Plaintiffs, by their attorneys, make the following allegations upon information and belief (except as to the allegations which pertain to the named plaintiffs and their counsel) based upon a review and analysis of relevant filings made with the Securities and Exchange Commission ("SEC"), press releases, reports of securities analysts, press reports and an investigation conducted by and through plaintiffs' counsel. Plaintiffs believe that further substantial evidentiary support will exist for the allegations set forth below after a reasonable opportunity for discovery.

1. This is a class action which arises out of material misrepresentations and omissions of fact made beginning, and in connection with, the sale on February 7, 1996, of 17,994,176 shares of General Nutrition Companies, Inc. ("GNC" or "General Nutrition" or the "Company") common stock in a public offering (the "Public offering") for $21.50 per share, or total proceeds of $386,874,784.00.

2. Defendants Thomas H. Lee Equity Partners, L.P. and ML-Lee Acquisition Fund, L.P. (hereinafter collectively referred to as the "Lee Investment Partnerships"), investment partnerships which are controlled by, among others, defendants Thomas H. Lee ("Lee") and Thomas R. Shepherd ("Shepherd"), both of whom are members of GNC's Board of Directors, sold a total of 14,310,790 shares of GNC in the Public Offering. Lee, acting through State Street Bank and Trust Company, as Trustee for The 1989 Thomas H. Lee Nominee Trust (the "Lee Trust"), also sold 1,368,002 shares of GNC in the Public Offering, Shepherd sold 87,686 shares of GNC for his own account in the Public Offering and other associates of Lee also made substantial sales of GNC common stock in the Public Offering. As a result, after completion of the Public Offering, the Lee Investment Partnerships, the Lee Trust, and Shepherd received net proceeds of more than $300,000,000.00 and no longer owned a single share of GNC stock.

3. GNC sold 1,635,834 shares of the Company's common stock in the Public Offering pursuant to an overallotment option it granted to the underwriters of the Public Offering and the Company thereby received net proceeds of $33,939,466.00 and the underwriters generated substantial profits by reselling those shares of GNC common stock to members of the investing public.

4. In addition, less than one month after completion of the Public Offering, starting on March 4, 1996, and ending on March 6, 1996, defendants Jerry D. Horn, William E. Watts and Louis Mancini, each of whom were senior executives and/or directors of GNC, sold substantial amounts of GNC stock to members of the investing public at prices ranging from $22.94 per share to $23.88 per share, reaping total proceeds of more than $6,800,000.00 (the "Insider Sales").

5. As alleged in detail below, plaintiffs and other members of the investing public purchased General Nutrition common stock at artificially inflated prices which were artificially inflated by defendants, failure to disclose material adverse facts concerning GNC's operations. When the truth was finally disclosed after the close of trading on May 28, 1996, the Company's stock declined precipitously to trade at $14.00 per share, or more than one-third less than the price of $21.50 per share those shares were sold for in the Public Offering.

6. As a result, plaintiffs and other members of the Class have suffered damages and brought this action in order to seek a remedy and obtain compensation for their damages.

7. The claims asserted herein arise pursuant to Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the "Securities Act") [15 U.S.C. §§ 77k, 771(a)(2) and 77o], Sections 10(b), 20(a) and 2OA(a) [15 U.S.C. §§ 78j(b), 78t(a) and 78tA(a)] of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder by the SEC, 70 P.S. § 1-501, and principles of common law.

8. This Court has jurisdiction of this action pursuant to Section 22 of the Securities Act [15 U.S.C. § 77v], Section 27 of the Exchange Act [15 U.S.C. §§ 78aa], and 28 U.S.C. §§ 1331 and 1337.

9. Venue is properly laid in this District because the acts performed in furtherance of the transactions complained of in this action, including preparation, issuance and dissemination of materially false and misleading information to the investing public, occurred in substantial part in this District. In addition, GNC, the issuer, maintains its principal places of business in this District.

10. In connection with the acts, conduct, combination and conspiracy alleged in this Complaint, defendants, directly or indirectly, used the mails and the means and instrumentalities of interstate commerce, including telephonic communications and the facilities of the National Association of Securities Dealers National Market System ("NASDAQ-NMS"), a national securities exchange.

Plaintiffs

11. (a) Plaintiff Steven Klein purchased 1,000 shares of GNC common stock on February 7, 1996 at $21.50 per share through an account he maintained at Smith Barney, Inc. ("Smith Barney"), one of the co-lead underwriters for the Public Offering. The shares of GNC which plaintiff Steven Klein purchased were issued pursuant to, or traceable to, the Public Offering. In addition, plaintiff Steven Klein was legally entitled to, and did, receive a copy of the Prospectus in connection with his purchase of GNC common stock in the Public Offering.

(b) Plaintiff Warren Brandwine purchased 320 shares of GNC common stock on March 5, 1996, at $23.50 per share contemporaneously with the sale of General Nutrition stock by certain directors and/or senior executives of GNC. Plaintiff Warren Brandwine also purchased an additional 300 shares of General Nutrition common stock on April 19, 1996, at $19.625 per share.

GNC

12. GNC is incorporated under the laws of the State of Delaware and maintains its principal office at 921 Penn Avenue, Pittsburgh, Pennsylvania 15222. The Company operates a nationwide chain of health food stores and manufactures many of the products sold in those stores. As reported in the Company's Form 10-K dated on or about April 29, 1996, GNC's products are sold through a network of 2,543 retail stores operating under the names of General Nutrition Centers and Nature Food Centers, of which approximately 1,584 are owned and operated by GNC and 959 are franchised, and all but 1111 of which are located in the United States.

Officer Defendants

13. (a) The Officer Defendants served, at times relevant to the claims set forth herein, as directors and/or as senior officers of GNC in the positions set forth opposite their names as follows:

Name	Position
Jerry D. Horn ("Horn")	Chairman of the Board of Directors
William E. Watts ("Watts")	President, Chief Executive Officer and Director
Luis Mancini ("Mancini")	President of General Nutrition Corporation, the Company's retail arm, Senior Vice President of Production and General Manager
Edwin J. Kozlowski ("Kozlowski")	Senior Vice President, Chief Financial Officer and Treasurer

(b) Horn, Watts and Kozlowski individually signed the Registration Statement and GNC's Form 10-K for the fiscal year ended February 3, 1996. Additionally, Horn, Watts and Mancini sold a substantial quantity of GNC common stock in March 1996 (as alleged in greater detail in ¶ 78 below).

The Lee Defendants

14. Defendant Thomas H. Lee Equity Partners, L.P. (the "Lee Equity Fund"), is a limited partnership located at 75 State Street, Boston, Massachusetts 02109, and, in the Public Offering, sold all 9,407,046 shares of GNC stock it owned.

15. Defendant ML-Lee Acquisition Fund, L.P. (the "ML- Lee Fund"), is a limited partnership located at 75 State Street, Boston, Massachusetts 02109, and, in the Public Offering, sold all 4,903,764 shares of GNC stock it owned.

16. Defendant State Street Bank and Trust Company of Connecticut, N.A., as Trustee for the 1989 Thomas H. Lee Nominee Trust (hereinafter referred to as the "Lee Trust"), is a trust which, in the Public Offering, sold all 1,368,002 shares of GNC stock it owned. State Street Bank and Trust Company of Connecticut, N.A. has disclaimed beneficial ownership of the securities held by the Lee Trust and defendant Lee is the beneficiary of the Lee Trust.

17. (a) Defendant Thomas H. Lee ("Lee,,) was, at all relevant times, a member of the Board of Directors of GNC. Lee signed the Registration Statement and GNC's Form 10-K for the fiscal year ended February 3, 1996.

(b) Lee is the beneficiary of the Lee Trust and, directly or indirectly, controlled or had the power to control the actions of the Lee Trust in selling GNC common stock in the Public Offering. In addition, through a series of corporate, partnership and/or trust entities, including, without limitation, Thomas H. Lee Company ("THL Co."), Thomas H. Lee Advisors I, THL Equity Advisors Limited Partnership, and THL Equity Trust, Lee, at all relevant times, controlled or had the power to control directly or indirectly the actions of both the Lee Equity Fund and the ML-Lee Fund and reaped substantial financial benefits from the profits those entities earned from the sale of GNC common stock in the Public Offering. Also, Lee has an interest in or directly or indirectly controls both The Stephen Zachary Lee 1988 Irrevocable Trust and the Robert Schiff Lee 1980 Irrevocable Trust, each of which sold 11,310 shares of GNC common stock in the Public Offering.

18. (a) Defendant Thomas R. Shepherd ("Shepherd") was, at all relevant times, a member of the Board of Directors of GNC. Shepherd signed the Registration Statement and GNC's Form 10-K for the fiscal year ended February 3, 1996. Shepherd, in the Public Offering, sold all 87,686 shares of GNC stock he owned.

(b) Shepherd is a managing director of THL Co. and through a series of corporate and partnership entities, controlled or had the power to control directly or indirectly the actions of defendants the Lee Equity Fund and the ML-Lee Fund and reaped substantial financial benefits from the profits those entities earned from the sale of GNC stock in the Public Offering.

19. (a) Defendant John W. Childs ("Childs") is a trustee of THL Equity Trust and/or a senior executive of THL Co. and through those relationships controlled or had the power to control directly or indirectly the actions of defendants Lee Equity and ML-Lee Fund.

(b) Childs sold 144,200 shares of GNC common stock in the Public Offering. In addition, trusts which Childs directly or indirectly controls or has an interest in sold GNC common stock in the Public Offering as follows: John W. Childs Charitable Remainder Unitrust U/A dated 11/10/94 sold 28,698 shares of GNC common stock in the Public Offering; JWC Charitable Remainder Trust FBO James E. Childs sold 3,900 shares of GNC common stock in the Public Offering; JWC Charitable Remainder Trust FBO Richard S. Childs sold 3,900 shares of GNC common stock in the Public Offering; and JWC Charitable Remainder Trust FBO Jerry C. Preston sold 3,900 shares of GNC common stock in the Public Offering. Childs also reaped substantial financial benefits from the profits which the Lee Equity Fund and/or ML-Lee Fund earned by selling GNC common stock in the Public Offering.

20. (a) Defendant David V. Harkins ("Harkins") is a trustee of THL Equity Trust and/or a senior executive of THL Co. and through those entities controlled or had the power to control directly or indirectly the actions of defendants Lee Equity Fund and ML-Lee Fund.

(b) Defendant Harkins sold 72,084 shares of GNC common stock in the Public Offering... In addition, Harkins reaped substantial financial benefits from the profits which Lee Equity Fund and ML-Lee Fund earned by selling GNC common stock in the Public Offering.

