SCHEDULE 14A INFORMATION
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Nutri/System, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

________________________________________________________________________________
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[LOGO] nutri/system(R)

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2001

To the Stockholders of
Nutri/System, Inc.:

The Annual Meeting of Stockholders of Nutri/System, Inc. (the "Company")
will be held at 11:00 a.m., local time, on Friday, May 11, 2001, at the offices
of the Company located at 202 Welsh Road, Horsham, Pennsylvania 19044, for the
following purposes:

1. To elect five directors of the Company to hold office until the
Company's 2002 Annual Meeting of Stockholders and until their successors are
duly elected;

2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for its 2001 fiscal year; and

3. To transact such other business as may properly come before the Annual
Meeting and any adjournment, postponement or continuation thereof.

The Board of Directors has fixed the close of business on April 5, 2001, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the Annual Meeting. A copy of the Company's Annual Report for
the year ended December 31, 2000, is being mailed to stockholders together with
this Notice.

If you do not expect to attend the Annual Meeting in person, please
complete, sign, date and return the enclosed form of proxy in the envelope
provided.

By Order of the Board of Directors,

Brian D. Haveson,
President and Chief Executive Officer

Horsham, Pennsylvania
April 9, 2001

NUTRI/SYSTEM, INC.
PROXY STATEMENT

This Proxy Statement and the form of proxy enclosed herewith, which are
first being mailed to stockholders on or about April 9, 2001, are furnished in
connection with the solicitation by the Board of Directors of Nutri/System, Inc.
(the "Company") of proxies to be voted at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at 11:00 a.m., local time, on Friday, May 11,
2001 and at any adjournment, postponement or continuation thereof, at the
Company's principal executive offices at 202 Welsh Road, Horsham, Pennsylvania
19044.

Shares represented by proxies in the accompanying form, if properly signed
and returned, will be voted in accordance with the specifications made thereon
by the stockholders. Any proxy not specifying to the contrary will be voted in
favor of the adoption of the proposal referred to in the Notice of Annual
Meeting and for the election of the nominees for director named below. A
stockholder who signs and returns a proxy in the accompanying form may revoke it
at any time before it is voted by giving written notice of revocation or a duly
executed proxy bearing a later date to the Secretary of the Company or by
attending the Annual Meeting and voting in person.

The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. Such solicitation will be made by mail and may also be made on
behalf of the Company in person or by telephone or telegram by the Company's
regular officers and employees, none of whom will receive special compensation
for such services. The Company, upon request therefore, will also reimburse
brokers, nominees, fiduciaries and custodians and persons holding shares in
their names or in the names of nominees for their reasonable expenses in sending
proxies and proxy material to beneficial owners.

Only holders of Common Stock of record at the close of business on April 5,
2001, will be entitled to notice of and to vote at the Annual Meeting. As of
the close of business on April 5, 2001, the Company had outstanding 28,735,974
shares of Common Stock, each of which is entitled to one vote. Cumulative
voting rights do not exist with respect to the election of directors. The
presence at the Annual Meeting in person or by proxy of a majority of the
outstanding shares of Common Stock will constitute a quorum.

As of April 5, 2001, Brian D. Haveson and HPF Holdings, Inc., who are
included in the table herein under "Beneficial Ownership of Common Stock,"
beneficially owned in the aggregate 15,578,500 shares, or approximately 54.2%,
of the Company's outstanding Common Stock. Such stockholders have advised the
Company that they will vote their shares for the election of Brian D. Haveson,
Michael E. Heisley, Frederick C. Tecce, Donald R. Caldwell and Dean J. Bozzano
as directors, and for the ratification of the appointment of Arthur Andersen LLP
as the Company's independent public accountants for its 2001 fiscal year.
Accordingly, Mr. Haveson, Mr. Heisley, Mr. Tecce, Mr. Caldwell and Mr. Bozzano
will be elected as directors and the appointment of Arthur Andersen LLP as
independent public accountants for the Company for its 2001 fiscal year will be
ratified regardless of the votes of the Company's stockholders other than HPF
Holdings, Inc. and Brian D. Haveson.

