represents less than 1%.
+ Messrs. Watts, Jerry D. Horn, Gregory T. Horn, Kozlowski and DiCecco have
entered into the Tender Agreement. See Item 2 of the Schedule 14D-9 to which
this Information Statement is attached, which Item 2 is incorporated by
reference herein.
(a) Based on information provided in a Schedule 13G filed with the Securities
and Exchange Commission on February 11, 1999. Includes 1,291,175 shares
beneficially owned by FLA Asset Management, Inc. and 1,002,750 shares
beneficially owned by FLA Advisers L.L.C. Forstmann-Leff Associates, Inc.
has sole dispositive power with respect to 2,785,975 shares and shared
dispositive power with respect to 2,293,925 shares.
(b) Based on information provided in a 13G filed with the Securities and
Exchange Commission on February 11, 1999.
(c) Includes 8,321 shares of Common Stock which may be deemed to be beneficially
owned by Mr. Lucas through his wife who is a partner in Harbour Investments
Ltd. Mr. Lucas disclaims beneficial ownership of such shares. Excludes 6,650
shares held by two trusts for his children. Mr. Lucas disclaims beneficial
ownership of such shares. Includes 33,591 options shares, which Mr. Lucas
has the right to acquire within 60 days.
(d) Includes 38,591 option shares, which Mr. Rossetti has the right to acquire
within 60 days.
(e) Includes 33,591 option shares, which Mr. Shepherd has the right to acquire
within 60 days.
(f) Includes 38,591 option shares, which Mr. Wellford has the right to acquire
within 60 days.
(g) Includes 44,946 option shares, which Mr. Jerry Horn has the right to acquire
within 60 days.
(h) Includes 1,253,873 option shares, which Mr. Watts has the right to acquire
within 60 days.
(i) Includes 230,196 option shares, which Mr. Gregory Horn has the right to
acquire within 60 days.
(j) Includes 230,012 option shares, which Mr. Kozlowski has the right to acquire
within 60 days.
(k) Includes 174,561 option shares, which Mr. DiCecco has the right to acquire
within 60 days.
(l) Includes 2,293,604 option shares, which such directors and executive
officers have the right to acquire within 60 days.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation paid to Mr. Watts as President and Chief Executive Officer
for the fiscal year ending February 6, 1999, was based on the salary specified
in his employment contract described below. Mr. Watts' employment agreement with
the Company provides for a base salary of $929,700 per year (subject to
adjustment for changes in the cost of living).
During the fiscal year ending February 6, 1999, Mr. Watts was granted
options to purchase, pursuant to the 1998 Management and Director Stock Option
Plan, an aggregate of 150,000 shares of Common Stock at $17.50 per share. Fifty
percent of these options vest on a daily basis over a four-year period from the
date of grant, and the remaining fifty percent vest in twenty five percent
increments over a four year period from the date of grant if the market price of
Common Stock appreciates twenty percent per year from the date of grant. In
addition, in 1998 Mr. Watts was permitted to purchase, pursuant to the 1996
Management and Director Stock Purchase Plan, 1,011 shares of Common Stock at
$25.27 per share which represented an average discount of $6.32 per share from
the market price at the time of the award.
A-15
<PAGE>
The terms of the amended employment agreement, as well as the options
granted under the 1998 Management and Director Stock Option Plan and the right
to participate in the 1996 Management and Director Stock Purchase Plan are all
reflective of the Compensation Committee's judgment as to the contribution Mr.
Watts has made to the success of the Company. This employment agreement will be
superseded at the Effective Time by the Watts Agreement described in Item 3 to
the Schedule 14D-9 to which this Information Statement is attached, which Item 3
is incorporated by reference herein.
EMPLOYMENT AGREEMENTS
GNI entered into employment agreements dated as of March 24, 1989, with each
of Messrs. Jerry Horn and Watts. These employment agreements were amended and
restated on June 16, 1997 and further amended on January 23, 1998. Mr. Jerry
Horn's agreement, as amended, provides that he shall serve as the Chairman of
the Board of GNI until February 1, 2002, at a base salary of $300,000 for fiscal
1998, $250,000 for 1999, $200,000 for 2000, $150,000 for 2001 and $150,000 for
2002. Under Mr. Jerry Horn's employment agreement, Mr. Jerry Horn 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 stock option
plans. It is not currently contemplated that Mr. Jerry Horn will continue to be
a member of the Board upon consummation of the Offer.
