<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JENNY CRAIG, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
JENNY CRAIG, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 5, 1998
The Stockholders of Jenny Craig, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Jenny
Craig, Inc. (the "Company") will be held at the Sheraton Grand Torrey Pines
Hotel, 10950 North Torrey Pines Road, La Jolla, California 92037, on Thursday,
November 5, 1998, at 2:00 p.m. (Pacific Standard Time), for the following
purposes:
1. To elect six directors for terms of one year each and until their
successors are duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
certified public accountants for fiscal year 1999; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on September 22,
1998, as the record date for determining the stockholders entitled to notice of,
and to vote at, the meeting and at any adjournment thereof. A list of the
stockholders entitled to vote at the meeting will be available for examination
by a stockholder for any purpose germane to the meeting during ordinary business
hours during the ten days prior to the meeting at the offices of the Company,
11355 North Torrey Pines Road, La Jolla, California 92037.
You are cordially invited to attend this meeting. Whether you expect to
attend the meeting or not, we encourage you to vote your shares by dating and
signing the enclosed proxy and returning it as promptly as possible in the
accompanying postage guaranteed envelope.
By order of the Board of Directors
Marvin Sears
Secretary
La Jolla, California
October 6, 1998
<PAGE> 3
JENNY CRAIG, INC.
11355 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 5, 1998
This Proxy Statement and the accompanying proxy are being furnished to
stockholders of Jenny Craig, Inc. (the "Company") in connection with the
solicitation of the enclosed proxy by or on behalf of the Board of Directors for
use at the Annual Meeting of Stockholders of the Company to be held at the
Sheraton Grand Torrey Pines Hotel, 10950 North Torrey Pines Road, La Jolla,
California 92037, on November 5, 1998, at 2:00 p.m. and at any and all
adjournments thereof. This Proxy Statement and the accompanying proxy are being
first mailed on or about October 6, 1998.
PROXY; VOTING
When the enclosed proxy is properly executed and returned, the shares it
represents will be voted at the Annual Meeting and at any adjournment thereof as
directed by the stockholder executing the proxy, unless it is earlier revoked.
If no directions are given on the proxy with respect to any particular matter to
be acted upon at the Annual Meeting or at any adjournment thereof, the shares
represented by the proxy will be voted in favor of such matter. Any stockholder
executing and delivering the proxy has the right to revoke it at any time before
the authority granted thereby is exercised, by the due execution of another
proxy bearing a later date or by written notification of revocation to the
Secretary of the Company. Stockholders who are present in person at the Annual
Meeting may also revoke their proxy and vote in person if they so desire.
At September 22, 1998, the Company had outstanding 20,688,971 shares of
Common Stock. Each share of Common Stock entitles its owner to one vote upon
each matter to come before the Annual Meeting. Only stockholders of record at
the close of business on September 22, 1998 (the "Record Date") will be entitled
to vote at the Annual Meeting and at any adjournment thereof.
The election of directors requires a plurality of the votes cast. Broker
non-votes will not have any effect on the proposals being submitted to the
stockholders at the 1998 Annual Meeting. Votes returned by proxy to the
Company's transfer agent will be tabulated by the transfer agent. The Company's
transfer agent will act as Inspector of Election at the meeting and will count
the votes based on the votes returned by proxy and votes cast at the meeting.
SOLICITATION OF PROXIES
This solicitation of proxies is being made by the Board of Directors of the
Company and the expenses thereof will be borne by the Company. The principal
solicitation is being made by mail; however, additional solicitations may be
made by telephone, telegraph, or personal interview by officers of the Company.
The Company expects to reimburse brokerage houses, banks and other fiduciaries
for reasonable expenses of forwarding proxy materials to beneficial owners.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table and the notes thereto set forth information as of
September 1, 1998, relating to beneficial ownership (as defined in Rule 13d-3 of
the Securities Exchange Act of 1934 (the "Exchange Act")) of the equity
securities of the Company, SJF Enterprises, Inc. ("SJF") and Craig Enterprises,
Inc. ("Craig Enterprises") by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of the voting stock of the
Company, SJF or Craig Enterprises, (ii) each director and nominee of the Company
and each of the executive officers named in the Summary Compensation Table and
(iii) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
OF THE
COMPANY
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED(1)(2) OWNERSHIP
------------------------ ------------ ---------
<S> <C> <C>
Sidney Craig(3)........................................... 14,212,500 68.7%
Jenny Craig(3)............................................ 14,212,500 68.7%
SJF Enterprises, Inc.(3).................................. 13,838,600 66.9%
FMR Corp.(4).............................................. 1,073,500 5.2%
82 Devonshire Street
Boston, Massachusetts 02109
Scott Bice................................................ 16,500(5) *
Marvin Sears.............................................. 18,000(5) *
Andrea Van de Kamp........................................ 16,500(5) *
Robert Wolf............................................... 16,500(5) *
Michael L. Jeub........................................... 100,000(5) *
Leslie A. Koll............................................ -0- *
Janet Rheault............................................. 2,400(5) *
All directors and executive officers as a group (13 14,399,400 69%
persons)(3)(5)..........................................