ELECTION OF DIRECTORS

The Company's by-laws provide that the number of members of the Company's
Board of Directors shall be as fixed by the Board of Directors from time to
time. The number of members of the Board of Directors is currently fixed at
five.

Five directors are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxies solicited by the Board of Directors will be voted for
the election of the nominees named below, all of whom are currently directors of
the Company. If a nominee becomes unavailable for any reason, it is intended
that the proxies will be voted for a substitute nominee designated by the Board
of Directors. The Board of Directors has no reason to believe the nominees named
will be unable to serve if elected. Any vacancy occurring on the Board of
Directors for any reason may be filled by a majority of the directors then in
office and each director elected to fill a vacancy will serve for the unexpired
term of his predecessor and until his successor is duly elected. The five
nominees for director receiving the largest number of the votes cast at the
Annual Meeting will be elected as directors. Shares held by brokers or nominees
as to which voting instructions have not been received from the beneficial owner
or person otherwise entitled to vote and as to which the broker or nominee does
not have discretionary voting power, i.e., broker non-votes, will be treated as
not present and not entitled to vote for nominees for election as directors.
Votes withheld and broker non-votes will have no effect on the election of
directors because they will not represent votes cast at the Annual Meeting for
the purpose of electing directors.

The names of the nominees for director, together with certain information
regarding them, are set forth below.

Director
Name Age Since
---------- --- -----

Brian D. Haveson 37 1999
Michael E. Heisley 63 1999
Frederick C. Tecce 65 1999
Donald R. Caldwell 54 2000
Dean J. Bozzano 41 2000

Brian D. Haveson has served as President, Chief Executive Officer and as a
member of the Board of Directors of the Company since its formation in August
1999. Mr. Haveson was President of Nutri/System L.P. (the "Partnership"), a
predecessor of the Company, from 1997 until 1999 and was Chief Financial Officer
of the Partnership from 1993 until 1997. For five years prior thereto, Mr.
Haveson was a Manager in the Corporate Recovery Services Practice of Arthur
Andersen LLP. His work encompassed numerous industries, including retail,
manufacturing, trucking, printing, financial services and health care, assisting
with turnarounds and restructurings for over 20 companies.

Michael E. Heisley has been a director of the Company since its formation
in August 1999. Mr. Heisley is principally engaged as President and Chief
Executive Officer of Heico Acquisitions. Mr. Heisley is also Chairman and Chief
Executive Officer of The Heico Companies LLC, and Chairman of the Boards of
Pettibone LLC, Davis Wire Corporation and Tom's Foods, Inc., and is Vice
Chairman of Robertson-Ceco Corporation. Since 1979 Mr. Heisley has acquired or
started over 30 operating companies and has substantial or complete ownership
interest in a group of businesses with over $1 billion in annual revenues. From
1973 until 1978 Mr. Heisley was President of SI Handling Systems, Inc. and from
1971 to 1973 he was Vice President of Sperry Univac (now Unisys) where he was
responsible for integrating the RCA Computer Division into Univac. From 1960
until 1971, Mr. Heisley held a series of management positions with RCA.

Frederick C. Tecce has been a director of the Company since its formation
in August 1999. Mr. Tecce is of counsel to the law firm of Klett Lieber Rooney &
Schorling. Prior to joining Klett Lieber in 1996 he had been of counsel to the
law firm of Pepper Hamilton LLP since 1993.

Donald R. Caldwell has been a director of the Company since March 2000.
Mr. Caldwell has been Chairman and Chief Executive Officer of Cross Atlantic
Capital Partners, Inc., a venture capital management firm, since 1999. From
1996 to 1999 Mr. Caldwell was President and Chief Operating Officer of Safeguard
Scientifics, Inc., an Internet holding company, and from 1993 to 1996 he was
Executive Vice President of Safeguard Scientifics, Inc.

Dean J. Bozzano has been a director of the Company since May 2000. Since
May 1999 Mr. Bozzano has been a principal of Magnum Capital, LLC, a venture
capital firm based in Phoenix, Arizona. From January 1996 to January 2000 Mr.
Bozzano also served as Chief Operating Officer of Sterling Capital, Ltd., an
investor in various early and middle stage operating companies. From March 1990
to December 1995 Mr. Bozzano was a partner with Arthur Andersen LLP, where he
was primarily responsible for starting Arthur Andersen LLP's International
Corporate Recovery Services practice.