Mr. Watts' agreement, as amended, provides that he shall serve as President
and Chief Executive Officer of GNI until February 1, 2002, at a base salary of
$929,700 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 100 hours per year. Under Mr. Watts'
employment agreement, Mr. 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 stock option plans. This employment agreement will
be superseded at the Effective Time by the Watts Agreement described in Item 3
to the Schedule 14D-9.
Under such employment agreements, each of Messrs. Jerry 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. In the event of a "change in control" (as
defined in the agreements), Mr. Jerry Horn is entitled to the payment of
$1,000,000 and Mr. Watts is entitled to three times his then current base
salary. Consummation of the Offer as contemplated would constitute a "change in
control" under these employment agreements.
In addition, the Board of Directors of the Company and its subsidiaries have
authorized all vice presidents and above, including the Senior Officers, to
receive one times their salary as a bonus in the event of a "change in control."
Consummation of the Offer as contemplated would constitute such a "change in
control."
For a summary of the employment agreements entered into between the Company
and each of the Senior Officers in connection with the Offer, see Item 3 of the
Schedule 14D-9 to which this Information Statement is attached, which Item 3 is
incorporated by reference herein.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board administers the Company's executive
compensation program. The Compensation Committee is composed exclusively of
non-employee directors. In its deliberations, the Compensation 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;
A-16
<PAGE>
2. Tie individual total compensation to individual and team performance and
the success of the Company; and
3. Align executive's 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, a
minimum stockholding requirement for members of senior management, and stock
options.
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 Compensation 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, level of
responsibility, sustained performance and comparison to peers inside and outside
the Company.
ANNUAL INCENTIVE AWARDS
Annual incentive awards are designed to reward personal contribution to the
success of the organization. In conjunction with the approval of the Company's
annual operating plan by Mr. Watts, performance goals are established for
individual officers based on aspects of the Company's performance related to the
particular officer's responsibilities and, in some cases, on individual
achievements. These goals are reviewed and approved by the Compensation
Committee early in each fiscal year. At the end on the year, the Compensation
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.
LONG-TERM INCENTIVE PROGRAMS
The Company's long-term incentive programs accomplish the third compensation
objective: to align the interests of executive officers with stockholder value.
The first step is that the Compensation Committee has established a minimum
stockholding requirement for members of senior management. All officers of the
Company must own Common Stock equal to their annual salary. If the officer's
holdings are less than the minimum requirement then any cash bonuses otherwise
paid to him or her are to be paid instead 50% in cash and 50% in Common Stock
until they meet the stockholding requirement. This requirement is designed to
align the interests of senior management with those of the stockholders.
The second step is the 1996 Management and Director Stock Purchase Plan,
which offers directors and senior management, officers and other key employees
selected by the Compensation Committee the opportunity to purchase Common Stock
at a discount and to leverage that purchase with a matching loan financed by the
Company which is used to purchase additional shares. The purchase plan offers
participants financial incentives based on long-term stock performance. This
means that the Company's stock must perform well for all stockholders in order
for the purchase plan to pay off for its participants.
The third step is achieved through stock options. The number of stock
options granted by the Company is determined by the recipient's 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 as to the size of stock
option grants to executive officers, including Mr. Watts, reflect the subjective
judgment of the Compensation 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.
A-17
<PAGE>
In September 1998, the Board reviewed the outstanding stock options and
determined that most of the stock options were out-of-the-money and no longer
useful or effective as realistic employee retention and long term incentive
devices. To address this problem, the Board adjusted the exercise price of
options held by current employees and non-employee directors under the 1993,
1995, 1996 and 1998 Stock Option Plans with exercise prices in excess of $17.50
per share to $17.50 per share. The current market price for Common Stock on the
date of adjustment was $13.50 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class of
the Company's equity securities to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors
and ten percent stockholders are also required by SEC rules to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it to
date, the Company believes that during the fiscal year ending February 6, 1999,
all reporting persons complied with Section 16(a) filing requirements applicable
to them.