</TABLE>
- ---------------
* Less than 1%.
(1) The Common Stock is the only class of equity securities of the Company
outstanding.
(2) Except as otherwise noted, all persons listed in the table have sole voting
and investment power with respect to their shares, subject to the rights of
their spouses under applicable community property laws.
(3) The address for these beneficial holders is: Jenny Craig, Inc., 11355 North
Torrey Pines Road, La Jolla, California 92037. SJF and its wholly-owned
subsidiary, DA Holdings, Inc., are the record owners of the aggregate number
of shares set forth opposite SJF's name. Because of the facts described
below, Sidney and Jenny Craig may be deemed to be the beneficial owners of
these shares pursuant to Rule 13d-3 under the Exchange Act. The only class
of equity securities outstanding of SJF is common stock, par value $.01 per
share, of which 980 shares are outstanding and beneficially owned by Craig
Enterprises. The only equity securities outstanding of Craig Enterprises are
88,940 shares of common stock, par value $.01 per share, which are
beneficially owned (as defined in Rule 13d-3 of the Exchange Act) by Sidney
and Jenny Craig. Sidney and Jenny Craig each are directors and the Company's
Chairman and Chief Executive Officer and Vice-Chairman and President,
respectively. See "Nominees for Election to Board of Directors." Sidney and
Jenny Craig hold their shares of Craig Enterprises common stock as community
property and exercise joint voting and investment power with respect to such
shares. Of the 14,212,500 shares shown as beneficially owned by Sidney Craig
and Jenny Craig as of September 1, 1998, 13,838,600 are the shares
beneficially owned by SJF on such date and 373,900 are shares owned by The
Sidney and Jenny Craig Foundation of which Sidney Craig is President and a
director and Jenny Craig is Vice President and Chief Financial Officer and a
director.
(4) Based solely on information contained in the Schedule 13G of FMR Corp., as
amended, filed with the Securities and Exchange Commission on February 11,
1998, which indicates that FMR Corp., together
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<PAGE> 5
with its wholly-owned subsidiary, Fidelity Management & Research Company, is
the beneficial owner of 1,073,500 shares of Common Stock as of February 11,
1998 and possesses sole dispositive power with respect to all of the shares
of Common Stock beneficially owned by it.
(5) Includes shares of Common Stock which may be acquired as of September 1,
1998 or within 60 days thereafter pursuant to the exercise of options as
follows: Scott Bice (16,500); Marvin Sears (18,000); Andrea Van de Kamp
(16,500); Robert Wolf (16,500); Michael L. Jeub (100,000); and Janet Rheault
(2,400).
ELECTION OF DIRECTORS
The Company's Board of Directors consists of six members. Six directors
will be elected at the Annual Meeting to serve until the 1999 Annual Meeting or
until their successors are duly elected and qualified. Proxies representing
shares of Common Stock held on the record date which are returned duly executed
will be voted, unless otherwise specified, in favor of the six nominees for the
Board of Directors named below. All such nominees are members of the present
Board of Directors. All nominees have consented to serve if elected, but should
any nominee be unavailable to serve (which event is not anticipated), the
persons named in the proxy intend to vote for such substitute nominee as the
Board of Directors may recommend. SJF, which beneficially owned 13,838,600
shares of the Company's Common Stock as of the Record Date (representing
approximately 66.9% of the Common Stock outstanding as of the Record Date),
intends to vote for the election of the nominees listed below, thereby assuring
the presence of a quorum and their election.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
The following table sets forth certain information with respect to each
nominee:
<TABLE>
<CAPTION>
AGE
---
<S> <C> <C>
Sidney Craig(1)........................ 66 Chairman of the Board and Chief
Executive Officer
Jenny Craig(1)......................... 66 Vice-Chairman and President
Scott Bice(2)(3)(4).................... 55 Director
Marvin Sears(1)(3)(4).................. 71 Secretary and Director
Andrea Van de Kamp(2)(3)(4)............ 54 Director
Robert Wolf(3)......................... 56 Director
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Performance Compensation Committee. Mr. Bice was a member of the
Audit Committee through June 30, 1998 and joined the Compensation Committee
and the Performance Compensation Committee on that date.
(3) Member of Audit Committee. Mr. Wolf was a member of the Compensation
Committee and the Performance Compensation Committee through June 30, 1998
and joined the Audit Committee on that date.
(4) Member of Compensation Committee.