Board and Committee Meetings

The Board of Directors met on three occasions in 2000. Each director,
except Mr. Michael Heisley, who missed one Board meeting, attended at least 75%
of all Board and applicable committee meetings during 2000.

The Board of Directors has an Audit Committee that consists of Messrs.
Tecce, Caldwell and Bozzano. The Audit Committee is responsible for
establishing and reviewing the Company's internal controls and operating
procedures to ensure compliance by the Company with all applicable laws,
regulations, generally accepted accounting standards and customary operating
procedures and practices. The Audit Committee met one time in 2000.

The Board of Directors has a Compensation Committee that consists of
Messrs. Tecce, Caldwell and Bozzano. In 2000 the Board of Directors performed
the functions of the Compensation Committee. The Compensation Committee did not
meet separately in 2000.

The Board of Directors does not have a standing Nominating Committee. The
Board of Directors performs the function of a Nominating Committee.

Compensation of Directors

The Company does not pay its directors cash compensation other than
reimbursement for expenses they incur in attending meetings. In May 2000
Directors other than Mr. Haveson and Mr. Heisley each received an option grant
of 20,000 shares under the 2000 Equity Incentive Plan for Outside Directors and
Consultants. Each option has an exercise price of $6.00 per share and is
exercisable in four equal installments on the first, second, third and fourth
anniversaries of the date of grant. The options expire ten years from the date
of grant.

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth as of April 5, 2001 the amount and
percentage of the Company's outstanding Common Stock beneficially owned by (i)
each person who is known by the Company to own beneficially more than 5% of its
outstanding Common Stock, (ii) each director and nominee for director, (iii)
each executive officer and (iv) all directors, nominees for director and
executive officers of the Company as a group.

Shares Percent of
Name Beneficially Outstanding
of Beneficial Owner Owned(1) Common Stock
- ----------------------------------------------------------------------------------------------------------

5% Holders:

HPF Holdings, Inc. (2) .................................... 8,200,000 28.5%
Michael E. Heisley
2075 Foxfield Road
St. Charles, IL 60174

Brian D. Haveson (3) ...................................... 7,378,500 25.7
202 Welsh Road
Horsham, PA 19044

Directors and Nominees for Directors (4):

Frederick C. Tecce (5) .................................... 875,000 3.0

Donald R. Caldwell (6) .................................... 605,000 2.1

Dean J. Bozzano (7) ....................................... 5,000 *

Executive Officers (8):

Deborah A. Gallen (9) ..................................... 185,000 *

James D. Brown (10) ....................................... 110,000 *

Brendon Perero (11) ....................................... 66,666 *

Joseph J. DiBartolomeo, Ph.D. (12) ........................ 1,666 *

All directors, nominees for directors
and executive officers as a group ......................... __________ _______
(9 persons) (13) .......................................... 17,426,832 60.6%
========== =======

__________________

* less than 1%.

(1) Information supplied by officers, directors and principal stockholders or
based upon filings, if any, with the Securities and Exchange Commission
(the "Commission") by each person. Under the rules of the Commission, a
person is deemed to be the beneficial owner of securities if such person
has or shares "voting power," which includes the power to vote, or to
direct the voting of, such securities, or "investment power," which
includes the power to dispose, or to direct the disposition, of such
securities. Under these rules, more than one person may be deemed the
beneficial owner of the same securities. The information set forth in the
above table includes all shares of Common Stock of the Company over which
the above-named persons individually or together share voting power or
investment power.

(2) According to a Schedule 13D dated February 27, 2000 filed with the
Commission by Michael E. Heisley and HPF Holdings, Inc., Mr. Heisley is the
sole stockholder and President of HPF Holdings, Inc. and therefore both Mr.
Heisley and HPF Holdings, Inc. are deemed to own such shares beneficially.

(3) Includes a total of 42,000 shares held by members of Mr. Haveson's
immediate family, as to which shares Mr. Haveson disclaims beneficial
ownership.

