<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
</TABLE>
GENERAL NUTRITION COMPANIES, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
[ X ] No fee required
<PAGE> 2
[GNC LIVE WELL LOGO]
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222
TO OUR STOCKHOLDERS:
We are pleased to invite you to attend the General Nutrition Companies,
Inc. 1999 Annual Meeting of Stockholders, which will be held on Thursday, June
24, 1999, in the Westmoreland Room at the DoubleTree Hotel Pittsburgh, 1000 Penn
Avenue, Pittsburgh, PA 15222. The meeting will begin at 10:00 a.m. local time.
The matters to be acted on at the meeting are described in detail in the
attached notice of meeting and proxy statement. The meeting will also provide an
opportunity to review with you the business and affairs of the Company and its
consolidated subsidiaries and give you an opportunity to meet your directors.
Please complete and sign the enclosed proxy card and return it promptly in
the accompanying envelope. This will ensure that your shares are represented at
the meeting.
Please read the proxy materials carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
I look forward to seeing you at the meeting.
Very truly yours,
/s/ WILLIAM E. WATTS
WILLIAM E. WATTS
President and
Chief Executive Officer
Pittsburgh, Pennsylvania
May 21, 1999
<PAGE> 3
[GNC LIVE WELL LOGO]
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1999
TO ALL STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of General
Nutrition Companies, Inc., a Delaware corporation, will be held on Thursday,
June 24, 1999, at 10:00 a.m. Eastern Daylight Time, in the Westmoreland Room at
the DoubleTree Hotel Pittsburgh, 1000 Penn Avenue, Pittsburgh, PA 15222.
Pursuant to the By-Laws, the Board of Directors fixed the close of business
on May 5, 1999, as the record date for determination of stockholders of the
Company entitled to receive notice of and to vote at the Annual Meeting. The
following items, described in the attached proxy statement, will be on the
agenda:
1. Election of two Class III directors to the Board of Directors for a
three-year term expiring in 2002;
2. Ratification of the appointment of the Company's independent auditors
for the current fiscal year; and
3. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
So far as management is aware, no business will properly come before the
Annual Meeting other than the matters described above.
By Order of the Board of Directors,
/s/ JAMES M. SANDER
JAMES M. SANDER
Vice President -- Law,
Chief Legal Officer and Secretary
Pittsburgh, Pennsylvania
May 21, 1999
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD APPOINTING EDWIN J.
KOZLOWSKI, DAVID R. HEILMAN AND EILEEN D. SCOTT, AS YOUR PROXIES, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
<PAGE> 4
GENERAL NUTRITION COMPANIES, INC.
300 SIXTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1999
The following statement is made in connection with solicitation of the
enclosed proxy by the Board of Directors of General Nutrition Companies, Inc.
(the "Company" or "GNCI") for use at the Annual Meeting of Stockholders. The
approximate mailing date of this proxy material is May 21, 1999.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of the Company's outstanding Common Stock (the "Common Stock")
have voting rights in connection with the proposals discussed herein. The close
of business on May 5, 1999 has been fixed by the Board of Directors as the
record date for the determination of stockholders of the Company entitled to
receive notice of and to vote at the Annual Meeting. On May 5, 1999, there were
67,856,738 shares of Common Stock outstanding and entitled to vote. Each share
entitles the holder to one vote on each matter presented for stockholder
approval.
Shares represented by a properly executed proxy in the accompanying form
will be voted at the meeting as specified in the proxy. If signed proxies are
returned without specification, such proxies will be voted according to the
recommendations of the Board of Directors. Those recommendations are described
later in this statement.
You may revoke your proxy at any time before its exercise by sending
written notice of revocation to the Secretary of the Company, or by signing and
delivering a proxy which is dated later, or by attending the meeting and voting
in person.
At the date of this statement, the only matters that management intends to
present at the meeting are (1) the election of two Class III directors for a
three-year term expiring in 2002, and (2) the ratification of the appointment of
the Company's independent auditors for the current fiscal year.
If any other matters are properly brought before the meeting, the enclosed
proxy permits the stockholder to give discretionary authority to the persons
named in such proxy to vote the shares in their best judgment.