21. (a) Defendant Anthony J. DiNovi ("DiNovi") is a managing director of THL Co. and through that and other relationships controlled or had the power to control directly or indirectly the actions of defendants Lee Equity Fund and ML-Lee Fund.

(b)DiNovi sold 21,296 shares of GNC common stock in the Public Offering. In addition, DiNovi reaped substantial financial benefits from the profits which Lee Equity Fund and MLLee Fund earned from the sale of GNC common stock in the Public Offering.

22. Defendants Lee Equity Fund, ML-Lee Fund, Lee, Shepherd, Childs, Harkins and DiNovi are hereinafter collectively referred to as the "Lee Defendants." The Lee Defendants acted as a unit in selling and/or soliciting the sale of their shares of GNC common stock in the Public Offering.

The Underwriter Defendants

23. Defendant Morgan Stanley & Co. Incorporated ("Morgan Stanley") acted as one of the co-lead underwriters in connection with the Public Offering. Morgan Stanley together with Morgan Stanley & Co. International Limited, which is a subsidiary or affiliate of Morgan Stanley, purchased 2,261,674 shares of GNC common stock which it in turn sold to members of the investing public in connection with the Public Offering.

24. Defendant Alex. Brown & Sons Incorporated ("Alex Brown") acted as one of the co-lead underwriters in connection with the Public Offering. Alex Brown together with Alex. Brown & Sons International, a subsidiary or affiliate of Alex Brown, purchased 2,261,674 shares of GNC common stock which it in turn sold to members of the investing public in connection with the Public Offering, thus earning profits.

25. Defendant Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") acted as one of the co-lead underwriters in connection with the Public Offering. DLJ purchased 2,261,674 shares of GNC common stock which it in turn sold to members of the investing public in connection with the Public Offering, thus earning profits.

26. Defendant PaineWebber Incorporated ("PaineWebber") acted as one of the co-lead underwriters in connection with the Public Offering. PaineWebber together with PaineWebber International (U.K.) Ltd., a subsidiary or affiliate of PaineWebber, purchased 2,261,674 shares of GNC common stock which it in turn sold to members of the investing public in connection with the Public Offering, thus earning profits.

27. Defendant Smith Barney, Inc. ("Smith Barney") acted as one of the co-lead underwriters in connection with the Public Offering. Smith Barney purchased 2,261,674 shares of GNC common stock which it in turn sold to members of the investing public in connection with the Public Offering, thus earning profits.

28. Morgan Stanley, Alex Brown, DLJ, PaineWebber and Smith Barney are hereinafter collectively referred to as the "Underwriter Defendants." The Underwriter Defendants substantially participated in the commission of the wrongs alleged herein through their involvement in the Public Offering of GNC's common stock. The Underwriter Defendants were at all relevant times entities engaged in the business of investment banking, underwriting and selling securities to the investing public. The Underwriter Defendants were the lead underwriters for the Public Offering, for which they received large fees and an overallotment option, which they exercised, to purchase 1,635,834 additional shares of GNC common stock in connection with the Public Offering at approximately $20.7475 per share which they were then free to sell to members of the investing public. In addition, each of the Underwriter Defendants acted as a market maker for GNC's common stock on the NASDAQ-NMS and thereby earned additional substantial revenues and profits. Prior to the Public Offering, the Underwriter Defendants conducted or were required to conduct an investigation into the business, operations, prospects, financial condition and accounting and management control systems of GNC, known as a "due diligence investigation." In the course of such investigation, had it been properly conducted, the Underwriter Defendants would have obtained knowledge of the facts alleged herein (if they did not, in fact, have such knowledge). At all relevant times herein, the Underwriter Defendants had a duty to disseminate promptly truthful and accurate information with respect to GNC and its operations.

29. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a class (the "Class") consisting of all persons who purchased GNC common stock during the period from February 7, 1996, through May 28, 1996, inclusive (the "Class Period"). In addition, plaintiff Steven Klein brings this action on behalf of a subclass consisting of all persons who purchased GNC common stock issued pursuant or traceable to the Public Offering (the "Offering Subclass") and plaintiff Warren Brandwine brings this action on behalf of a subclass consisting of all persons who purchased GNC common stock contemporaneously with the sales of such stock by defendants Horn, Watts and Mancini (the "Insider Trading Subclass"). Excluded from the Class, the Offering Subclass and the Insider Trading Subclass are the defendants, members of their immediate families, any person, firm, trust, corporation, officer, director or other individual or entity in which any defendant has a controlling interest or which is related to or-affiliated with any of the defendants, and the legal representatives, heirs, successors-in-interest or assigns of any such excluded party.

30. The members of the Class are so numerous that joinder of all members is impracticable. As of April 26, 1996, GNC reported that it had 89,992,213 shares of common stock outstanding of which 17,994,176 shares were sold in connection with the Public Offering and of which more than 300,000 shares were sold by defendants Horn, Watts and Mancini between March 4, 1996, and March 6, 1996. Throughout the Class Period, shares of GNC common stock were traded on the NASDAQ-NMS. The precise number of members in the Class, the Offering Subclass and the Insider Trading Subclass is not yet known but is believed to number in the hundreds or thousands.

31. Plaintiffs will fairly and adequately represent and protect the interests of the members of the Class, plaintiff Steven Klein will fairly and adequately represent and protect the interests of the Offering Subclass and plaintiff Warren Brandwine will fairly and adequately represent the interests of the Insider Trading Subclass. Plaintiffs have retained competent counsel experienced in class action litigation under the federal securities laws and intend to prosecute this action vigorously.

32. Plaintiffs' claims are typical of the other Class members, claims because all their damages arise from, and were caused by, the same materially false and misleading statements. Plaintiffs do not have interests antagonistic to, or in conflict with, the Class, the Offering Subclass and the Insider Trading Subclass.

33. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Since the damages suffered by individual members of the Class, the Offering Subclass and the Insider Trading Subclass may be relatively small, the expense and burden of individual litigation-make it virtually impossible for the Class members to seek redress for the wrongful conduct alleged. Plaintiffs do not know of any difficulty which will be encountered in the management of this litigation which would preclude its maintenance as a class action.

34. Common questions of law and fact exist as to all Class members and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

(a) Whether the federal securities laws were violated by defendants' acts as alleged herein;

(b) Whether the statements made the Prospectus were materially false or misleading;

(c) Whether defendants participated directly or indirectly in the course of conduct complained of herein;

(d) Whether the documents, filings, releases and statements disseminated to the investing public omitted and/or misrepresented material facts about the business, markets, financial condition and future business prospects of the Company;

(e) With respect to the claims brought under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, whether defendants acted willfully, knowingly or recklessly in omitting to state and/or misrepresenting material facts;

(f) With respect to the claims brought under Sections 10(b) and 20(a) of the Exchange Act, whether the market prices of the Company's common stock during the Class Period were artificially inflated due to the material non-disclosures and/or misrepresentations complained of herein; and

(g) The extent of injuries sustained by the members of the Class and the appropriate measure of damages.

35. The names and addresses of the record purchasers of shares of GNC's common stock purchased during the Class Period are available from GNC, its agents, and the underwriters who distributed GNC's stock in the Public Offering. Notice can be provided to such record owners by a combination of published notice and first-class mail using techniques and a form of notice similar to those customarily used in class actions arising under the federal securities laws.

36. At all relevant times, the market for GNC common stock was an efficient market for the following reasons, among others:

(a) GNC common stock met the requirements for listing, and was listed and actively traded, on the NASDAQ National Market System, a highly efficient and automated market;

(b) As a regulated issuer, GNC filed periodic public reports with the SEC and the NASD;

(c) GNC regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide ranging public disclosures, such as communications with the financial press, Dow Jones and other similar reporting services; and

(d) GNC stock was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace. Among the securities firms that followed the Company during the Class Period are the Underwriter Defendants and those identified in paragraph 39 herein.

37. As a result, the market for GNC securities promptly digested current information regarding GNC from all publicly-available sources and reflected such information in GNC's stock price. Under these circumstances, all purchasers of GNC securities during the Class Period suffered similar injury through their purchase of securities at artificially inflated prices and a presumption of reliance applies.

38. As described in greater detail below, defendants used communications with securities analysts to promote the Company and to artificially inflate the price of GNC stock during the Class Period.

39. GNC is followed by securities analysts employed by brokerage houses and/or broker/dealers which issue reports and make recommendations concerning GNC's common stock to their clients. Among the several securities firms that followed the Company during the Class Period were Alex Brown, DLJ, Morgan Stanley, PaineWebber, Smith Barney, Bear Stearns & Co., Inc. ("Bear Stearns"), Robertson Stephens & Co. ("Robertson Stephens") and Value Line.

40. In writing their reports, these analysts relied in substantial part upon information provided by the Company, public statements and reports of the Company, information provided to them privately by defendants and assurances by defendants and the Company that information in the analysts' reports did not materially vary from the Company's internal knowledge of its operations and prospects.

41. Defendants used their communications with analysts to assure them that their estimates of GNC's business were accurate and that the Company was on track to achieve strong earnings and growth.

42. Prior to and during the Class Period, it was the Company's practice to have its top officers and key members of its management team, including defendants Watts and Kozlowski, communicate regularly with securities analysts at the firms identified above (and others), on a regular basis, to discuss, among other things, the Company's operating results and anticipated revenues and to provide detailed "guidance" to these analysts with respect to the Company's business and anticipated revenues and earnings. These communications included, but were not limited to, conference calls, meetings, and analyst briefings where defendants discussed relevant aspects of the Company's operations and financial prospects. GNC representatives -- including Watts -- also attended "conferences" sponsored by securities firms in and, throughout the Class Period (including, without limitation, a growth stock conference sponsored by defendant Smith Barney in January 1996) and sponsored "conference calls" with securities analysts and institutional investors in connection with releases of earnings announcements and other major corporate events, among other events and conferences during the Class Period, during which they promoted the Company's stock by disseminating materially misleading information about the Company.

43. Defendants knew that by participating in these regular and periodic direct communications with analysts, the Company could disseminate information to the investment community and that investors would rely and act upon such information (i.e., make purchases and sales of the Company's securities). GNC had these communications with analysts in order to cause or encourage them to issue favorable reports concerning GNC -- which the analysts did -- and defendants used these communications to falsely present the operations and allegedly successful prospects of GNC to the marketplace in order to artificially inflate the market price of GNC's common stock. Despite their duty to do so, defendants failed to correct these statements (of which they were the sources or which they had caused or facilitated) during the Class Period.