A-18
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
The table set forth below compares the change in the Company's cumulative
total shareholder return on Common Stock (as measured by dividing the difference
between the 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 table assumes
$100 was invested on January 31, 1993 in Common Stock and in the indexes and
also assumes the reinvestment of dividends.
<TABLE>
<CAPTION>
DOW JONES U.S.
GENERAL NUTRITION SPECIALTY
COMPANIES, INC. NASDAQ COMPOSITE RETAIL
----------------- ----------------- ---------------
<S> <C> <C> <C>
1/21/93..................................................... 100.00 100.00 100.00
2/5/93...................................................... 142.00 100.00 102.00
2/4/94...................................................... 353.00 111.00 89.00
2/5/95...................................................... 314.00 110.00 96.00
2/3/96...................................................... 550.00 153.00 88.00
2/1/97...................................................... 453.00 197.00 101.00
1/31/98..................................................... 902.00 231.00 147.00
2/6/99...................................................... 392.00 339.00 245.00
</TABLE>
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 72 equal
monthly installments of $12,500. In addition, the consulting agreement provided
that Mr. Rossetti would be entitled to serve as a member of the Board for three
years following the transaction and be entitled to participate, as an
independent director, in the 1994 stock option plan established by the Company.
Mr. Rossetti became a director of the Company in September 1994 and received an
option covering 20,000 shares of Common Stock pursuant to the 1994 stock option
plan at an exercise price of $11.46875 per share, the market price on the date
of grant.
The Company, in the regular course, utilizes the services of Lane &
Mittendorf, attorneys-at-law. Mr. Beimfohr is a Senior Partner with Lane &
Mittendorf.
See also "Compensation Committee Interlocks and Insider Participation"
above. The matters set forth elsewhere in this Information Statement and in Item
3 of the Schedule 14D-9 are hereby incorporated by reference herein.
A-19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- -------------------- ------------------------------------------------------------------------------------------ ---------
<C> <S> <C> <C>
*+ (a)(1) Offer to Purchase dated July 9, 1999.
*+ (a)(2) Letter of Transmittal.
+ (a)(3) Text of press release dated July 5, 1999.
* (a)(4) Letter to stockholders of the Company dated July 9, 1999.
+ (a)(5) Form of Summary Advertisement dated July 9, 1999.
* (a)(6) Opinion of Morgan Stanley & Co. Incorporated.
+ (a)(7) Text of press release dated July 9, 1999.
(b) Not applicable.
+ (c)(1) Agreement and Plan of Merger dated as of July 5, 1999.
+ (c)(2) Tender Agreement dated as of July 5, 1999.
+ (c)(3) Employment Agreement of Mr. William E. Watts dated as of July 5, 1999.
+ (c)(4) Employment Agreement of Mr. Gregory T. Horn dated as of July 5, 1999.
+ (c)(5) Employment Agreement of Mr. Russell L. Cooper dated as of July 5, 1999.
+ (c)(6) Employment Agreement of Mr. John A. DiCecco dated as of July 5, 1999.
+ (c)(7) Employment Agreement of Mr. David R. Heilman dated as of July 5, 1999.
+ (c)(8) Employment Agreement of Mr. Edwin J. Kozlowski dated as of July 5, 1999.
+ (c)(9) Employment Agreement of Mr. Michael Locke dated as of July 5, 1999.
+ (c)(10) Employment Agreement of Mr. Mike K. Meyers dated as of July 5, 1999.
+ (c)(11) Employment Agreement of Mr. Donald G. Smith dated as of July 5, 1999.
+ (c)(12) Employment Agreement of Mr. Reginald W. Steele dated as of July 5, 1999.
+ (c)(13) Non-Competition and Non-Solicitation Agreement of Gregory T. Horn dated as of July 5,
1999.
+ (c)(14) Benefits Letter dated July 5, 1999.
</TABLE>
- ------------------------
* Included in materials delivered to stockholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule
14D-1 dated July 9, 1999, and incorporated herein by reference.
<PAGE>
99(A) 4
[LOGO]
July 9, 1999
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PA 15222
To the Stockholders of General Nutrition Companies, Inc.:
I am pleased to report that on July 5, 1999, General Nutrition Companies,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Koninklijke Numico N.V., a company incorporated under the laws
of The Netherlands ("Numico"), and Numico Investment Corp., a Delaware
corporation and an indirect wholly owned subsidiary of Numico (the "Purchaser").