Under Delaware law and the Company's Restated Certificate of Incorporation,
if a quorum is present at the meeting (i) the two nominees for election as
directors who receive the greatest number of votes cast for the election of
directors at the meeting by the shares present in person or by proxy and
entitled to vote shall be elected directors and (ii) proposal 2 must be approved
by the affirmative vote of the majority of shares present in person or by proxy
and entitled to vote on the matter. In the election of directors, any action
other than a vote for a nominee will have the practical effect of voting against
the proposals since it is one less vote in favor. Broker non-votes will have no
impact on such matter since they are not considered "shares present" for voting
purposes.
2
<PAGE> 5
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven people, two of whom are
members of management and five of whom are non-management directors. In
accordance with the Company's Restated Certificate of Incorporation, directors
are divided into three classes, each of which is composed as nearly as possible
of one-third of the directors. The terms of the Class II and Class I directors
and the term of the two Class III directors elected in 1999 will expire
respectively, on the date of the 2000, 2001, and 2002 Annual Meetings of
Stockholders, or until a successor has been elected and qualified. The nominees
for director are currently Board members. The names of the nominees for the
Board of Directors, as recommended by the Board of Directors, and the names of
directors whose terms will continue after the 1999 Annual Meeting, are listed
below. Shares represented by a properly executed proxy in the accompanying form
will be voted for such nominees unless authority is withheld. However,
discretionary authority is reserved to vote such shares in the best judgment of
the people named in the proxy in the event that any person or persons other than
the nominees listed below are to be voted on at the meeting due to the
unavailability of any nominees so listed. The nominees are not related to any
other director or executive officer of the Company or its subsidiaries, except
that Jerry Horn, Chairman, is the father of Gregory Horn, Executive Vice
President of Business Development and Chief Operating Officer.
NOMINEES FOR CLASS III DIRECTORS
TERM EXPIRING AT 2002 ANNUAL MEETING
JERRY D. HORN, 61, Chairman of the Board and Director
Mr. Jerry Horn has served as Chairman of the Board of GNCI and General
Nutrition Corporation ("GNC") since October 1991 and as Chairman of the Board of
General Nutrition, Incorporated ("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., Cinnabon 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.
THOMAS R. SHEPHERD, 69, Director
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 he has been engaged as a consultant to Thomas H. Lee Company since
1986 and is currently a Managing Director. He is also a director of 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 1988. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE DIRECTOR NOMINEES.
3
<PAGE> 6
CONTINUING DIRECTORS
CLASS II DIRECTORS
TERM EXPIRING AT 2000 ANNUAL MEETING
WILLIAM E. WATTS, 46, President, Chief Executive Officer and Director
Mr. Watts has served as a director of GNCI since October 1991 and as a
director of GNI since January 1986. Mr. Watts has served as President and Chief
Executive Officer of GNCI 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
previously has served as Senior Vice President -- Retailing of GNI between
August 1985 and January 1988. Mr. Watts was Vice President -- Retail Operations
of GNC from February 1984 to August 1985 and prior thereto served as Director of
Retail Operations. Mr. Watts is also a director of C T Farm & Country, Inc.
RONALD L. ROSSETTI, 55, Director
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.
CLASS I DIRECTORS
TERM EXPIRING AT 2001 ANNUAL MEETING
DAVID LUCAS, 51, Director
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.
W. HARRISON WELLFORD, 59, Director
Mr. Wellford has served as a director of the Company and GNI since January
1994. Since November 1991, Mr. Wellford has been a partner in the Washington
D.C. office of the law firm of Latham & Watkins where he is 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
a 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; and prior
to that time period, he was a partner at the law firm of Wellford, Wegman and
Hoff from 1981 through 1988. In addition, Mr. Wellford was Executive Director of
the 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).
EDWARD G. BEIMFOHR, 66, Director
Mr. Beimfohr has served as a director of the Company and GNI since January
1999. He is a Senior Partner with Lane & Mittendorf Attorneys, N.Y., N.Y. and
has been employed by that firm since 1965. Mr. Beimfohr received an A.B. from
Washington University in 1953.
4
<PAGE> 7
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1998, there were five meetings of the Board of Directors of the
Company. All of the Directors attended at least 75% of the aggregate of (i) the
total number of meetings of the Board of Directors, and (ii) the total number of
meetings held by committees of the Board of Directors on which they served. Each
non-employee Director receives compensation in the amount of $5,000 for each
fiscal quarter and $500 per meeting for attending meetings of the Board of
Directors of the Company.