44. The investment community and, in turn, investors, relied and acted upon the information communicated in these written reports that repeatedly recommended that investors purchase GNC common stock and touted the purported appreciation prospects of the shares. Defendants manipulated and inflated the market price of GNC stock by falsely presenting to analysts, through regular meetings and during both telephonic and written communications, the prospects of the Company and by failing to disclose the true adverse information about the Company that was known only to them.

General Background

45. General Nutrition Companies is a specialty retailer of vitamin and mineral supplements, sports nutrition products and herbs, and also provides personal care, fitness and other health-related products. There are more than 2,500 GNC stores approximately 60% of which are owned by the Company and the rest of which are owned by franchisees.

46. General Nutrition's common stock traded at a premium to the general stock market (i.e., the average company) based on the perception in the investment community that GNC was a growth company. This perception was fostered, in part, by the seemingly impressive results which the Company reported of having achieved comparable store sales gains of 12.5% through the third fiscal quarter of 1995 after having registered comparable store sales gains of 5.8% in fiscal year 1994 in stores owned by the Company.

47. Comparable store sales is generally defined as sales by stores that have been open at least one year. As described by the Standard & Poor's Industry Survey-Retailing Basic Analysis, it is the most closely watched indicator of a retail company's growth. That is because it more effectively measures a store's success with customers and the popularity of its product offerings and marketing programs.

48. In addition, increasing sales at existing stores allows fixed overhead items such as rent, insurance and executive salaries to be spread over more sales dollars, allowing for increased profitability at the retail outlets. The economies achieved from increased sales are commonly referred to as operating leverage causing reported profits to increase at a faster rate than the rate of sales growth and conversely causing profits to shrink at a faster rate than any sales decline. Thus, for example, the Prospectus reported that while net revenue for fiscal year 1994 increased 23.2%, earnings before interest, taxes and extraordinary items increased 29.0% over the prior year -- a positive spread exactly equal to the 5.8% gain in comparable store sales in the same period. Similarly, while revenues for the thirty-six weeks ended October 14, 1995, increased 30.1%, earnings before interest, taxes and extraordinary items increased 45.1% compared with the same period in 1994 -- a positive spread slightly greater than the reported 12.5% gain in comparable store sales for that period.

49. However, in early 1996, prior to the time of the Public Offering, certain adverse business developments had occurred. Those developments seriously threatened GNC's continued growth but were not disclosed to investors at that time.

50. One of these adverse developments related to free advertising support that GNC, by virtue of its market dominance, had secured from third-party manufacturers to provide for GNC, consisting of advertisements prominently advising that the products were available at GNC stores. These arrangements provided substantial no-cost marketing benefits to GNC and allowed the Company the luxury of not being subject to the scrutiny of the Federal Trade Commission ("FTC") which in the past had brought charges of false advertising against the Company.

51. Cybergenics was one of the key third-party manufacturers providing free advertising support to GNC. The primary product manufactured by Cybergenics in early 1996 was QuickTrim, a diet aid product. Cybergenics had in May 1995 provided heavy advertising support to GNC in connection with the introduction of QuickTrim. The introduction appeared to be a success and resulted in high sales of the product. In addition, the advertising program provided supplemental benefits to GNC of causing those customers to purchase other GNC products and drawing additional customer traffic into GNC stores.

52. In January 1996, Cybergenics started its advertising program anew for QuickTrim. That advertising program, however, was not successful at generating sales because of an apparent lack of consumer satisfaction with the product and/or market saturation. GNC knew of the advertising program and also knew based upon its monitoring of QuickTrim sales at the Company's retail stores that the advertising program was not succeeding. In addition, GNC knew, or must have known that, if sales of QuickTrim did not quickly and rapidly improve, Cybergenics would not have the financial resources necessary to continue the free advertising support it was providing for GNC. In fact, in January 1996, Watts communicated to senior executives at Cybergenics his concern about QuickTrim sales and their potential impact on Cybergenics' financial stability and ability to continue to provide GNC with free advertising support. In March 1996, Cybergenics suspended or substantially reduced its advertising support for GNC, because of the culmination of those trends which existed since at least January 1996, facts which GNC, its officers and directors knew based upon its monitoring of such third party advertising.

53. Other third-party manufacturers of diet products who had provided free advertising support for GNC also decreased or had indicated to the Company that they intended or would be forced to decrease their level of advertising support for products sold in GNC outlets. These vendors included Met-Rx and Kal. Met-Rx, like Cybergenics, was experiencing severe financial difficulties. Kal had already shifted or at least indicated that it intended to shift its distribution strategy in order to emphasize independent health food and nutrition stores.

54. It was axiomatic that this reduced level of advertising would have an adverse impact on the sales of diet category products which were the subject of these promotions. In addition, it was also known by GNC that less advertising mentioning GNC's name was expected to result in lower consumer awareness of GNC, causing lower customer traffic in the Company's stores and an adverse trend in comparable store sales.

55. This decline in advertising support could not have come at a worse time for the Company since at the same time GNC experienced problems relating to adverse publicity for several products it sold. Publicity questioning the safety and/or efficacy of GNC's products was potentially devastating to the Company because more than anything else, GNC sells its products to the health-conscious consumer.

56. One such problem was adverse publicity relating to the use of ephedrine/ma huang which was adversely affecting the sale of the Company's herbal products. The use of those substances was reported to have resulted in actual deaths. As consumer awareness of those matters increased, GNC's sales of herbal products began to show an ever worsening sales trend.

57. Another problem related to findings from two major clinical intervention trials of beta carotene supplements to reduce cancer risks sponsored by the National Cancer Institute ("NCI"), a division of the Department of Health & Human Services. Those findings seriously questioned the efficacy of vitamin A and beta carotene dietary supplements in preventing cancer and other diseases and, even raised the possibility of harm to users of such supplements. On January 18, 1996, NCI issued a release stating in part that:

Investigators conducting the Beta Carotene and Retinol Efficacy Trial (CARET), a large study of the combination of beta carotene and vitamin A as preventive agents for lung cancer in high-risk men and women, terminated the intervention last week after an average of four years of treatment and told the 18,314 participants to stop taking their vitamins. Interim study results indicate that the supplements provide no benefit and may be causing harm.

Investigators in another trial, the Physicians' Health Study, said today that their study of 22,071 U.S. male physicians ended on schedule, Dec. 31, 1995, after more than 12 years of treatment. The study showed no significant evidence of benefit or harm from beta carotene on cancer or cardiovascular disease. (Emphasis added.)

58. As subsequently reported in the March 15, 1996, edition of The Wall Street Journal, after the release of the results of these clinical trials, Watts called major institutional shareholders to reassure them that they would not result in a material adverse impact on GNC's sales. These assurances were also made to several brokerage firms covering GNC's stock and resulted in favorable comments by those firms. Thus, for example, on January 19, 1996, Smith Barney issued an analysts' report which stated that:

Two studies released yesterday (1/18) on beta-carotene produced results negative on the surface and likely in the media treatment to follow, but in fact are irrelevant to GNCI and should cause no material adverse impact, based on recent history. Investors should buy on any weakness. For a narrow group of high risk people, such as heavy smokers and asbestos workers, one study found no cancer prevention benefit; it further found a statistically insignificant increase in cancer incidence, though based on dosages many times those normally consumed or included in products' of GNCI or other retailers. The other study simply found no prevention benefit for heart disease or cancer, but recommended further study to test the preponderance of positive findings from the rest of the literature. Only 0.3% of GNCI retail sales are in pure beta-carotene products.

The Smith Barney report went on to state that "more broadly negative vitamin stories have come out (as in the Money Magazine September 1995 issue) with no measurable impact on [General Nutrition]...."

59. Other brokerage firms after discussing the findings of the NCI studies with GNC issued similarly calming reports to the effect that the findings would not have a material adverse impact on GNC's sales. As a result, the price of GNC's common stock remained stable in the $20 per share range.

60. However, comparing the expected impact of the January 18th release to an article appearing in Money Magazine was deceitful. The NCI had the imprimatur of an agency of the United States government and, as a result, the findings received widespread publicity on television news reports and in major newspapers and magazines. Moreover, the findings suggested that actual harm could result from the use of certain dietary supplements. GNC knew that a less widely publicized study emanating from Finland in or about July 1994 had caused a material decline in GNC's sales.

61. GNC also knew about consumers' likely adverse reaction to these developments. In fact, as subsequently reported in the March 15, 1996, edition of The Wall Street Journal, Watts and other senior executives of the Company sent GNC stores electronic mail through their cash registers with instructions for inquiring customers.

62. Causing further difficulties, a shortage of deodorized distillate, a key ingredient used in the manufacture of natural vitamin E, caused GNC to only be able to manufacture approximately two-thirds of vitamin E based products that it had previously delivered. This shortage inhibited GNC's ability to make or grow sales of those products. In fact, franchisees were informed in February 1996 of an impending shortage of vitamin E-based products.

63. These adverse conditions and trends in GNC's business were further aggravated by the Company's strategy of continuing to rapidly open new GNC stores. Since almost all major retail mall and prime retail locations already had a GNC store, new store openings were being shifted to less desirable strip mall centers and other secondary retail locations. The problem, however, was that new stores were being opened in increasingly close geographic proximity to existing stores and as a result were taking away sales from existing stores. As the rate of new store openings accelerated, this problem grew, causing an ever-worsening trend in comparable store sales with respect to older, established outlets in more premium locations.

64. It was against this background that on January 22, 1996, GNC filed a preliminary registration statement that indicated that the Lee Defendants planned to sell all their GNC common stock. The investing public reacted poorly to the development, taking it as a sign of the Lee Defendants' lack of confidence in GNC's operations and future business prospects. As a result, GNC's stock declined to close at $18.75 per share.

65. In order to assure the success of the Public Offering and the ability of the Lee Defendants to recoup the maximum proceeds from its successful completion, defendants sought to downplay the significance of this development. A report issued by Bear Stearns on January 23, 1996, echoed the party line by stating that, "[t]he timing of this transaction coincides with business opportunities that are available to the Thomas H. Lee Company, rather than any issues related to [General Nutrition]." In truth and in fact, a key factor motivating the Lee Defendants to sell their GNC common stock was that they had been informed by Watts and other senior executives of GNC of the material adverse developments discussed above, or had otherwise become aware of those adverse trends and their impact through inside corporate information.

66. After the filing of the preliminary registration statement, defendants acting either individually or through their agents, continued to foster the view in the investment community that GNC's comparable store sales would grow by approximately 5%-6% in the Company's 1996 fiscal year and conceal the material adverse business developments which GNC was experiencing. Thus, Watts met with members of the investment community at a growth stock conference sponsored by defendant Smith Barney beginning on or about January 23, 1996, and lasting through approximately January 25, 1996, at the Plaza Hotel in New York, and in meetings commonly referred to as "road shows" that GNC held in connection with the Public Offering.