The Merger Agreement provides for the acquisition of all outstanding shares of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock") by
the Purchaser at a price of $25.00 per share, net to the seller in cash, without
interest. Under the terms of the proposed transaction, the Purchaser has
commenced a tender offer (the "Offer") for all of the outstanding shares of
Common Stock at $25.00 per share, net to the seller in cash, without interest.
The Offer is currently scheduled to expire at 12:00 Midnight, New York City
time, on Thursday, August 5, 1999, unless otherwise extended.
Following the successful completion of the Offer and upon approval by a
stockholder vote, if required, the Purchaser will be merged with and into the
Company (the "Merger") and all shares of Common Stock not purchased in the Offer
will be converted into the right to receive, without interest, an amount in cash
equal to the amount paid pursuant to the Offer.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND
IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES OF COMMON STOCK AND RECOMMENDS
THAT ALL HOLDERS OF SHARES OF COMMON STOCK TENDER THEIR SHARES OF COMMON STOCK
PURSUANT TO THE OFFER.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 and the Company's
Information Statement pursuant to Section 14(f) of the Securities Exchange Act
of 1934, as amended, each filed by the Company with the Securities and Exchange
Commission. The Board of Directors of the Company has received an opinion, dated
July 3, 1999, of Morgan Stanley & Co. Incorporated, financial advisor to the
Company, that the $25.00 per share cash consideration to be paid in the Offer
and the Merger to the holders of shares of Common Stock is fair, from a
financial point of view, to such holders. A copy of this opinion is attached to
the Schedule 14D-9.
Also accompanying this letter is a copy of the Offer to Purchase and related
materials of Numico and the Purchaser, including a Letter of Transmittal for use
in tendering your shares of Common Stock. These documents set forth the terms
and conditions of the Offer and provide instructions for tendering your shares
of Common Stock.
WE URGE YOU TO READ EACH OF THE ENCLOSED MATERIALS CAREFULLY.
The management and directors of the Company thank you for the support you
have given the Company.
Sincerely,
[LOGO]
William E. Watts
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
99(A) 6
July 3, 1999
Board of Directors
General Nutrition Companies, Inc.
300 Sixth Avenue
Pittsburgh, PA 15222
Members of the Board:
We understand that General Nutrition Companies, Inc. (the "Company"), Royal
Numico N.V. ("Buyer") and Numico Investment Corp., a wholly owned subsidiary of
Buyer ("Acquisition Sub") propose to enter into an Agreement and Plan of Merger
substantially in the form of the draft dated July 2, 1999 (the "Merger
Agreement"), which provides, among other things, for (i) the commencement by
Acquisition Sub of a tender offer (the "Tender Offer") for all outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), of the
Company for $25.00 per share net to the seller in cash, and (ii) the subsequent
merger (the "Merger") of Acquisition Sub with and into the Company. Pursuant to
the Merger, the Company will become a wholly owned subsidiary of Buyer and each
outstanding share of Common Stock, other than shares held in treasury or held by
Buyer or Acquisition Sub or as to which dissenters' rights have been perfected,
will be converted into the right to receive $25.00 per share in cash. The terms
and conditions of the Tender Offer and the Merger are more fully set forth in
the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Common Stock pursuant to the Tender Offer and the
Merger as contemplated by the Merger Agreement is fair from a financial point of
view to such holders.
For purposes of the opinion set forth herein, we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions with representatives of the Company, Buyer
and their financial and legal advisors;
(ix) reviewed the Merger Agreement and have assumed that the final Merger
Agreement will not vary from the draft provided to us in any respect
that is material to our analyses; and
(x) performed such other analyses and considered such other factors as we
have deemed appropriate.
<PAGE>
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such appraisal.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company with the Securities and Exchange
Commission with respect to the Tender Offer and the Merger. In addition, Morgan
Stanley expresses no opinion or recommendation as to whether the stockholders of
the Company should tender their shares of Common Stock into the Tender Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Tender Offer and the Merger as contemplated by the Merger Agreement is
fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stephen R. Munger
------------------------------------
Name: Stephen R. Munger
Title: Managing Director