COMMITTEES
The Board of Directors has established standing Audit, Compensation and
Executive Committees. The membership of each committee is usually determined at
the organizational meeting of the Board. The Board of Directors does not have a
nominating committee.
AUDIT COMMITTEE
Messrs. Rossetti, Shepherd and Wellford serve as the Audit Committee of the
Board of Directors. The Audit Committee's functions include (i) reviewing the
Company's external and internal audit programs and the adequacy of the internal
accounting and financial controls, (ii) reviewing with the independent auditors
their report on the Company's financial statements, (iii) reviewing the
professional services proposed to be provided by the independent auditors to
consider the possible effect of such services on their independence, and (iv)
such other related services as the Board from time to time may request. The
Audit Committee met once during the fiscal year ended February 6, 1999.
COMPENSATION COMMITTEE
Messrs. Lucas and Shepherd serve as the Compensation Committee of the Board
of Directors. The Compensation Committee's functions include administering the
Company's Executive Retirement Arrangement and Deferred Compensation Plan,
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 ended February 6, 1999.
EXECUTIVE COMMITTEE
Messrs. Watts, Horn and Shepherd serve as the Executive Committee of the
Board of Directors. 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 ended February
6, 1999.
STOCK OWNERSHIP AND TRADING REPORTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Act") requires
the Company's officers and persons who own more than 10% of the Company's Common
Stock to file with the Securities and Exchange Commission reports concerning
their ownership of the Company's Common Stock and changes in such ownership.
Copies of such reports are required to be furnished to the Company. To the
Company's knowledge, based solely on a review of copies of such reports
furnished to the Company during or with respect to the Company's most recent
fiscal year, all Section 16(a) filing requirements applicable to persons who
were, during the most recent fiscal year, officers or directors of the Company
or greater than 10% beneficial owners of its Common Stock were complied with on
time.
5
<PAGE> 8
OWNERSHIP OF STOCK BY DIRECTOR, NOMINEES FOR DIRECTOR,
EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following tables sets forth information with respect to the beneficial
ownership of shares of Common Stock of the Company as of March 31, 1999, by all
stockholders of the Company known to be beneficial owners of more than 5% of
such Common Stock, by each director and nominee, by each executive officer named
in the Summary Compensation Table below and by all directors and executive
officers as a group, as determined in accordance with Rule 13d-3(d) under the
Exchange Act:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF VOTING
OF COMMON STOCK* STOCK OUTSTANDING*
---------------- --------------------
<S> <C> <C>
Forstmann-Leff Associates, Inc. 5,079,900(a) 7.49%
590 Madison Avenue
New York, NY 10022
Pacific Financial Research 6,475,000(b) 9.54
9601 Wilshire Boulevard, Suite 800
Beverly Hills, CA 90210
Edward G. Beimfohr 18,875 *
David Lucas 158,131(c) *
Ronald L. Rossetti 97,931(d) *
Thomas R. Shepherd 122,381(e) *
W. Harrison Wellford 105,931(f) *
Jerry D. Horn 227,504(g) *
William E. Watts 1,548,584(h) 2.24
Gregory T. Horn 266,167(i) *
Edwin J. Kozlowski 322,760(j) *
John A. DiCecco 238,285(k) *
All directors and executive officers 3,447,065(l) 4.92
of the Company as a group (16 persons)
</TABLE>
- ---------
* Represents less than 1%.
(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 2 trusts for his children. Mr. Lucas
disclaims beneficial ownership of such shares. Includes 27,421 option
shares, which Mr. Lucas has the right to acquire within 60 days.
(d) Includes 37,421 option shares, which Mr. Rossetti has the right to acquire
within 60 days.
(e) Includes 32,421 option shares, which Mr. Shepherd has the right to acquire
within 60 days.
(f) Includes 37,421 option shares, which Mr. Wellford has the right to acquire
within 60 days.
(g) Includes 39,340 option shares, which Mr. Jerry Horn has the right to
acquire within 60 days.
(h) Includes 1,225,843 option shares, which Mr. Watts has the right to acquire
within 60 days.
(i) Includes 211,778 option shares, which Mr. Gregory Horn has the right to
acquire within 60 days.
(j) Includes 215,790 option shares, which Mr. Kozlowski has the right to
acquire within 60 days.
(k) Includes 167,750 option shares, which Mr. DiCecco has the right to acquire
within 60 days.
(l) Includes 2,194,997 option shares, which such directors and executive
officers have the right to acquire within 60 days.