67. As a result of these positive statements, the trading price of GNC's common stock advanced steadily throughout late January 1996, advancing from the closing price of $19.25 per share on January 24, 1996 to the price of $21.50 per share obtained in the Public Offering on February 7, 1996.

Class Period Events

68. On February 6, 1996, the Public Offering was successfully completed pursuant to a prospectus ("Prospectus") which was filed with the SEC as part of a Form S-3 registration statement ("Registration Statement"). Item 11(a) of Form S-3 requires that issuers such as GNC disclose known trends and uncertainties with respect to net sales or revenues or income from continuing operations.

69. The Prospectus failed to disclose the required material information, since at the time of the Public Offering there existed adverse known trends and uncertainties with respect to at least the following matters that were not disclosed:

(i) diet category sales were lagging materially behind expectations;

(ii) advertising support provided by third-party manufacturers was already lagging or expected to soon start declining (with corresponding adverse impacts on customer traffic and sales);

(iii) sales of herbal products were experiencing continued and growing weakness due to consumer concerns relating to the safety of ephedrine/ma huang, a common ingredient in herbal products;

(iv) continued and growing shortages of vitamin E was impairing the Company's ability to sell products containing vitamin E as an ingredient;

(v) the recent findings issued by the NCI was having an adverse impact on GNCI sales; and

(vi) the rapid opening of new GNC stores which was being done in close proximity to existing stores was causing an ever-worsening trend in comparable store sales.

70. In addition to the Prospectus being legally defective for its failure to disclose these material facts, it also made numerous materially false or misleading statements concerning these facts. Thus, the Prospectus made repeated references to the Company's vitamin products, the goal to increase GNC's share of that market and the resultant expected favorable impact on the Company's profitability. These misrepresentations of the Company's state of operations and future business prospects enabled the Public Offering to be successfully completed.

(a) A discussion in the "Prospectus Summary" section of the Prospectus (on page 4) repeated in the "Business" section of the Prospectus (on page 24) stated that:

The Company's marketing emphasizes high margin, value-added vitamin and mineral supplements . . . . The Company believes that it is well-positioned to capitalize on the growing health and self-care markets . . . The Company's strategy is to increase its market share in the vitamin, mineral and supplement market and to leverage this increase to maximize profitability.

(b) In describing the Company's retail products the Prospectus (on page 26) stated that:

Vitamin and Mineral Supplements. For 60 years, vitamin and mineral supplements have represented the core of the Company's product line. The Company sells more than 460 different types of vitamin and mineral supplements, of which approximately 91% are sold under the Company's own brand names and the remainder are sold under the brand names of others. Vitamins and minerals are sold in single vitamin and multivitamin form and in different potency levels. Products are produced in tablets, soft gelatin and hard- shell capsules, and powder forms. The Company has reformulated many of its existing private label products and added new "consumer focused" products to its line of Special Nutritional Formulas ("SNF"). SNF products have unique formulations and/or different delivery systems, packaging designed for target markets and are priced to achieve high margins. The Company places continued emphasis on these high-margin, value-added Special Nutritional Formulas for its vitamin and mineral products sold under GNC brand names.

(c) The Prospectus (on page 8) described GNC's risks in the sale of vitamin and mineral supplements as arising from the fact that:

[T]he Company competes directly with mass merchandisers, drug stores and supermarkets . . . [and] The Company's future performance will be subject to a number of factors beyond its control, including any future economic downturns and any cyclical variations in the retail market for vitamin and mineral supplements . . . .

(d) These statements concerning the Company's vitamin and mineral supplement products were materially false or misleading because they misrepresented or failed to disclose that:

(i) Because of a growing shortage in the raw materials necessary to make the naturally based vitamin E which GNC sold in its stores, the Company was expected to suffer material shortfalls in the amount of products containing vitamin E delivered to and sold in its stores; and

(ii) The findings issued by the NCI on January 18th were causing a discernible trend of lower consumer interest in purchasing the vitamin and other nutritional supplements sold by GNC (which also reduced customer traffic in its store);

71. (a) The Prospectus described a key part of the Company's strategy as being increasing comparable same-store sales (i.e., growth in sales of stores open for one year or more). Thus, the "Prospectus Summary" section of the Prospectus (on pages 4-5) and the "Business" section of the Prospectus (on pages 24-25) stated that:

Comparable Store Sales Gains. The Company believes that it has achieved gains in comparable store sales in both Company-owned and franchised locations through the continued introduction or reformulation of value-added specialty branded products as well as through refinements of its store format. In 1995, the Company introduced more than 150 new or reformulated proprietary branded products and plans to introduce an additional 165 in 1996. The Company has also focused on creating an updated store format that provides consumers with informational displays and signage in an attractive shopping environment. Sales generated by updated stores have shown significant increases when compared to sales of the stores prior to conversion. Sales for those stores in their first twelve months after conversion increased an average of approximately 17.5% compared to the twelve months immediately prior to conversion. The Company has converted 462 Company-owned stores to its current format as of October 14, 1995 and intends to convert an additional 95 stores to this format in 1996. Beginning in 1993, all the Company's new stores have utilized the updated format. Through the combined benefits of product innovation and enhanced store format, the Company achieved comparable store sales gains of 5.8% and 12.5% in 1994 and through the third quarter of 1995, respectively.

(b) That statement was materially false or misleading because it misrepresented or failed to disclose that:

(i) increased advertising support by third- party vendors which had been a material cause of GNC's high comparable same-store sales growth in 1995 was not expected to continue in 1996; and

(ii) the Company's continued opening of new stores in close geographical proximity to existing stores was carusing a cannibalization of sales form the old stores to the new stores causing material adverse trend in store sales which would likely result in an actual decline or a decrease in the rate of growth in comparable store sales, rather than the previously experienced rapid gains in those numbers.

72. (a) In connection with describing GNC's advertising practices, the Prospectus (on page 29) stated that:

[T]he Company derives significant benefits through advertisements that identify GNC stores as a source for the product being advertised but that are paid for entirely by manufacturers and suppliers of such products.

(b) That statement was materially misleading because it failed to disclose that:

(i) two significant manufacturers and suppliers of products, Cybergenics and Met-Rx, were suffering from severe financial distress which had caused (or threatened to cause) those manufacturers to materially decrease or discontinue their previous policy of paying entirely for advertisement of the products they were selling through GNC; and

(ii) Kal, another significant manufacturer and supplier of products to GNC was changing its distribution policy to place a greater focus on independent health food stores.

73. The successful completion of the Public Offering was a financial bonanza for the Lee Defendants. Thomas H. Lee Equity Partners, L.P. sold 9,407,046 shares of GNC common stock for gross proceeds of more than $202,250,000; ML-Lee Acquisition Fund, L.P. sold 4,903,764 shares of GNC common stock for gross proceeds of more than $105,430,000; the Lee Trust sold 1,368,002 shares of GNC common stock for gross proceeds of approximately $29,412,043; Shepherd sold 87,686 shares of GNC common stock for gross proceeds of approximately $1,885,249; Childs sold 144,200 shares of GNC common stock for gross proceeds of approximately $2,991,789.50; Harkins sold 72,084 shares of GNC common stock in the Public Offering for gross proceeds of $1,495,562.79; and DiNovi sold 21,296 shares of GNC common stock in the Public Offering for gross proceeds of approximately $441,838.76.

74. The underwriters for the Public Offering also exercised an option to acquire 1,635,834 shares of GNC common stock from the Company for the purpose of covering any overallotments in connection, with the Public Offering. As a result, GNC received additional net proceeds from the Public Offering after paying for the underwriters' discounts and commissions of $33,939,466.00 and the underwriters earned substantial additional profits from reselling those securities to members of the investing public.

75. On February 28, 1996, defendant Smith Barney added GNC to its emerging growth stock mid-cap focus list. This provided GNC with yet greater exposure to the investing public and helped maintain and increase the trading price of GNC common stock.

76. (a) On March 5, 1996, GNC issued a press release announcing the Company's results for the fiscal year ended February 3, 1996. The press release represented that defendant Watts "attributed the strong gains in profitability in the quarter and year to . . . increased profit margins as the Company continues to shift its mix of products toward its own private label products." In addition, the press release quoted defendant Watts as stating that:

GNC's growth strategy is on track. Our goal is to combine profitability at every level . . . with aggressive expansions in key markets through store openings.

(b) The March 5, 1996, press release was materially false or misleading because it failed to disclose that: (i) the continued shift to a private mix of products was being accompanied by a material decrease in advertising support by third-party manufacturers causing the Company to begin to experience an adverse trend in sales; and (ii) the aggressive expansion through rapid new store openings was resulting in declines in same-store sales caused by the cannibalization of sales of old stores by new stores, causing a declining trend in comparable same-store sales.

(c) In addition, the March 5, 1996, press release was false because the Company's growth strategy was not, in fact, "on track." In reality, and undisclosed to members of the investing public, the Company was experiencing (i) vitamin E raw material shortages, (ii) weakening sales of products containing vitamin A and beta carotene because of the adverse studies issued by the NCI, (iii) weakening herbal sales due to consumer concerns relating to the safety of ephedrine/ma huang, (iv) weakening diet category sales due to a material decrease in advertising support by major third-party vendors and the Company's inability to replace that advertising support, and (v) new stores being opened by GNC were increasingly in close geographic proximity to existing GNC stores, thereby taking away sales from the existing stores and creating a growing adverse trend in same-store sales, i.e., cannibalization.

77. (a) On March 5, 1996, at approximately 10:30 a.m., GNC hosted a conference call with defendants Watts and Kozlowski to discuss the Company's earnings for the fourth quarter and full year of fiscal 1995. In the conference call GNC, Watts and Kozlowski reaffirmed the projection that the Company's comparable same-store sales would grow by 5% to 6% in the first quarter.

(b) Plaintiffs' belief that GNC, Watts and Kozlowski made those statements in the conference call is based upon comments made in analysts, reports following the call which specifically referred to guidance given by GNC management including a report issued by Marcia Aaron and Joseph Grillo of Alex Brown and a report issued by Janet J. Kloppenburg of the Robertson Stephens & Co. brokerage firm which stated that: [t]he [C]ompany remains comfortable with our [first quarter] comp[arable] projection of 5-60% . . . ."