(4) Excludes directors and nominees for directors listed under "5% Holders."

(5) Includes a total of 20,000 shares held by members of Mr. Tecce's immediate
family, as to which shares Mr. Tecce disclaims beneficial ownership. Also
includes an option to purchase 5,000 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(6) Includes 500,000 shares held by CRX Investments I, L.P., a limited
partnership of which Mr. Caldwell is a limited partner and Cross Atlantic
Capital Partners, Inc. is the general partner. Mr. Caldwell is the Chief
Executive Officer and a principal stockholder of Cross Atlantic Capital
Partners, Inc. and therefore may be deemed to own such shares beneficially.
Also includes an option to purchase 5,000 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(7) Includes an option to purchase 5,000 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(8) Excludes executive officers listed under "5% Holders."

(9) Includes a total of 20,000 shares held by members of Ms. Gallen's immediate
family, as to which shares Ms. Gallen disclaims beneficial ownership.

(10) Includes an option to purchase 90,000 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(11) Includes an option to purchase 66,666 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(12) Includes an option to purchase 1,666 shares of Common Stock that is
exercisable within 60 days of April 5, 2001.

(13) Includes a total of 82,000 shares held by members of the immediate families
of such persons, as to which shares such persons disclaim beneficial
ownership. Includes options to purchase 173,332 shares of Common Stock that
are exercisable within 60 days of April 5, 2001.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to
compensation paid or accrued by the Company during its 1999 (from the Company's
formation in August 1999) and 2000 fiscal years to the Company's Chief Executive
Officer and those of its executive officers which received more than $100,000 in
total salary and bonus during 2000. No other executive officer of the Company
received more than $100,000 in total salary and bonus during 2000.

Summary Compensation Table
--------------------------

Long-Term
Annual Compensation Compensation
-------------------- ------------
Awards
--------
Securities All Other
Name and Salary Underlying Compensation
Principal Position Year ($)(1) Bonus($) Options(#) ($)(2)
- ---------------------------------- ---- ------- -------- ------------ -------------

Brian D. Haveson.................. 2000 250,000 --- --- ---
President and Chief 1999 67,308 --- --- 8,200,000 (3)
Executive Officer

Deborah A. Gallen................. 2000 108,402 --- 20,000 ---
Vice President of E-Commerce

James D. Brown.................... 2000 130,055 --- 100,000 3,000
Chief Financial Officer

Brendon Perero.................... 2000 120,027 --- 40,000 2,769
Chief Information Officer

_________________

(1) Mr. Haveson, Ms. Gallen and Mr. Perero commenced employment in August 1999,
while Mr. Brown commenced employment in November 1999.

(2) Unless otherwise indicated, the amounts in this column consist of matching
contributions made by the Company under its qualified tax deferred defined
contribution retirement plan.

(3) In addition to his cash compensation, in 1999 Mr. Haveson received
8,200,000 shares of the Company's Common Stock, valued at $1.00 per share,
in consideration for his transfer to the Company of his 7.5% interest in
NSDirect, now a wholly owned subsidiary of the Company. This issuance of
shares to Mr. Haveson was treated as a compensation expense for accounting
purposes only.

Option Grants

The following table shows all options to acquire shares of the Company's
Common Stock granted during 2000 to the named executive officers:

Stock Option Grants in Last Fiscal Year
Individual Grants
-----------------

Number of
Securities
Underlying % of Total Options Grant
Options Granted to Employees Exercise Expiration Date Present
Name Granted (#) (1) in Fiscal Year Price ($/Sh) Date Value ($) (2)
- ---- -------------- -------------------- ----------- ---------- -------------

Brian D. Haveson................ --- 0.0% --- --- ---

James D. Brown.................. 70,000 5.9% 5.00 3/1/10 125,500
30,000 2.5% 1.60 10/24/10 33,000

Brendon Perero.................. 20,000 1.7% 13.50 6/28/10 188,800
20,000 1.7% 1.60 10/24/10 22,000

Deborah A. Gallen............... 20,000 1.7% 1.60 10/24/10 22,000

Joseph J. DiBartolomeo.......... 5,000 0.4% 2.50 1/14/10 4,450
20,000 1.7% 13.50 6/28/10 188,800
45,000 3.8% 1.60 10/24/10 49,500

_________________

(1) Each option is has an exercise price per share equal to 100% of the
estimated fair market value of the Company's Common Stock on the grant
date. Each option is exercisable in three equal cumulative installments
commencing on the first, second and third anniversaries of the grant date,
assuming that the option holder remains an employee of the Company. The
Company has not granted any stock appreciation rights.