6
<PAGE> 9
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation program. The Committee is
composed exclusively of non-employee directors. In its deliberations, the
Committee takes into account the recommendations of appropriate Company
officials.
The goals of the Company's executive compensation program are to:
1. Pay competitively to attract, retain and motivate a highly competent
executive team;
2. Tie individual total compensation to individual and team performance and
the success of the Company; and
3. Align executives' financial interests with stockholder value.
The Company's program utilizes a combination of base salary, annual
incentive (bonus) awards based on the achievement of performance objectives, a
minimum stockholding requirement for members of senior management, and stock
options. In 1993 the Internal Revenue Code was amended to limit the deduction a
public company is permitted for compensation paid in 1994 and thereafter to the
chief executive officer and to the four most highly compensated executive
officers, other than the chief executive officer. Generally, amounts paid in
excess of $1 million to a covered executive, other than performance-based
compensation, cannot be deducted. In order to qualify as performance-based
compensation under the current tax law, certain requirements must be met,
including approval of the performance measures by the stockholders. The
Committee intends to consider ways to maximize deductibility of executive
compensation, while retaining the discretion the Committee considers appropriate
to compensate executive officers at levels commensurate with their
responsibilities and achievements.
BASE SALARIES
Base salaries are targeted to be moderate, yet competitive in relation to
salaries commanded by those in similar positions with other companies. In the
course of its deliberations the Committee reviews management recommendations for
executive officers' salaries, and examines data assembled by the Company from
surveys of compensation paid to executives with similar responsibilities in
major U.S. retail companies, including specialty retailers. Individual salary
determinations are based on experience, levels of responsibility, sustained
performance and comparison to peers inside and outside the Company. The base
salaries of Messrs. Horn and Watts are specified in employment agreements
described below entered into initially in 1989 and amended and restated in 1997.
Mr. Watts' employment agreement provides for annual adjustments to a base salary
for changes in the cost of living.
ANNUAL INCENTIVE AWARDS
Annual incentive awards are designed to reward personal contributions to
the success of the organization. In conjunction with the approval of the
Company's annual operating plan by Mr. Watts, the President and Chief Executive
Officer of the Company, performance goals are established for individual
officers based on aspects of Company performance related to the particular
officers' responsibilities and in some cases, on individual achievements. These
goals are reviewed and approved by the Compensation Committee early in each
fiscal year. At the end of the year, the Committee evaluates actual performance
and awards incentive compensation in the form of cash bonuses (or, in some
cases, stock options) based on the achievement of the performance goals.
Incentive awards to the President and Chief Executive Officer, the Chairman and
the other three most highly compensated executive officers are shown in the
"Bonus" column of the Summary Compensation Table, which follows this report.
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.
7
<PAGE> 10
The first step is that the Committee has established a minimum stockholding
requirement for members of senior management. All officers of the Company must
own common stock of the Company equal to one times their annual salary. If the
officer's holdings are less than the minimum requirement then any cash bonuses
otherwise paid to him or her shall 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 Committee the opportunity to purchase Company stock at a
discount and to leverage that purchase with a matching loan financed by the
Company which is used to purchase additional shares. This plan enables
participants to stand alongside shareholders in both risk and reward. 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
shareowners 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 recipients' position, grade
level and performance during the previous year, with participants of higher
positions and grade levels being eligible to receive more options than those of
lower positions and grade levels. The determination as to the size of stock
option grants to executive officers, including Mr. Watts, reflect the subjective
judgment of the 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.
In September 1998 the Board of Directors 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 of Directors 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 the
Common Stock on the date of adjustment was $13.50 per share.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation paid to Mr. Watts as President and Chief Executive Officer
for 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 ended 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 the Company's 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 the Company's 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 the Company's 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.
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 Committee's judgment as to the contribution Mr. Watts has made
to the success of the Company.
COMPENSATION COMMITTEE
Thomas R. Shepherd
David Lucas
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the total amount and long-term compensation of
the Chief Executive Officer and the other four most highly compensated executive
officers of the Company.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
OTHER OPTION
NAME AND ANNUAL SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2)* GRANTED(3) COMPENSATION(4)
------------------ ---- ------ -------- ---------------- ---------- ---------------
<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 1997 222,552 105,500 53,803 160,000 106,323
of Business Development 1996 186,301 6,000 96,029 200,000 99,284
and COO
Edwin J. Kozlowski 1998 283,365 0 29,335 415,000 39,657
Executive Vice 1997 240,000 60,000 46,303 160,000 127,131
President & CFO 1996 227,000 28,000 115,636 195,000 19,608
John A. DiCecco 1998 220,019 123,615 29,839 227,500 19,273
Senior Vice President 1997 190,179 121,115 6,318 62,500 60,630
-- Logistics/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,
respectively, $78,048, $62,303 and $76,402 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. See also the Ten Year Option Repricing Table.