(c) Defendants' statements made in the March 5, 1996, conference call were materially false and misleading because they failed to disclose a material decrease in advertising support by third-party manufacturers, an adverse trend in the sale of herbal products and shortages of naturally based vitamin E. In addition, defendants had actual knowledge that the projection of 5%-6% growth in comparable store sales made in the March 5, 1996, conference call lacked a reasonable basis because of the existence of those adverse trends.

78. The Officer Defendants took advantage of the artificial inflation in the price of GNC common stock price created by the material misrepresentations and omissions of fact in the Prospectus and the March 5, 1996, press release and conference call by making the following substantial open market sales of GNC common stock:

                      SHARES     SHARE
NAME     DATE SOLD     SOLD      PRICE   GROSS PROCEEDS
----     ---------    ------     -----   --------------
Horn      3/06/96     29,988    $23.88   $  715,963.50
Horn      3/06/96     30,012     23.88      716,536.50
Mancini   3/05/96     20,282     23.44      475,410.08
Watts     3/05/96     13,574     23.44      318,174.56
Watts     3/05/96     33,376     23.44      782,333.44
Horn      3/05/96      6,260     23.44      146,734.40
Mancini   3/04/96     11,800     22.94      270,692.00
Mancini   3/04/96     17,600     22.94       43,744.00
Mancini   3/04/96     15,118     22.94      346,806.92
Watts     3/04/96     45,956     22.94    1,054,230.64
Watts     3/04/96     27,808     22.94      637,915.52
Watts     3/04/96     42,860     22.94      983,208.40
Horn      3/04/96     13,740     22.94      315,195.60
         TOTAL       308,374              6,806,945.56

79. On March 14, 1996, the Company issued a press release announcing the opening of its 1,000th franchise. The press release quoted Russell L. Cooper, GNC's franchising senior vice president and general manager as stating that: "We're doing extremely well. The herbal and nutritional supplement market is booming."

80. The March 14, 1996, press release was materially false and misleading because it misrepresented the true state of GNC's business. In reality, and undisclosed to members of the Investing public, the Company was experiencing (i) vitamin E raw material shortages, (ii) weakening sales of products containing vitamin A and beta carotene because of the adverse studies issued by the National Cancer Institute, (iii) weakening herbal sales due to consumer concerns relating to the safety of ephedrine/ma huang, (iv) advertising support previously provided by major third-party manufacturers was not being replaced by any other source and (v) a declining trend in comparable same-store sales due to the rapid opening of new GNC stores in close geographical proximity to existing GNC stores.

81. (a) On or about April 3, 1996, GNC's management communicated with at least the following securities analysts in a meeting arranged by defendant Morgan Stanley: Bruce M. Misset of Morgan Stanley; Dana Telsey of Bear Stearns; Marcia L. Aaron of Alex Brown; and Gary Gilber of Smith Barney.

(b) In that communication, GNC's management disclosed that based upon existing trends, GNC's comparable same-store sales would increase by between 3% and 5%, below the 5% to 6% rate of increase previously projected by GNC management in January 1996 at the Smith Barney Growth Stock Conference. In the communication, GNC continued to represent to those analysts and, by extension the investing public, that GNC would earn $1.00 per share for the fiscal year based upon the representations that: (i) the sales shortfalls were attributable to certain lower margin diet category products whose comparable sales were purportedly running at negative 20% for the quarter, translating into only a 1.5% negative impact to overall retail comparable sales; (ii) a recent acceleration in openings of company-owned stores was making up the difference in the total retail revenue forecast; and (iii) franchising and manufacturing divisions were exceeding original first quarter forecasts.

(c) Plaintiffs' belief that the favorable facts mentioned in the analysts' reports were communicated by GNC to the securities analysts is based upon statements in these reports identifying GNC management as the source. Thus, for example, the Alex Brown report stated that "[m]anagement indicates that margins remain strong, new stores are opening ahead of schedule and manufacturing revenues are showing signs of improvement." (Emphasis added.) Similarly, the Bear Stearns report stated that "[m]anagement has scaled back their same store sales budget to a range of 2%-4%." (Emphasis added.) The report issued by Janet J. Kloppenburg of the Robertson Stephens was quite explicit on the degree of guidance given by GNC management by stating that:

We spoke with the [C]ompany and learned that [1st quarter] comp[arable] growth is trending up approximately 3-5%. . . . Offsetting this somewhat softer growth is the fact that new company-owned stores are opening slightly ahead of schedule. . . . Moreover, the [C]ompany comments that both franchise revenue and manufacturing revenue growth are trending above expectations. (Emphasis added.)

(d) These statements made by GNC were materially false or misleading because the Company's sales shortfall was not only limited to diet category products with relatively low profit margins. Instead, a substantial proportion of the sales shortfall extended into products containing natural vitamin E, herbal products, vitamin A and beta carotene. In addition, the material decline in advertising support by third-party manufacturers of diet category products was causing a decline in consumer awareness of GNC and in other products sold by GNC. These adverse sales trends and the Company's rapid opening of new GNC stores in close geographical proximity to existing GNC stores, which was draining sales away from the existing stores, also caused GNC to have actual knowledge that the projection that GNC would have comparable store sales growth of 2%-4% in the second quarter and that the Company would earn $1.00 per share in the 1996 fiscal year lacked a reasonable basis.

82. (a) On April 15, 1996, GNC issued a press release listing defendant Kozlowski as the contact person which announced that the Company's Board of Directors had authorized up to $100,000,000 to be available to purchase shares of GNC's common stock from time to time in the open market.

(b) This announcement was intended to convey to the investing public GNC's purported confidence in the Company's operations and future business prospects based upon data available from the Company's operations. Thus, Janet J. Kloppenburg of Robertson Stephens stated in a report issued on April 16, 1996, that "this move underscores management's belief in the [C]ompany's growth story and future prospects." Similarly, Dana Telsey of Bear Stearns wrote that the announced share repurchase program "showed a clear sign of confidence in [the Company's] prospects. . . ."

(c) The April 15, 1996, press release was materially misleading because it deceived the investing public into believing that the fundamentals of GNC's business, including trends in its sales were strong when, in fact, those trends particularly in the sale of vitamin E, vitamin A, beta carotene and herbal products were continuing to weaken. In addition, the lack of free advertising support by third-party manufacturers of diet category products threatened to cause a decline in GNC's sales.

83. (a) On or about April 29, 1996, GNC filed its annual report on Form 10-K with the SEC for the fiscal year ended February 3, 1996. The Form 10-K was signed by defendants Watts, Horn, Lee, Shepherd and Kozlowski.

(b) Attached as Exhibit 13.1 to the Form 10-K was the 1995 Annual Report of GNC (the "Annual Report") which was disseminated to existing shareholders of GNC and members of the investing public. The Annual Report contained a letter to GNC's shareholders (the "Letter") which was signed by defendants Horn and Watts.

(c) The Letter stated, among other things, that:

We further expect the worldwide market for dietary supplements to grow substantially, as the same fundamental consumer attitudes that support market growth in the domestic arena will continue to build momentum around the world.

(d) Defendants had actual knowledge that the expectation expressed in the Letter was materially false or misleading because defendants had actual knowledge that it misrepresented or failed to disclose that: (i) the findings released in January 1996 by the NCI were already causing a decline in the demand or the growth in demand for dietary supplements having vitamin A and beta carotene as ingredients and were adversely impacting consumer attitudes towards the efficacy and desirability of paying for and taking vitamin and dietary supplements; (ii) the Company was experiencing an increasingly weakening trend in the sale of herbal products due to public concern about the safety of ephedrine/ma huang which were used as ingredients in many herbal products; and (iii) a shortage in the raw materials used in making or extracting vitamin E was impairing GNC's ability to manufacture and sell products containing vitamin E as an ingredient.

84. (a) In addition, the Letter stated that:

Growth Strategy Over the next three years, the Company plans to continue U.S. expansion by growing its domestic store base to approximately 4,000 stores. With expansion, the Company will also continue to utilize proprietary brands to fuel and protect our market-leading position.

(b) Defendants had actual knowledge that this statement was false because it misrepresented or failed to disclose the facts identified above in paragraph 83(d) and that the market for GNC stores was saturated as demonstrated by the fact known to defendants (but undisclosed to plaintiffs and the investing public) that the opening of new stores in close geographic proximity to existing stores was creating an increasingly adverse trend in comparable same-store sales.

85. (a) On May 13, 1996, GNC issued a press release announcing the Company's results for the first fiscal quarter ended April 27, 1996. The press release quoted defendant Watts as stating that "[o]ur business strategy is on track, as demonstrated by the strength of our retail, franchising and manufacturing segments . . . . "

(b) Discussions which GNC had with securities analysts after the May 13, 1996, press release revealed the existence of vitamin E raw material shortages and weakening herbal sales due to consumer concerns relating to the safety of ephedrine/ma huang were causing a decline in retail sales. Nonetheless, GNC falsely represented that, despite those adverse factors, the Company would still be able to generate substantial growth through increases in comparable same-store sales.

(c) Thus, for example, Bruce M. Misset of Morgan Stanley issued a report stating that "[m]anagement has put a plan in place that they believe will deliver 2.0% comps in the quarter." Similarly, Dana Telsey and Donna M. Leong of the Bear Stearns brokerage firm issued a report stating that GNC was "beefing up its advertising and promotions in order to generate a low single digit same store sale gain . . . ." And, Gary Gilber of Smith Barney attributed the decreasing trend in first quarter comparable sales to reasons which were "largely non-recurring."

(d) Defendants' May 13, 1996, disclosures were materially false and misleading because they misled and failed to inform the investing public of the full impact which those adverse trends were having on GNC's retail sales. In reality and undisclosed to members of the investing public, GNC had actual knowledge that the existing adverse trends described above which the Company was experiencing as well as the rapid opening of new GNC stores in close geographic proximity to existing GNC stores made any expectation that the Company would be able to obtain a 2% increase in comparable same-store sales in the second quarter of 1996 entirely unrealistic and therefore, lacking in any reasonable basis.

The May 28, 1996, Disclosure And The Market's Reaction

86. On May 28, 1996, after the close of trading on the NMS, General Nutrition shocked the investing public by disclosing that it anticipated that comparable same-store sales for Company-owned stores in the second fiscal quarter ended July 20, 1996, would be 3-6% below last year's. The announcement attributed the decline in comparable same-store sales to (i) continued softness in third-party diet products, which were heavily promoted a year ago, (ii) slower growth in the herbal product category which was affected by negative publicity on ephedrine/ma huang, and (iii) a continued shortage of vitamin E, a key ingredient in many of the Company's products.