(2) The Black-Scholes model, a widely used and accepted formula for valuing
traded stock options, was used to determine the grant date present value of
the stock options. The Black-Scholes value used in this table is the same
value used to report the expense associated with stock options in the
Company's audited financial statements in accordance with FAS 123. The
following assumptions were used to calculate the Black-Scholes value: no
dividend yield; expected stock price volatility of 0.1%-66.5%; risk-free
interest rate of 5.25%-6.32% and expected life of seven years. These are
not projections, and therefore there is no guarantee that the Company's
assumptions will be the actual stock price volatility or the risk-free
interest rate over the next ten years. There will be no gain to the named
executives, however, if the per share market price of the Company's Common
Stock does not increase or declines.

Options Exercised and Year-End Option Values

The following table sets forth information with respect to options held at
December 31, 2000 by the named executive officers of the Company:

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values(1)

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End ($) (2)
-------------------------- --------------------------

Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------

Brian D. Haveson --- --- --- ---

James D. Brown............... 90,000 210,000 --- ---

Brendon Perero............... 66,666 173,334 12,500 25,000

Deborah A. Gallen............ --- 20,000 --- ---

_______________

(1) No options were exercised by the named executive officers during 2000.

(2) The value of unexercised in-the-money options equals the difference between
the option exercise price and the closing price of the Company's Common
Stock on December 29, 2000 (the last day of trading for 2000), multiplied
by the number of shares underlying the options. The closing price of the
Company's Common Stock on December 29, 2000, as reported on the Nasdaq
National Market, was $1.19 per share.

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company's officers and directors and persons who own more than
10% of the Company's Common Stock file reports of ownership with the Commission.
Based solely on the Company's review of the copies of such reports received by
it, or written representations received from reporting persons, the Company
believes that during January 1, 2000 through December 31, 2000, all filing
requirements applicable to these persons were complied with, except that the
Form 3 for Donald R. Caldwell was not filed timely and it has since been filed.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee Report

In the section below, we describe our financial and accounting management
policies and practices.

Composition. The Audit Committee of the Board of Directors is composed of
three independent directors, as defined by Nasdaq rules, and operates under a
written charter adopted by the Board of Directors, a copy of which is attached
as Appendix A. The members of the Audit Committee are Donald R. Caldwell,
Frederick C. Tecce and Dean J. Bozzano (Chairman).

Responsibilities. The responsibilities of the Audit Committee include
recommending to the Board of Directors an accounting firm to be engaged as the
Company's independent accountants. Management is responsible

for the Company's internal controls and financial reporting process. The
independent accountants are responsible for performing an independent audit of
the Company's Consolidated Financial Statements in accordance with generally
accounting standards and for issuing a report thereon. The Audit Committee's
responsibility is to oversee these processes.

Review with Management and Independent Accountants. In this context, the
Audit Committee has met and held discussions with management and the independent
accountants. Management represented to the Audit Committee that the Company's
Consolidated Financial Statements were prepared in accordance with generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the Consolidated Financial Statements with management and the
independent accountants. The Audit Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61, "Communication with the Audit Committees."

The Company's independent accountants also provided to the Audit Committee
the written disclosures and the letter required by Independent Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and the Audit
Committee discussed with the independent accountants, Arthur Andersen LLP, the
firm's independence. The Audit Committee also considered the compatibility of
the provision of non-audit services by Arthur Andersen LLP with the maintenance
of Arthur Andersen LLP's independence.

Summary. Based upon the Audit Committee's discussions with management and
the independent accountants and the Audit Committee's review of the
representation of management, and the report of the independent accountants to
the Audit Committee, the Audit Committee recommended that the Board of Directors
include the audited Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, as filed with the
Securities and Exchange Commission.

