GNC 2010 Annual Report Download - page 113

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
damages. Under its purchasing agreement with the vendor, WellNx, GNC tendered the matter to WellNx for defense and indemnification.
WellNx has accepted GNC's request for defense and indemnification. Any liabilities that may arise from this matter are not probable or
reasonably estimable at this time.
Chen Claim. On April 30, 2009, plaintiff Yuging "Phillis" Chen filed a Third Amended Complaint against, among others, Nutra
Manufacturing, Inc., in the Superior Court of California for the County of Los Angeles. Plaintiff alleges that her use and consumption of various
products, including Mega Garlic Plus and Herbalifeline, manufactured by Nutra Manufacturing, caused personal injuries. Plaintiff asserts,
among other things, claims for strict liability, negligence, and fraud, and seeks unspecified monetary damages. Any liabilities that may arise
from this matter are not probable or reasonably estimable at this time.
California False Labeling and Consumer Fraud Claims. Beginning in May 2009, a series of false labeling and consumer fraud cases
(listed below) were filed in California in connection with label claims of non-GNC products sold in the Company's stores.
• Michael Gonzales and Zia Nawabi, et al. v. Maximum Human Performance, Inc., et al., U.S. District Court, Central District of California,
09CV532 (filed May 5, 2009) ("Musclemeds");
• Michael Campos and Michael Gonzales, et al. v. LG Sciences, LLC, et al., Superior Court of California, for the County of Orange,
removed to U.S. District Court, Central District of California, 09CV663 (filed May 20, 2009) ("LG Sciences");
• Nicole Forlenza and Shaiden Monroe, et al. v. Dynakor Pharmacal, LLC, et al., U.S. District Court, Central District of California,
09CV3730 (filed May 26, 2009) ("Basic Research — Akävar");
• Vance Monroe and Mac Gonzales, et al. v. Biotab Nutraceuticals, Inc., et al., U.S. District Court, Southern District of California,
09CV1207 (filed June 3, 2009);
• Richard Johnson, et al. v. Vianda, LLC, et al., Superior Court of California, for the County of Los Angeles, BC 423825 (filed October 20,
2009); and
• Michael Flores, et al. v. EP2. Inc., et al., U.S. District Court, Central District of California, 09CV7872 (filed October 28, 2009).
The LG Sciences matter was settled and dismissed in August 2009. A settlement was reached and approved by the Court in December 2009 in
the Musclemeds case. Plaintiffs in the Basic Research - Akävar case dismissed GNC with prejudice in January 2010, after which a similar
action, Shalena Dysthe, et al., v. Basic Research, et al., U.S. District Court, Central District of California, 09CV8013 (filed November 2, 2009)
was filed by a different law firm.
Commitments
The Company maintains certain purchase commitments with various vendors to ensure its operational needs are fulfilled of
approximately $20.5 million. The future purchase commitments consisted of $9.7 million of advertising, inventory commitments and spending
for website redesign, $10.8 million management services agreement and bank fees. Other commitments related to the Company's business
operations cover varying periods of time and are not significant. All of these commitments are expected to be fulfilled with no adverse
consequences to the Company's operations of financial condition.
Environmental Compliance
In March 2008, the South Carolina Department of Health and Environmental Control ("DHEC") requested that the Company investigate
its South Carolina facility for a possible source or sources of contamination detected on an adjoining property. The Company has commenced
the investigation at the facility as requested by DHEC. After several phases of the investigation the possible source or sources of contamination
have not been sufficiently identified. The Company is continuing such investigation. The proceedings in this matter have not yet progressed to a
stage where it is possible to estimate the timing and extent of any remedial action that may be required, the ultimate cost of remediation, or the
amount of the Company's potential liability. 107