(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 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 the 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,
9
<PAGE> 12
$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 executives
stock purchases 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 above 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, $245,000; 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 in the amount of $486,000 made in connection with
the amendment of his employment agreement.
OPTIONS GRANTS IN 1998
Information concerning 1998 grants to the President and Chief Executive
Officer and the other four most highly compensated executive officers is
provided below.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES OF
------------------------------------ STOCK
% OF TOTAL PRICE APPRECIATION FOR
OPTIONS OPTIONS EXERCISE OR OPTION TERM(3)
GRANTED GRANTED TO BASE PRICE EXPIRATION -----------------------------
NAME (#)(1) EMPLOYEES ($/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
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>
10
<PAGE> 13
- ---------
(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 $13.50 per share. See
also the Ten Year Option Repricing Table.
(3) The dollar amounts under these columns are the results of calculations at
assumed rates of appreciation of 5% and 10% by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. No gain to the
optionees is possible without an increase in price of the Common Stock,
which will benefit all shareholders proportionately.
AGGREGATED OPTION EXERCISES AND VALUES AT FISCAL YEAR-END
The following information is furnished for the fiscal year ended February
6, 1999 with respect to the stock options held by the Company's President and
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company and its subsidiaries.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JANUARY 30, 1998 JANUARY 30, 1998(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) 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 the 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 $15.50 for shares
granted under the 1996 stock option plan.
11
<PAGE> 14
TEN YEAR OPTION REPRICING TABLE
The following information is furnished with respect to the repricing of
stock options held by the Company's executive officers.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK EXERCISE PRICE REMAINING AT
OPTIONS AT TIME OF AT TIME OF DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) 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 9/11/98 20,000 13.50 19.375 17.50 7 yrs. 4 mo.
President of 9/11/98 40,000 13.50 18.60 17.50 8 yrs. 3 mo.
Business 9/11/98 40,000 13.50 22.32 17.50 8 yrs. 9 mo.
Development 9/11/98 40,000 13.50 26.78 17.50 8 yrs. 10 mo.
and COO 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 4/25/92 16,000 1.25 2.50 1.25 7 yrs. 8 mo.
President & CFO 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>
12
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK EXERCISE PRICE REMAINING AT
OPTIONS AT TIME OF AT TIME OF DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) 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 4/25/92 16,000 1.25 2.50 1.25 7 yrs. 8 mo.
President 4/25/92 2,672 1.25 2.50 1.25 8 yrs. 2 mo.
--Logistics/Mfg. 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 4/25/92 2,000 1.25 2.50 1.25 8 yrs. 6 mo.
President and 4/25/92 624 1.25 2.50 1.25 8 yrs. 11 mo.
General Manager 4/25/92 16,000 1.25 2.50 1.25 9 yrs. 4 mo.
of GNC 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 4/25/92 40,000 1.25 2.50 1.25 7 yrs. 8 mo.
of GNC 4/25/92 444 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>
13
<PAGE> 16
EMPLOYMENT AGREEMENTS
All officers of the Company, GNI and GNC serve at the discretion of the
Board of Directors. GNI has entered into employment agreements dated as of March
24, 1989 with each of Messrs. Horn and Watts. The employment agreements were
amended and restated on June 16, 1997 and further amended on January 23, 1998.
The agreements as amended provide as follows. 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. 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 their respective employment
agreements, each of Messrs. Jerry Horn and Watts is required to maintain the
confidentiality of GNI information for two years following the termination of
his employment, and is entitled to certain other benefits and reimbursement of
expenses and to participate in the Company's stock option plans.
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.