This report is submitted by the Audit Committee on March 26, 2001.

Dean J. Bozzano (Chairman)
Frederick C. Tecce
Donald R. Caldwell

Audit and Related Fees

Audit Fees. The aggregate fees billed by Arthur Andersen LLP for
professional services for the audit of the Company's annual Consolidated
Financial Statements for 2000 and the review of the Consolidated Financial
Statements included in the Company's Forms 10-Q for 2000 were $72,000.

Financial Information Systems Design and Implementation Fees. There were no
fees billed by Arthur Andersen LLP to the Company for financial information
systems design and implementation in 2000.

All Other Fees. The aggregate fees billed to the Company for all other
services rendered by Arthur Andersen LLP in 2000, including fees for tax
advisory services and fees in connection with proposed funding transactions,
were $99,500.

Report of the Board of Directors on Compensation Matters

In the section below, we describe our executive compensation policies and
practices. We also identify the procedures we use to determine the compensation
of the Company's Chief Executive Officer and executive management team.

Compensation Philosophy. In developing the Company's executive compensation
policies, we relied on two principal objectives: (1) attracting and retaining
talented officers and (2) motivating officers to achieve corporate goals that
enhance stockholder value.

In 2000 the paramount corporate goal was to create stockholder value by
rapidly increasing revenues and profitability while operating within the
Company's funding constraints. Accordingly, we emphasized stock options as tool
for attracting, retaining and incentivizing executive management.

Cash Compensation. The Board of Directors authorized guidelines for base
compensation for executive management after reviewing compensation information
for firms of similar size and growth prospects in the Philadelphia region. The
Company's goal is to provide a reasonably competitive level of base
compensation.

In light of the Company's requirement to carefully manage cash resources in
order to purse its business strategy, the Company did not provide any cash bonus
compensation for executive management team in the year 2000 or, to date, any
increases in base compensation increases for the year 2001.

Working closely with Mr. Haveson, we will carefully monitor cash
compensation practices during 2001. Going forward, the Board of Directors
expects that cash compensation will be linked to factors such as corporate
financial and operating performance measures as well as the achievement of
individual executive performance objectives.

Stock Options. The Board of Directors strongly believes that stock options
motivate executive management and other employees to identify with stockholder
interests and maximize stockholder value. With the adoption of the 1999 and
2000 Equity Incentive Plans, the Company granted stock options to a large
proportion of the Company's employees. All stock options have a per share
exercise price equal to the fair market value of the Company's Common Stock on
the grant date. To date, options granted to employees vest in three equal
annual installments.

The number of options granted to each officer and the vesting schedule are
determined based on a variety of factors, including (1) the executive's position
at the Company, (2) his or her individual performance and (3) the number of
options the executive already holds. In 2000, the full Board of Directors
relied upon these factors to approve stock option grants for the named executive
officers and all other employees.

Compensation of the Chief Executive Officer. During 2000, Mr. Haveson
received a salary of $250,000. In light of the Company's need to carefully
manage cash resources in order to pursue its business strategy, Mr. Haveson
requested that the Board of Directors not provide him with cash bonus
compensation for fiscal year 2000. In addition, Mr. Haveson currently will
forego any increase in base compensation. While Mr. Haveson has been granted no
stock options, the Board of Directors believe his interests are aligned with
stockholders by virtue of his direct ownership of 7,336,500 shares of Common
Stock or 25.5% of the Common Stock outstanding.

Tax Deductibility of Executive Compensation. Under Section 162(m) of the
Internal Revenue Code, the Company generally receives a federal income tax
deduction for compensation paid to any of its named executive officers if the
compensation is less than $1,000,000 during any fiscal year or is "performance-
based" under Section 162(m). Under these rules, all compensation paid to the
Company's named executive officers is tax deductible.

This report is submitted by the Board of Directors on March 26, 2001.

Frederick C. Tecce
Donald R. Caldwell
Dean J. Bozzano
Brian D. Haveson
Michael E. Heisley

Compensation Committee Interlocks and Insider Participation

During the year 2000, none of the Company's executive officers served on
the board of directors of any entities whose directors or officers serve on the
Company's Compensation Committee. No current or past executive officers of the
Company serve on its Compensation Committee.