87. In reaction to this surprise report, in after-hour trading, GNC's stock fell $3.50 per share to $15.00 per share. The next day that was the first full day of market trading following the surprise announcement, GNC's stock continued to decline and closed at $14.00 per share, representing a total decline of $4.50 per share, or more than 20% from its previous closing price of $18.50 per share.

88. Securities analysts also reacted swiftly to the Company's announcement: Alex Brown analyst Marcia Aaron lowered her stock recommendation on GNC to "buy" from "strong buy"; PaineWebber analyst Mark Hanratty downgraded GNC to "neutral" from "attractive"; and Smith Barney analyst Gary Gilber cut his rating on GNC to "underperform" from "buy."

Inapplicability Of Statutory Safe Harbor

89. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the forward-looking statements alleged to be false and misleading in this Complaint. To the extent certain of the statements alleged to be materially false or misleading may be characterized as forward-looking, they were not identified as "forward-looking statements" when made. Also, there was either no statement that actual results "could differ materially from those projected" or there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements accompany those forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any such forward-looking statements, defendants are liable for those false forward-looking statements because, at the time each of those forward-looking statements was made, the speaker knew the forward-looking statement was false and the forward-looking statement was authorized and/or approved by an executive officer or director of GNC who knew that those statements were false when made.

90. Plaintiff Steven Klein repeats and realleges each and every allegation contained in paragraphs 1 through 74 and 89 above.

91. This Count is brought by plaintiff Steven Klein pursuant to Section 11 of the Securities Act, 15 U.S.C. § 77k, on behalf of the Offering Subclass against GNC, Horn, Watts, Kozlowski, Lee and Shepherd and the Underwriter Defendants, and it does not sound in fraud.

92. The Registration Statement, which contained the Prospectus for the Public Offering, was materially inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and concealed and failed adequately to disclose material facts as described above.

93. GNC is the registrant for the shares sold to plaintiff Steven Klein and other members of the Offering Subclass. GNC issued, caused to be issued and participated in the issuance of materially false and misleading written statements to the investing public which were contained in the Registration Statement, which misrepresented or failed to disclose, inter alia, the facts set forth above. As an issuer of the shares, GNC is strictly liable to plaintiff Steven Klein and the Offering Subclass for the material misstatements or omissions.

94. Horn, Watts, Kozlowski, Lee and Shepherd either personally or through an attorney-in-fact signed the Registration Statement for the Public Offering and were directors and/or executive officers of GNC at the time of the Public Offering. As such, Horn, Watts, Kozlowski, Lee and Shepherd were responsible for the contents and dissemination of the Registration Statement and Prospectus and liable to plaintiff Steven Klein and other members of the Offering Subclass.

95. As underwriters of the Public Offering, each of the Underwriter Defendants owed to the purchasers of the shares of GNC, including plaintiff Steven Klein and other members of the Offering Subclass, the duty to make a reasonable and diligent investigation of the statements contained in the Registration Statement and the Prospectus at the time it became effective, to ensure that said statements were true and that there were no omissions to state a material fact required to be stated in order to make the statements contained therein not misleading. The Underwriter Defendants knew, or in the exercise of reasonable care, should have known of the material misstatements and omissions contained in the Registration Statement and the Prospectus as set forth herein. As such, the Underwriter Defendants are liable to plaintiff and other members of the Offering Subclass.

96. All of the defendants named in this Count failed to make a reasonable investigation or possess reasonable grounds for believing that each of the statements contained in the Registration Statement and Prospectus was true, and did not omit any-material facts and was not materially misleading.

97. Plaintiff Steven Klein and other members of the Offering Subclass acquired shares of GNC issued pursuant to, or traceable to, the Registration Statement.

98. Plaintiff Steven Klein and the Offering Subclass have sustained damages. The value of the Company's shares has declined substantially subsequent to and due to defendants' violations.

99. At the times they purchased the Company's shares, plaintiff Steven Klein and other members of the Offering Subclass were without knowledge of the facts concerning the wrongful conduct alleged herein and could not have reasonably discovered those facts. Less than one year elapsed from the time that plaintiff Steven Klein discovered or reasonably could have discovered the facts upon which this complaint is based to the time that plaintiff Steven Klein filed his Complaint. Less than three years elapsed from the time that the securities upon which this Count is brought were bona fide offered to the public to the time plaintiff Steven Klein filed his Complaint.

100. Plaintiff Steven Klein repeats and realleges each and every allegation contained in paragraphs 1 through 74 and 89 above.

101. This Count is brought by plaintiff Steven Klein pursuant to Section 12(a)(2) Of the Securities Act, 15 U.S.C. § 771(a)(2), on behalf of the Offering Subclass against defendants GNC, the Lee Defendants and the Underwriter Defendants, and it does not sound in fraud.

102. The statements identified above were each made in a "prospectus" as that term is defined in Section 2(a)(10) of the Securities Act, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and concealed and failed to disclose material facts. The actions of the defendants named in this Count solicited the sale of shares of GNC common stock in the Public Offering for their personal financial gain. Those actions included participating in the preparation of the materially false and misleading Prospectus and other materials used in the sale of GNC common stock identified above.

103. The defendants named in this Count owed to the purchasers of the Company's shares, including plaintiff Steven Klein and other members of the Offering Subclass, the duty to make a reasonable and diligent investigation of the statements contained in the offering materials and prospectuses to insure that such statements were true and that there was no omission to state a material fact required to be stated in order to make the statements contained therein not materially misleading.

104. The defendants named in this Count sold and/or solicited the sale of the Company's common stock offered pursuant to the Prospectus and Registration Statement for their individual financial gain.

105. The Lee Defendants and the Company solicited the sale of GNC common stock in the Public Offering by, among other things, employing the Underwriter Defendants in order to solicit plaintiff Steven Klein and other members of the Offering Subclass to purchase shares of GNC common stock in the Public Offering: (i) the Lee Defendants paid those brokerage firms $0.7525 per share in discounts and commissions for the GNC common stock sold in the Public Offering with the total amount of such discounts and commissions amounting to more than $12,000,000; and (ii) GNC granted the Underwriter Defendants an option to purchase 1,635,834 shares of the common stock at $20.7475.

106. GNC, the Lee Defendants and the Underwriter Defendants also caused senior executives of GNC including, without limitation, Watts to extol GNC's operations, business strategy and future business prospects and the benefits of purchasing GNC common stock in various road shows and other promotional meetings conducted with members of the investing public prior to the completion of the Public Offering.

107. The individual financial gain which the defendants named in this Count received included the following:

(a) Lee Equity Fund received gross proceeds of more than $202,250,000 from the sale of 9,407,046 shares of GNC stock in the Public Offering;

(b) ML-Lee Fund received gross proceeds of more than $105,430,000 from the sale of 4,903,764 shares of GNC stock in the Public Offering;

(c) Shepherd received net proceeds of approximately $1,885,249 from the sale of 87,686 shares of GNC stock in the Public Offering;

(d) The Lee Trust received net proceeds of approximately $28,412,043 from the sale of 1,368,002 shares of GNC stock in the Public Offering;

(e) Lee is a beneficiary of the Lee Trust and also has an interest or directly or indirectly controls various other trusts which sold 11,310 shares of GNC common stock in the Public Offering;

(f) Childs received net proceeds of approximately $2,991,789.50 from the sale of 144,200 shares of GNC common stock in the Public Offering and trusts which he directly or indirectly controls, received net proceeds of approximately $843,759.33 from the sale of a total of 40,398 shares of GNC common stock in the Public Offering;

(g) Harkins received net proceeds of approximately $1,495,562.79 from the sale of 72,084 shares of GNC common stock in the Public Offering;

(h) DiNovi received net proceeds of approximately $441,838.76 from the sale of 21,296 shares of GNC common stock in the Public Offering.

(i) Lee, Shepherd, Childs, Harkins and DiNovi also received substantial financial benefits from their being compensated, in part, based upon the profits earned by Lee Equity Fund and/or ML-Lee Fund in connection with sale by those entities of GNC common stock in the Public Offering at a substantial profit;

(j) Each of the Underwriter Defendants received more than $1,700,000.00 apiece in underwriting and/or brokerage fees from the successful completion of the Public Offering and an overallotment option exercisable within 30 days of February 7, 1996, to acquire additional shares of GNC common stock at $20.7475 per share; and

(k) GNC received net proceeds of $33,939,466.00 from the exercise of the overallotment option by the Underwriter Defendants successful completion of the Public Offering.

108. Plaintiff Steven Klein and other members of the Offering Subclass purchased or otherwise acquired the Company's common stock pursuant to and traceable to the Prospectus. Plaintiff Steven Klein and other members of the Offering Subclass did not know, or in the exercise of reasonable diligence could not have known, of the untruths and omissions contained in or made in connection with the Prospectus which was filed with the SEC as part of the Registration Statement.

109. Plaintiff Steven Klein and other members of the Offering Subclass have sustained injury and suffered damages.

110. By reason of the conduct alleged herein, the defendants named in this Count violated Section 12(a)(2) of the Securities Act. Accordingly, plaintiff Steven Klein and members of the Offering Subclass who hold the Company's shares have the right to rescind and recover the consideration paid for the Company's shares and hereby elect to rescind and tender their shares of the Company to the defendants sued herein. Plaintiff Steven Klein and the Offering Subclass members who have sold their shares of GNC are entitled to rescissory damages.

111. Less than three years elapsed from the time that the securities upon which this Count is brought were sold to the investing public to the time of the filing of this action. Less than one year elapsed from the time when plaintiff discovered or reasonably could have discovered the facts upon which this Count is based to the time of the filing of this action.

112. Plaintiff Steven Klein repeats and realleges each and every allegation contained in paragraphs 1 through 74 and 89 through 111 above.

113. This Count is brought by plaintiff Steven Klein pursuant to Section 15 of the Securities Act, 15 U.S.C. § 77o, on behalf of the Offering Subclass against the Lee Defendants, Horn, Watts and Kozlowski, and it does not sound in fraud.

114. GNC is liable as an issuer under Section 11 of the Securities Act as set forth in Count I herein and as a seller or solicitor of GNC common stock as set forth in Count II herein.

115. Defendants Horn, Watts and Kozlowski, as executive officers and/or directors of the Company, are, and at all relevant times were, controlling persons of the Company within the meaning of Section 15 of the Securities Act. By reason of their positions with the Company, they were able to and did, directly or indirectly, in whole or in material part, control the content of public statements issued by or on behalf of the Company including the Registration Statement and the Prospectus filed by GNC with the SEC in connection with the Public Offering, which they signed in their capacities as directors and/or executive officers of GNC. By reason of their positions with the Company, Horn, Watts and Kozlowski had access to internal Company documents, reports and other information, including the adverse non-public information concerning the Company's business and future prospects, and attended management and/or board of directors meetings at which those subjects were discussed.