In addition, the Board of Directors of the Company and its subsidiaries
have authorized all vice presidents and above, including the named executive
officers, to receive one times their salary as a bonus in the event of a "change
in control," as defined.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Messrs. Lucas and Shepherd served as members of the Compensation Committee
during fiscal 1999. None of the named individuals were officers or employees of
the Company or any of its subsidiaries during fiscal 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994 the Company acquired all of the outstanding Common Stock of Nature
Food Centres, Inc. ("NFC") for approximately $59.4 million. Ronald L. Rossetti,
President and Chief Executive Officer of NFC, received in the transaction
approximately $28 million for his NFC Common Stock and $2,323,000 in
consideration of the termination of various contractual relationships between
Mr. Rossetti and NFC. In addition, the Company entered into a consulting and
non-competition agreement with Mr. Rossetti pursuant to which, for a three-year
period ending in September 1997, Mr. Rossetti has agreed to serve as a
consultant to the Company's subsidiary, NFC, in consideration of a consulting
fee of approximately $176,000 per year; and pursuant to which, for a six year
period ending in September 2000, Mr. Rossetti has agreed not to compete with the
Company in consideration of an aggregate fee of $900,000, payable in seventy-two
equal installments of $12,500 per month. In addition, the consulting agreement
provided that Mr. Rossetti would be entitled to serve as a member of the Board
of Directors of the Company for three years following the transaction and be
entitled to participate, as an independent director, in the 1994 Stock Option
Plan for Non-Employee Directors established by the Company. Mr. Rossetti became
a director of the Company in September 1994 and received an option covering
20,000 shares of the Company's Common Stock pursuant to the 1994 Stock Option
Plan for Non-Employee Directors at an exercise price of $11.46875 per share, the
market price on the date of grant.
14
<PAGE> 17
PERFORMANCE GRAPH
The graph set forth below compares the change in the Company's cumulative
total shareholder return on the Common Stock (as measured by dividing the
difference between the Company's share price at the end and the beginning of the
period indicated by the share price at the beginning of the period indicated)
with the cumulative total return of the NASDAQ Composite Market Index and the
Dow Jones World Industry Groups U.S. Specialty Retailers Index for the period
commencing with the Company's initial public offering on January 21, 1993. The
graph assumes $100 was invested on January 21, 1993 in the Company's Common
Stock and in the indexes and also assumes the reinvestment of dividends.
<TABLE>
<CAPTION>
GENERAL NUTRITION DOW JONES U.S. 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>
The Board of Directors and its Compensation Committee recognize that the
market price of stock is influenced by many factors, only one of which is
Company performance. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP and predecessor firms have served
continuously since 1964 as independent auditors of the Company and has been
appointed by the Board of Directors as the Company's independent auditors to
audit the financial statements of the Company for the fiscal year ending
February 5, 2000. Although the appointment of independent auditors is not
required to be approved by the stockholders, the Board of Directors believes
stockholders should participate in making the appointment by voting on the
subject. If the stockholders do not ratify the appointment of Deloitte & Touche
LLP, the selection of auditors will be reconsidered by the Board of Directors.
Representatives of that firm will be present at the Annual Meeting, where they
will be available to respond to appropriate questions and will also have the
opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
15
<PAGE> 18
STOCKHOLDER PROPOSALS AND OTHER MATTERS
The Company's next Annual Meeting will be held on June 29, 2000. An
eligible stockholder who desires to have a qualified proposal considered for
inclusion in the proxy statement for that meeting must notify the Secretary of
the terms and content of the proposal no later than January 24, 2000.
The Company's By-Laws outline procedures, including minimum notice
provisions, for stockholder nomination of directors and other stockholder
business to be brought before stockholders at the Annual Meeting. A copy of the
pertinent By-Laws provisions is available on request to James M. Sander,
Secretary, General Nutrition Companies, Inc., 300 Sixth Avenue, Pittsburgh,
Pennsylvania 15222.
SOLICITATION AND EXPENSES OF SOLICITATION
The enclosed proxy is solicited by the Board of Directors of the Company.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegram by officers or employees of the Company. The Company does not expect to
pay any compensation for the solicitation of proxies, but under arrangements
made with brokers, custodians, nominees and fiduciaries to send proxy material
to the beneficial owners of shares held by them, the Company may reimburse them
for their expenses in so doing.
ANNUAL REPORT AND FORM 10-K
The Annual Report on Form 10-K of the Company for the fiscal year ended
February 6, 1999, was mailed to the stockholders together with this Proxy
Statement.