STOCK PERFORMANCE

The following graph shows a comparison of cumulative total return since
June 16, 2000 (the date the Company became listed on the Nasdaq National Market)
for the Company's Common Stock, the Russell 2000 Index and the Dow Jones
Consumer Services Index (a published industry index), each of which assumes an
initial value of $100 and reinvestment of dividends.

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG NUTRI/SYSTEM, INC., THE DOW JONES
CONSUMER SERVICES INDEX AND THE RUSSELL 2000 INDEX

INSERT GRAPH HERE
-----------------

6/16/00 12/29/00
------- --------
Nutri/System, Inc.................. 100 8
Dow Jones Consumer Services Index.. 100 52
Russell 2000 Index................. 100 94

CERTAIN RELATED PARTY TRANSACTIONS

From time to time, the Company purchases food from Tom's Foods, Inc., a
vendor that is an affiliate of Mr. Heisley, and vitamins and supplements from
HPF, L.L.C., a vendor that is an affiliate of Mr. Heisley and Mr. Haveson.
During the Company's 2000 fiscal year, the aggregate amount of food purchases
was approximately $286,000 and the aggregate amount of vitamin and supplement
purchases was approximately $56,000. Such transactions were effected on terms no
less favorable to the Company than those made available to independent third
parties.

RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

Arthur Andersen LLP served as the Company's independent accountants for the
fiscal year ended December 31, 2000. The Board of Directors has reappointed
Arthur Andersen LLP as the Company's independent accountants for the fiscal year
ending December 31, 2001 subject to ratification thereof by the stockholders.
Absent instructions to the contrary, it is intended that votes will be cast
pursuant to the proxies for the ratification of the appointment of Arthur
Andersen LLP as the Company's independent accountants for its 2001 fiscal year.
The Company has been advised by Arthur Andersen LLP that none of its members or
associates has any direct financial interest or material indirect financial
interest in the Company or its subsidiaries. The ratification of the
appointment of Arthur Andersen LLP will require the affirmative vote of the
holders of a majority of the shares represented in person or by proxy at the
Annual Meeting. An abstention will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote. Shares held by a broker or
nominee that does not have the discretion to vote in the absence of specific
instructions from the beneficial owner, or "broker non-votes," will not be
counted in determining the number of votes necessary for approval.

A representative of Arthur Andersen LLP will attend the Annual Meeting.
This representative will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to any
appropriate questions presented by the stockholders at the Annual Meeting.

ANNUAL REPORT

A copy of the Company's Annual Report for its fiscal year ended December
31, 2000 is being mailed to the Company's stockholders with this Proxy
Statement.

STOCKHOLDER PROPOSALS

Any stockholder who, in accordance with and subject to the provisions of
the proxy rules of the Commission, wishes to submit a proposal for inclusion in
the Company's proxy statement for the 2002 Annual Meeting of Stockholders must
deliver such proposal in writing to the Secretary of the Company at the
Company's mailing address in Horsham, Pennsylvania, not later than December 10,
2001.

Pursuant to Rule 14a-4(c) of the Exchange Act, if a stockholder who intends
to present a proposal at the 2002 Annual Meeting of Stockholders does not notify
the Company of such proposal on or before February 20, 2002, then management
proxies will be allowed to use their discretionary voting authority to vote on
the proposal when the proposal is raised at the Annual Meeting, even though
there is no discussion of the proposal in the 2002 proxy statement.

OTHER PROPOSALS

The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters described in the
Notice of Annual Meeting, but if any matters are properly presented, it is the
intention of the persons named in the accompanying proxy to vote on such matters
in accordance with their judgment.

By Order of the Board of Directors,

Brian D. Haveson,
President and Chief Executive Officer
April 9, 2001

Appendix A - Audit Committee Charter

CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF NUTRI/SYSTEM, INC.

Purpose

The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including the
overview of the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public and others who
rely thereon, the Company's systems of internal accounting and financial
controls, the selection, evaluation and retention of independent auditors and
the annual independent audit of the Company's financial statements.