116. Each of the Lee Defendants was a controlling person of the Company within the meaning of Section 15 of the Securities Act with respect to the Public offering by virtue of their collective ownership of more than 18% of the Company's common stock at the time of the Public Offering, which constituted a dominant and controlling block of the outstanding shares of GNC common stock. Lee and Shepherd were also members of GNC's Board of Directors and by reason of their position with the Company, were able to and did, directly or indirectly, in whole or in material part, control the content of public statements issued by or on behalf of the Company including the Registration Statement and the Prospectus filed by GNC with the SEC in connection with the Public Offering which they signed in their capacities as directors of GNC. By reason of their positions with the Company and the ownership by the Lee Defendants of a dominant and controlling block of GNC's outstanding common stock, Lee and Shepherd had access to internal GNC documents, reports and other information concerning the Company's business and future prospects, and attended management and/or Board of Directors meetings at which those subjects were discussed. Lee and Shepherd also had close business and/or personal relationships with other members of GNC's Board of Directors. Finally, the Lee Defendants' control over GNC is evidenced by the Company having paid the expenses of the Public Offering, estimated at $775,000, despite the fact that any shares' of GNC common stock which would be sold pursuant to Registration Statement and Prospectus would only be made if the Underwriter Defendants exercised an overallotment option; and causing the Company to grant an overallotment option to purchase an additional 1,635,834 shares of GNC common stock at $20.7475.

117. As a result, the defendants named in this Count are liable to plaintiff Steven Klein and other members of the Offering Subclass under Section 15 of the Securities Act for GNC's primary violations of Sections 11 and 12(a)(2) of the Securities Act.

118. Plaintiff Steven Klein repeats and realleges each and every allegation contained in paragraphs 1 through 74 and 89 through 112 above.

119. This Count is brought by plaintiff Steven Klein pursuant to Section 15 of the Securities Act, 15 U.S.C. § 77o, on behalf of the Offering Subclass against defendants Lee, Shepherd, Childs, Harkins and DiNovi, and it does not sound in fraud.

120. Lee Equity Fund, ML-Lee Fund and the Lee Trust are primarily liable under Section 12(a)(2) of the Securities Act as set forth in Count II herein.

121. Defendants Lee, Shepherd, Childs, Harkins and DiNovi are controlling persons of Lee Equity Fund and ML-Lee Fund, within the meaning of Section 15 of the Securities Act because through their positions with THL Equity Trust and/or THL Co., through which Lee, Shepherd, Childs, Harkins and DiNovi, served as general partners of, or otherwise had the power to control the actions of, Lee Equity Fund and ML-Lee Fund. Lee, Shepherd, Childs, Harkins and DiNovi, acted on behalf of Lee Equity Fund and ML-Lee Fund, in causing those entities to sell and solicit the sale of their shares of GNC common stock in the Public Offering.

122. As a result, Lee, Shepherd, Childs, Harkins and DiNovi are liable to plaintiff Steven Klein and other members of the Offering Subclass under Section 15 of the Securities Act for the primary violation of Section 12(a)(2) of the Securities Act by defendants Lee Equity Fund and ML-Lee Fund.

123. Defendant Lee is a controlling person of the Lee Trust within the meaning of Section 15 of the Securities Act because the trustee routinely defers to the instruction of Lee, who is a beneficiary of the Lee Trust, with respect to matters of securities sales and investment management, particularly where, as here, the investment is one in which Lee has an active involvement. Lee caused the Lee Trust to sell and solicit the sale of their shares of GNC common stock in the Public Offering.

124. As a result, Lee is liable to plaintiff Steven Klein and other members of the Offering Subclass under Section 15 of the Securities Act for the primary violation of Section 12(a)(2) of the Securities Act by the Lee Trust.

125. Plaintiff Steven Klein repeats and realleges the allegations contained in paragraphs 1 through 74 above.

126. This Count is brought by plaintiff Steven Klein pursuant to Section 1-501(a) of the Pennsylvania Securities Act, 70 P.S. § 1-501, on behalf of the Offering Subclass against defendants GNC, the Underwriter Defendants and the Lee Defendants, and it does not sound in fraud.

127. The defendants named in this Count offered or sold GNC common stock to plaintiff Steven Klein and other members of the Offering Subclass by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

128. Plaintiff Steven Klein and other members of the Offering Subclass did know of the untruths or omissions alleged herein and in the exercise of reasonable diligence could not have known of the untruths or omissions alleged above.

129. Plaintiff Steven Klein and other members of the Offering Subclass have sustained injury and suffered damages.

130. Plaintiff Steven Klein and other members of the Offering Subclass hereby give notice that they are willing to exchange and tender their shares of GNC common stock purchased in the Public Offering for the consideration they paid in cash for their shares of GNC common stock with interest thereon at the legal rate from the date of payment (less the amount of any income or distributions, in cash or in kind, received on the GNC common stock). In the alternative, if plaintiff Steven Klein or other members of the Offering Subclass no longer own the shares Of GNC common stock they purchased in the Public offering, they are entitled to recover damages which are equal to the amount which would have otherwise been recoverable upon a tender of their GNC common stock less the value of their stock when it was sold plus interest at the legal rate from the date of disposition.

131. The defendants named in this Court are jointly and severally liable to plaintiff Steven Klein and other members of the Offering Subclass.

132. The claims asserted in this Count were brought within four years after the acts and transactions constituting the acts or transactions complained of herein and within one year after plaintiff Steven Klein received actual notice or upon the exercise of reasonable diligence should have known of the facts constituting the violation.

133. Plaintiffs repeat and reallege each and every allegation contained above.

134. This Count is brought pursuant to Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by the SEC on behalf of the Class against defendants GNC, the Officer Defendants, the Lee Defendants and the Underwriter Defendants.

135. Defendants, directly and indirectly, by the use of means or instrumentalities of interstate commerce and/or the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business and future financial prospects of GNC as alleged above.

136. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and courses of conduct as alleged herein in an effort to assure investors of GNC's value, performance and continued substantial growth, which included the making, or participating in the making, of untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about GNC, its operations and business prospects, in the light of the circumstances under which they were made, not materially misleading, as set forth more particularly in the paragraphs above, and engaged in practices and courses of business which operated as a fraud and deceit upon the purchasers of GNC's common stock during the Class Period.

137. The defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Defendants knew or must have known about the misrepresented and undisclosed material facts because the matters involved were material to the operations of GNC and were carefully monitored by GNC's senior management and directors as a routine part of the Company's business. These misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing GNC's true operating condition and future business prospects from the investing public and supporting the artificially inflated price of its stock. Defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading.

138. This knowledge or reckless disregard of the facts is also demonstrated by the substantial profit the defendants named in this Count earned. This includes:

(a) The substantial monetary benefits realized by GNC, the Lee Defendants and the Underwriter Defendants through the successful completion of the Public Offering as set forth in paragraphs 107 above;

(b) The substantial monetary benefits realized by defendants Horn, Watts and Mancini reaped from the sale of GNC common stock during the Class Period, as set forth in paragraph 78 above;

(c) The receipt by the Underwriter Defendants of an option exercisable within 30 days to acquire an additional 1,635,834 shares of GNC common stock at $20.7475 per share which they exercised and then sold those shares of GNC common stock to members of the investing public at substantially higher prices;

(d) The Underwriter Defendants wished to maintain the goodwill of the Lee Defendants so that they would be selected or retained by them in any subsequent underwritings or corporate deals; and

(e) GNC received substantial fees from the opening of new franchises which was largely dependent of the Company's perceived success in the marketplace.

139. In addition, the sale of stock by the Lee Defendants in the Public Offering fits a pattern in which Lee and entities he and his associates control have sold the stock of companies in which they have previously invested to the public at very high prices, prior to "bad news" coming out about the company, thereby generating enormous profits for Lee at the expense of the investing public. One example involved Snapple Beverage Corp. THL Co. acquired its controlling interest in Snapple for $27 million and sold a portion of its holdings to the public at $23 per share for gross proceeds of $122.6 million. (Earlier sales of Snapple stock netted THL Co. another $750 million.) Shortly after THL Co.'s stock sales, Snapple's common stock price plunged and Snapple agreed to be bought out by Quaker Oats Co. for $14 per share, a tremendous loss for those who paid Lee $23 per share for their Snapple stock. A similar attempt was made to sell stock in First Alert in a secondary public offering immediately prior to the disclosure of material adverse facts which caused that stock to decline precipitously and the public offering to be canceled. In keeping with this practice, Lee sought to and did unload the GNC stock held by the Lee Defendants to the investing public at prices driven up and supported by the materially false and misleading statements and omissions of material facts relating to GNC's business and future prospects. 140. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of GNC common stock was artificially inflated during the Class Period. In ignorance of the materially false and misleading nature of the reports and statements described above, plaintiffs and other members of the Class relied, to their damage, on the reports and statements described above and/or on the integrity of the market price of GNC common stock and the completeness and accuracy of the information disseminated to GNC investors in connection with their purchase of GNC common stock.

141. The market for GNC common stock was open, well-developed and efficient at all relevant times. As a result of the materially false and misleading statements and failures to disclose the full truth about GNC and its business and future prospects, GNC common stock traded at artificially inflated prices throughout the entire Class Period. Plaintiffs and other members of the Class purchased or otherwise acquired GNC common stock relying upon the integrity of the market price of GNC stock and market information relating to GNC or, in the alternative, upon defendants' materially false and misleading statements, and in ignorance of the adverse, material undisclosed information and false financial statements known to defendants, and have been damaged thereby. Upon ultimate disclosure of all the true facts regarding the Company on May 29, 1996, GNC's common stock, declined to close that day at $14.00 per share representing a drop of $4.50, or more than 20%, from its previous closing price of $18.50 per share and more than one-third from the $21.50 per share price GNC stock was sold at in the Public Offering. Had plaintiffs and other members of the Class known of the materially adverse information not disclosed by the defendants, they would not have purchased or acquired GNC's common stock at the artificially inflated prices they did.

142. At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by plaintiffs and other members of the Class. As described herein, during the Class Period, defendants made or caused to be made a series of positive and optimistic statements about GNC and its future business prospects which were materially false and misleading and lacking in reasonable basis, and further failed to disclose material facts about the Company, its deteriorating operational performance and competitive disadvantages. These material misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of GNC and its future profitability, thus causing the Company's common stock to be overvalued and artificially inflated at all relevant times. Defendants' false portrayal of GNC, of its operating condition and future prospects during the Class Period resulted in plaintiffs and other members of the Class purchasing GNC's common stock at a disparity between the market price and the actual value of such shares, thus causing the damages complained of herein.