Sidney Craig has been Chairman of the Company or its predecessors since
1983 and served as Chief Executive Officer from 1983 through April, 1994. In
October 1997, Mr. Craig was elected Chief Executive Officer of the Company.
Jenny Craig has served as Vice-Chairman of the Company since September,
1991, as President and Chief Operating Officer of the Company or its
predecessors from 1983 to August, 1991 and as a director of the Company or its
predecessors from 1983 to date. Mrs. Craig was elected President of the Company
in October 1997. Sidney and Jenny Craig are husband and wife.
Marvin Sears, a director of the Company since July 1989, has served as the
Secretary of the Company since June, 1991, and as Assistant Secretary of the
Company from August 1985 to June, 1991. Mr. Sears is a
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<PAGE> 6
practicing attorney in Los Angeles, California where, since May 1989, he has
been a partner in the law firm of Proskauer Rose LLP, counsel to the Company
during fiscal 1998 and currently. From June 1960 until May 1989, Mr. Sears was a
senior partner of the Los Angeles law firm of Pacht, Ross, Warne, Bernhard &
Sears, Inc., and its successor, Shea & Gould. Mr. Sears is a member of the Board
of various privately-owned business enterprises.
Scott Bice has served as a director of the Company since February, 1995.
Mr. Bice has been the Dean of the University of Southern California Law Center
since 1980, and serves as a director of various privately-owned corporations.
Andrea Van de Kamp has served as a director of the Company since August,
1994. Ms. Van de Kamp was Senior Vice President and Managing Director of West
Coast Operations, Sotheby's, from 1989 through May, 1997 and has been Chairman,
West Coast Operations of Sotheby's since May, 1997. Prior to joining Sotheby's,
Ms. Van de Kamp was President and Chief Executive Officer of the Independent
Colleges of Southern California, and is a director of The Walt Disney Co. and
City National Corporation.
Robert Wolf has served as a director of the Company since February, 1995.
Mr. Wolf is the President and Chief Executive Officer of Bob Wolf Partners &
Co., a marketing and advertising consulting company. Mr. Wolf was the Chairman
and Chief Executive Officer of Chiat/Day North America, an advertising firm,
from 1989 through November, 1995.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held seven meetings in fiscal year 1998.
The Board of Directors established standing Audit and Compensation Committees in
August, 1991 and in November 1997 established a Performance Compensation
Committee. During fiscal 1998, each member of the Board of Directors attended
75% or more of the meetings of the Board of Directors and of each committee of
the Board of which such person was a member.
As directed by the Board, the functions of the Audit Committee include (a)
annually recommending to the Board of Directors independent public accountants
as auditors of the books, records and accounts of the Company; (b) reviewing the
scope of audits made by the independent public accountants; (c) receiving and
reviewing the audit reports submitted by the independent public accountants; (d)
determining and reviewing the duties and responsibilities of the Controller and
internal auditing staff; (e) reviewing the annual program for the internal audit
of the operational procedures of the Company and all major accounting policy
matters; and (f) making recommendations to the Board of Directors with respect
to auditing policies and procedures and the scope and extent of audits. During
fiscal year 1998, the Audit Committee held two meetings.
The functions of the Compensation Committee generally are to determine and
oversee the Company's policies with respect to the compensation of the executive
officers of the Company. The Performance Compensation Committee, consisting
solely of members of the Compensation Committee who, to the extent legally
required, qualify as "Outside Directors" under Section 162(m) of the Internal
Revenue Code and as "Non-Employee Directors" under rule 16b-3(c) of the
Securities Exchange Act of 1934, as amended, administers the Stock Option Plan
of the Company. In addition, the Performance Compensation Committee is
responsible for awarding compensation intended to qualify for the exception for
performance-based compensation under Section 162(m) of the Code. The
Compensation Committee met once during fiscal 1998. During fiscal year 1998, the
Performance Compensation Committee did not hold any meetings and acted twice by
written consent.
4
<PAGE> 7
CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered to the Company and its subsidiaries for the
fiscal years ended June 30, 1996, 1997 and 1998 of the Company's Chief Executive
Officer and the four (4) remaining most highly compensated executive officers
serving at June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- -------------------- ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS OTHER ANNUAL OPTIONS LTIP COMPENSATION
POSITION YEAR ($) ($) COMPENSATION (#) PAYOUTS($) ($)
------------------ ------ ------- ------- ------------ ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sidney Craig............... 1998 500,000
Chairman and Chief 1997 500,000
Executive Officer(1) 1996 500,000 385,210
Jenny Craig................ 1998 500,000
Vice Chairman and 1997 500,000
President(1) 1996 500,000 385,210
Michael L. Jeub............ 1998 250,000 771 75,000 2,141(3)
Senior Vice President, 1997 250,000 5,335 25,000 2,188(3)
Treasurer and Chief 1996 250,000 80,000 781(3)
Financial Officer
Leslie A. Koll............. 1998 250,000 771 175,000 2,281(3)
Senior Vice President, 1997 250,000 4,801 25,000 1,813(3)
Marketing 1996 250,000 35,000 781(3)
Janet Rheault,............. 1998 212,500 656 187,000 3,334(3)
Senior Vice President -- 1997 200,000 4,290 3,000(3)
Operations 1996 120,902 20,000 125(3)
C. Joseph LaBonte(2)....... 1998 187,500 20,625 3,070,844(2)
1997 750,000 82,500 2,375(3)
1996 750,000 287,025 87,843 969(3)
</TABLE>
- ---------------
(1) Mr. Craig was elected to the additional office of Chief Executive Officer in
October 1997. Mrs. Craig was elected to the additional office of President
in October 1997.