In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and to retain outside counsel,
auditors or other experts to advise the Committee. The Board and the Committee
are in place to represent the Company's stockholders; accordingly, the
independent auditors are ultimately accountable to the Board and the Committee.

The Committee shall review the adequacy of this Charter on an annual basis
and recommend any proposed changes to the Board.

Membership

The Committee shall be comprised of not fewer than three members of the
Board, and the Committee's composition shall satisfy the requirements of the
Audit Committee Policy of the Nasdaq Stock Market. Accordingly, all of the
members shall be directors:

. who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and

. who are financially literate or who shall become financially literate
within a reasonable period of time after appointment to the Committee.

In addition, at least one member of the Committee shall have accounting or
related financial management expertise.

Key Responsibilities

The Committee's role is one of oversight, and the Committee recognizes that
the Company's management is responsible for the preparation and publication of
the Company's financial statements and that the independent auditors are
responsible for auditing those financial statements. In addition, the Committee
recognizes that financial management, as well as the independent auditors, have
more time, more knowledge and more detailed information regarding the Company
than do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee shall not be deemed to provide any expert or
special assurance as to the Company's financial statements or any professional
certification as to the independent auditors' work.

The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide, with the understanding that the Committee may diverge from this
guide as it deems appropriate given the circumstances.

A-1

. The Committee shall review with management and the independent
auditors the audited financial statements to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Stockholders if distributed prior to the filing of the Form 10-K) and
shall review and consider with the independent auditors the matters
required to be discussed by Statement of Auditing Standards No. 61
("SAS No. 61").

. As a whole, or through the Committee chair, the Committee shall review
with the independent auditors the Company's interim financial results
to be included in the Company's Quarterly Reports on Form 10-Q and the
matters required to be discussed by SAS No. 61; this review shall
occur prior to the Company's release of quarterly financial
information and filing of the Form 10-Q.

. The Committee shall discuss with management and the independent
auditors the quality and adequacy of the Company's internal controls.

. The Committee shall:

. request from the independent auditors annually a formal written
statement delineating all relationships between the auditors and
the Company consistent with Independence Standards Board Standard
No. 1;

. discuss with the independent auditors any such disclosed
relationship and the impact thereof on the independent auditors'
independence; and

. recommend that the Board take appropriate action to oversee the
independence of the independent auditors.

. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select
(or nominate for stockholder approval), evaluate and, where
appropriate, replace the independent auditors.

A-2

Nutri/System, Inc.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby constitutes and appoints Brian D. Haveson and
James D. Brown, and each or either of them, proxies of the
undersigned, with full power of substitution, to vote all of the
shares of Common Stock of Nutri/System, Inc. (the "Company") which the
undersigned may be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the offices of the Company
located at 202 Welsh Road, Horsham, Pennsylvania 19044, on Friday, May
11, 2001 at 11:00 a.m., local time, and at any adjournment,
postponement or continuation thereof, as follows:

1. ELECTION OF DIRECTORS.

[_] FOR all nominees listed below

[_] WITHHOLD AUTHORITY to vote for the nominees listed below

INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name on the following list:

Brian D. Haveson, Michael E. Heisley, Frederick C. Tecce, Donald R.
Caldwell, Dean J. Bozzano.

2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2001.

[_] FOR [_] AGAINST [_] ABSTAIN

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(Please date and sign on reverse side)

(Continued from other side)

3. In their discretion, the proxy holders, on behalf of and at the
discretion of the Board of the Directors of the Company, are
authorized to vote with respect to matters incident to the conduct
of the Annual Meeting and upon such other business as may properly
come before the Annual Meeting, pursuant to SEC Rules, and any
adjournment, postponement or continuation thereof.

This proxy will be voted as specified. If a choice is not specified,
the shares represented by this proxy will be voted "FOR" each director
nominee, and "FOR" the ratification of Arthur Andersen LLP as the
independent public accountants of the Company.

This proxy should be dated, signed by the stockholder(s) and returned
promptly to the Company in the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate.

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Signature

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Dated: _______________, 2001