143. At the time of said misrepresentations and omissions, plaintiffs and other members of the Class were ignorant of their falsity, and believed them to be true. Plaintiffs and other class members could not in the exercise of reasonable diligence have known the actual facts. In reliance on said misrepresentations and in reliance upon the superior knowledge and expertise of defendants and upon the integrity of the market, plaintiffs and other members of the Class were induced to and did purchase GNC common stock at artificially inflated prices. Had plaintiffs and other members of the Class known the truth, they would not have taken such action.

144. Defendants Horn, Watts, Kozlowski, Mancini, Lee and Shepherd as executive officers and/or directors of GNC are liable as direct and indirect participants in the wrongs complained of herein. They each signed the Registration Statement and defendants Horn and Watts reaped substantial financial rewards from the sale of GNC stock at artificially inflated prices during the Class Period. With knowledge of the falsity of the statements contained therein and in reckless disregard of the true operating condition and future business prospects of GNC, Horn, Watts, Lee and Shepherd caused the false and misleading statements and omissions of material facts as alleged herein. In addition, in participating in making the materially false and misleading statements alleged herein, defendants Lee and Shepherd were, in part, acting on behalf of and for the benefit of Thomas H. Lee Equity Partners, L.P. and ML-Lee Acquisition Fund, L.P.

145. By virtue of the foregoing, the defendants named in this Count have violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder.

146. Plaintiffs repeat and reallege each and every allegation contained above.

147. This Count is brought by plaintiffs pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against the Officer Defendants and the Lee Defendants.

148. The Officer Defendants acted as controlling persons of GNC within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, participation in and/or awareness of the Company's operations and/or intimate knowledge of the Company's financial condition, products and the actual progress of its development sales and marketing efforts.

149. The Lee Defendants acted as controlling persons of GNC within the meaning of Section 20(a) of the Exchange Act as alleged here by virtue of their collective ownership of a controlling block of GNC common stock at the time of the Public Offering. In addition, through the service of Lee and Shepherd on GNC's board of directors and the relationship which those defendants had with other members of GNC's board of directors and senior management, the Lee Defendants were aware and/or intimately knowledgeable with respect to the Company's operations and trends in its sales.

150. As a result, both the Officer Defendants and the Lee Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision- making of the Company, including the content and dissemination of the various statements which plaintiffs contend are materially false and misleading. The Officer Defendants and the Lee Defendants were provided with or had unlimited access to copies of the Company's reports, press releases, public filings and other statements alleged by plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

151. In particular, the Officer Defendants, Lee and Shepherd had direct and supervisory involvement in the day-to-day operations of the Company and therefore, are presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same.

152. As set forth above, GNC violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the Individual Defendants and the Lee Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of defendants' wrongful conduct, plaintiffs and other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.

153. Plaintiff Warren Brandwine repeats and realleges each and every allegation contained in paragraphs 1 through 89 above.

154. This Count is brought by plaintiff Warren Brandwine on behalf of the Insider Trading Subclass against defendants Horn, Watts and Mancini.

155. During the Class Period, the defendants named in this Count collectively sold on the open market more than 300,000 shares of GNC common stock for total proceeds of approximately $6,806,945.56 in the amounts set forth at paragraph 78 herein while in the possession of the material non-public information as set forth above. Defendants Horn, Watts and Mancini violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder as alleged hereinabove. As a result of these violations, the sales of GNC common stock by Horn, Watts and Mancini violated Section 2OA(a) of the Exchange Act.

156. During the Class Period, Horn, Watts and Mancini, while in the possession of material, non-public information, sold GNC common stock while plaintiff Warren Brandwine and other members of the Insider Trading Subclass, contemporaneously with the sale of GNC common stock by Horn, Watts and Mancini, on March 4, 1996, and March 5, 1996, purchased GNC common stock of the same class sold by the defendants named in this Count.

157. This action was first commenced within five years of the March 1996 open-market sales of GNC common stock by Horn, Watts and Mancini as set forth in paragraph 78 of this Complaint.

158. As a result of the foregoing, plaintiff Warren Brandwine and other members of the Insider Trading Subclass have suffered substantial damages.

159. Plaintiff Warren Brandwine repeats and realleges each and every allegation contained in paragraphs, 1 through 89 above.

160. This Count is brought by plaintiff Warren Brandwine and other members of the Insider Trading Subclass against defendants Horn, Watts and Mancini.

161. GNC is an issuer located in the State of Pennsylvania.

162. Horn, Watts and Mancini are officers and/or directors of GNC. Through that relationship, defendants Horn, Watts and Mancini had access, directly or indirectly, to material information about GNC not generally available to the public in March 1996 when they sold GNC common stock in the open market. That information, if disclosed, would have significantly affected the market price of GNC common stock and was generally not available to the public. In addition, Horn, Watts and Mancini knew that the information was not intended to be so available to the public.

163. Plaintiff Warren Brandwine and other members of the Insider Trading Subclass purchased GNC common stock from defendants Horn, Watts and Mancini because the purchases Warren Brandwine and other members of the Insider Trading Subclass were contemporaneous with the sales of GNC common stock by Horn, Watts and Mancini.

164. Plaintiff Warren Brandwine and other members of the Insider Trading Subclass are entitled to damages equal to the difference between the price at which they purchased GNC common stock and the market value which GNC common stock would have had at the time of their purchases had the material undisclosed information alleged above been disseminated prior to that time and a reasonable time had elapsed for the market to absorb the information, plus interest at the legal rate.

165. Plaintiff Warren Brandwine and other members of the Insider Trading Subclass did not know of the material undisclosed information alleged above and would not have purchased GNC common stock at the same price if that information had been revealed to them.

166. The defendants named in this Count are jointly and severally liable to plaintiff Warren Brandwine and other members of the Insider Trading Subclass.

167. The claims asserted in this Count were brought within four years after the acts and transactions constituting the acts or transactions complained of herein and within one year after plaintiff Warren Brandwine received actual notice or upon the exercise of reasonable diligence should have known of the facts constituting the violation.

168. Plaintiffs repeat and reallege each and every allegation contained above.

169. This Count is brought by plaintiffs against all the defendants based upon common law principles of negligent misrepresentation, and does not sound in fraud.

170. Defendants made and participated in the making of representations of fact to plaintiffs and other members of the Class by means of various documents and statements as alleged herein.

171. In making said misrepresentations and statements, as alleged above, defendants failed to state material facts necessary (i) in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (ii) in order that prospective investors in General Nutrition stock would have all of the material facts necessary for an informed decision. Among the direct and proximate causes of said misrepresentations and omissions to state material facts was the negligence and carelessness of defendants, and the absence of any reasonable basis for belief in the truth of such statements.

172. At the time of said misrepresentations and omissions, plaintiffs and the other members of the Class were ignorant of their falsity, and believed them to be true. In reliance, directly and/or indirectly, on said misrepresentations and in reliance upon the superior knowledge and expertise of defendants, plaintiffs and the other members of the Class were induced to and did purchase General Nutrition common stock. Had plaintiffs and the other members of the Class known the truth, they would not have taken such action. By reason thereof, plaintiffs and the other members of the Class have been damaged.

173. Plaintiffs hereby demand a trial by jury pursuant to Rule 38(b) of the Federal Rules of Civil Procedure.

WHEREFORE, plaintiffs pray for judgment as follows:

1. declaring this action to be a plaintiff class action properly maintained pursuant to Fed. R. Civ. P. 23 (b) (3);

2. awarding plaintiffs and other members of the Class damages together with interest thereon;

3. awarding plaintiff Steven Klein and the Offering Subclass damages in accordance with Section 11 of the Securities Act on Count I and Count III;

4. awarding plaintiff Steven Klein and the Offering Subclass damages in accordance with Section 12(a)(2) of the Securities Act on Count II and Count IV;

5. awarding plaintiff Steven Klein and the Offering Subclass damages in accordance with Section 1-501(a) of the Pennsylvania Securities Act on Count V;

6. awarding plaintiff Warren Brandwine and the Insider Trading Subclass damages in accordance with Section 20A of the Exchange Act on Count VIII;

7. awarding plaintiff Warren Brandwine and the Insider Trading Subclass damages in accordance with Section 1-501(e) of the Pennsylvania Securities Act on Count IX;

8. awarding plaintiffs and the Class their costs and expenses of this litigation, including reasonable attorneys' fees, accountants' fees and experts' fees and other costs and disbursements; and

9. awarding plaintiffs and other members of the Class such other and further relief as may be just and proper under the circumstances.

Dated: August 2, 1996

WARREN BRANDWINE ("Plaintiff") declares, as to the claims asserted under the federal securities laws, that:

1. Plaintiff has reviewed the Complaint and authorized its filing.

2. Plaintiff did not purchase the security that is the subject of this action at the direction of plaintiff's counsel or in order to participate in this private action.

3. Plaintiff is willing to serve as a representative party on behalf of the class, including providing testimony at deposition and trial, if necessary.

4. Plaintiff's transactions in the security that is the subject of this action during the Class Period are as follows:

5. During the three years prior to the date of this Certification, Plaintiff has sought to serve or served as a representative party for a class in the following actions filed under the federal securities laws: Warren Brandwine v. Sony Corporation, et al., in the United States District Court, Central District of California, Civ. No. 94-8282-JGD(JGx).

6. Plaintiff has sought to serve or served as a representative party for a class in the following actions filed subsequent to December 22, 1995: N/A

7. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond the Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as order or approved by the Court. I declare under penalty of perjury that the foregoing is true and correct. Executed this 28 day of July , 1996, at Mt. Laurel, New Jersey.

STEVEN KLEIN ("Plaintiff") declares, as to the claims asserted under the federal securities laws, that:

1. Plaintiff has reviewed the Complaint and authorized its filing.

2. Plaintiff did not purchase the security that is the subject of this action at the direction of plaintiff's counsel or in order to participate in this private action.

3. Plaintiff is willing to serve as a representative party on behalf of the class, including providing testimony at deposition and trial, if necessary.

4. Plaintiff's transaction in the security that is the subject of this action during the Class Period is as follows:

During the three years prior to the date of this Certification, Plaintiff has sought to serve or served as a representative party for a class in the following actions filed under the federal securities laws: N/A

6. Plaintiff has sought to serve or served as a representative party for a class in the following actions filed subsequent to December 22, 1995: N/A

7. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond the Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the Court.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 25th day of July, 1996, at Cherry Hill, New Jersey.