Upon written request by any shareholder entitled to vote at the 1999 Annual
Meeting, the Company will furnish that person without charge a copy of the Form
10-K Annual Report for the fiscal year ended February 6, 1999, which it filed
with the Securities and Exchange Commission, including financial statements and
schedules. If the person requesting the report was not a shareholder of record
on May 5, 1999, the request must contain a good faith representation that the
person making the request was a beneficial owner of Company Common Stock at the
close of business on that date. Requests should be addressed to James M. Sander,
Secretary, General Nutrition Companies, Inc., 300 Sixth Avenue, Pittsburgh,
Pennsylvania 15222.
The foregoing notice and proxy statement are sent by order of the Board of
Directors.
/s/ JAMES M. SANDER
JAMES M. SANDER
Vice President -- Law,
Chief Legal Officer and Secretary
May 21, 1999
16
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
[ ]
1. ELECTION OF TWO CLASS III DIRECTORS FOR all nominees [ X ] WITHHOLD AUTHORITY * EXCEPTIONS [ X ]
to the Board of Directors, each for three- listed below to vote for all
year term expiring in 2002. (except as marked nominees listed below.
to the contrary)
Nominees: Jerry D. Horn and Thomas R. Shepherd
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions ____________________________________________________________________________________________________________
2. To ratify the appointment of Deloitte & Touche LLP as independent auditors 3. Transaction of such other business as
of the Company for the fiscal year ending February 5, 2000. may properly come before the meeting
or any adjournment thereof.
FOR [ X ] AGAINST [ X ] ABSTAIN [ X ]
Change of Address and
or comments Mark Here [ X ]
When signing as attorney, executor, administrator,
trustee, guardian, custodian, or the like, give
title as such. If the signer is a corporation sign
in the corporation name by a duly authorized
officer.
Dated:_____________________________________
___________________________________________
Signature
___________________________________________
Signature
VOTES MUST BE INDICATED
PLEASE RETURN PROMPTLY IN THE ENCLOSED ENVELOPE (X) IN BLACK OR BLUE INK. [ ]
WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.A.
</TABLE>
<PAGE> 20
GENERAL NUTRITION COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GENERAL NUTRITION COMPANIES, INC.
The undersigned holder of General Nutrition Companies, Inc. Common Stock hereby
constitutes and appoints Edwin J. Kozlowski, David R. Heilman and Eileen D.
Scott, or any one of them with full power of substitution, as attorneys and
proxies for the undersigned to appear and vote all of the shares of Common Stock
of General Nutrition Companies, Inc. (the "Company") standing on the books of
the Company in the name of the undersigned at the 1999 Annual Meeting of
Stockholders of the Company to be held in the Westmoreland Room at the
DoubleTree Hotel Pittsburgh, 1000 Penn Avenue, Pittsburgh, Pennsylvania on June
24, 1999 at 10:00 a.m. Eastern Daylignt Time, and at any adjournments of said
Annual Meeting. A majority of said attorneys and proxies as shall be present and
voting (or if only one shall be present and voting, then that one) in person or
by substitutes or substitutes at said meeting or any adjournment thereof, shall
have and may exercise all of the powers of such said attorneys and proxies
hereunder. The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement dated May 21, 1999 and instructs its attorneys
and proxies to vote as set forth on the Proxy. The undersigned stockholder may
revoke this proxy at any time before it is voted by delivering to the Secretary
of the Company either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
Additional Voting instructions for Certain GNCI Employees: To the extent the
undersigned is a participant in the General Nutrition Companies, Inc. 1993
Employee Stock Purchase Plan, the undersigned hereby instructs The Board of
Directors, as Trustee (i) to vote the shares of Common Stock allocated to my
Stock Purchase Plan account in accordance with the following direction and (ii)
to grant a proxy to the proxies nominated by the Company's Board of Directors
authorizing them to vote in their discretion upon such other matters as may
properly come before the meeting.
The undersigned hereby ratifies and confirms all that each of the proxies
and/or The Board of Trustees may lawfully do in the premises, and hereby
revokes all proxies (or voting instructions in the case of Plan shares)
previously given by the undersigned to vote at the Annual Meeting and at any
adjournments or postponements thereof. The undersigned acknowledges receipt of
the notice of and the proxy statement for the Annual Meeting and instructs its
attorneys and proxies to vote as set forth on this Proxy.
GENERAL NUTRITION COMPANIES, INC.
P.O. BOX 11404
NEW YORK, N.Y. 10203-0404
(Continued and to be marked, dated and signed on reverse side)