(2) Mr. LaBonte was President and Chief Executive Officer from April, 1994
through October 1997. In connection with his resignation, Mr. LaBonte will
receive his former salary ($750,000 annually) through December 31, 1998, a
loan in the amount of $1,500,000 made by the Company in 1995 to Mr. LaBonte
to purchase a residence was forgiven, and the Company agreed to pay Mr.
LaBonte $1,000,000 in consideration of the cancellation of stock options for
1,000,000 shares of common stock of the Company held by him. $82,500 was
included in other annual compensation in fiscal 1996 and fiscal 1997 and
$20,625 in fiscal 1998 representing interest at 5.5% on the $1,500,000 loan
referred to above during those fiscal years. In fiscal 1998, $2,344 was
contributed to the Company's 401(k) plan for the account of Mr. LaBonte.
(3) Represents the Company's contributions to the accounts of the named
executive officers pursuant to the Company's 401(k) plan.
5
<PAGE> 8
OPTION GRANTS TABLE
The following table sets forth information with respect to the grant of
options to named executive officers during the fiscal year dated June 30, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Jeub(1)......... 25,000 1.6% 5.88 2/10/2008 $ 92,448 $ 234,280
(2) 50,000 3.2% 5.82 4/21/2008 $183,008 $ 463,779
Leslie A. Koll(1).......... 125,000 8% 5.88 2/10/2008 $462,240 $1,171,400
(2) 50,000 3.2% 5.82 4/21/2008 $183,008 $ 463,779
Janet Rheault(1)........... 137,000 8.8% 5.88 2/10/2008 $506,612 $1,283,855
(2) 50,000 3.2% 5.82 4/21/2008 $183,008 $ 463,779
</TABLE>
- ---------------
(1) These options become exercisable in 33% installments commencing one year
from the date of grant, February 10, 1998, with full vesting occurring on
the third anniversary of the grant date.
(2) These options become exercisable in 25% installments commencing one year
from the date of grant, April 21, 1998, with full vesting occurring on the
fourth anniversary of the date of grant.
(3) These amounts represent potentially realizable values at assumed rates of
appreciation in value of the Common Stock of the Company. No gain will be
realized by the optionees without an increase in the value of shares of
Common Stock of the Company which will benefit all shareholders.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the exercise of
options during the fiscal year ended June 30, 1998, options held at the end of
the fiscal year and the value of unexercised options at the end of the fiscal
year with respect to named executive officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Jeub............. 0 0 100,000 75,000 $18,250 $16,688
Leslie A. Koll.............. 0 0 0 175,000 0 34,938
Janet Rheault............... 0 0 2,400 187,600 1,038 37,387
</TABLE>
- ---------------
(1) The closing price of the Company's Common Stock on June 30, 1998, the last
trading day of the fiscal year, as quoted on the New York Stock Exchange,
was $6.0625.
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<PAGE> 9
TEN-YEAR OPTION/SAR REPRICINGS
The following table sets forth information with respect to the repricing
during fiscal 1994 and fiscal 1998 of options held by certain executive
officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES LENGTH OF ORIGINAL
UNDERLYING MARKET PRICE OF OPTION TERM
OPTIONS/SAR'S STOCK AT TIME EXERCISE PRICE AT NEW REMAINING AT
REPRICED OR OF REPRICING OR TIME OF REPRICING OR EXERCISE DATE OF REPRICING
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE OR AMENDMENT
---- ------- ------------- --------------- -------------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Jeub 2/10/98 25,000 $5.88 $ 9.38 $5.88 9 yrs.
Leslie A. Koll 2/10/98 100,000 $5.88 $ 7.07 $5.88 6 yrs. 9 mos.
Leslie A. Koll 2/10/98 25,000 $5.88 $ 9.38 $5.88 9 yrs.
Janet Rheault 2/10/98 100,000 $5.88 $ 9.50 $5.88 8 yrs. 2 mos.
Janet Rheault 2/10/98 25,000 $5.88 $ 9.38 $5.88 9 yrs.
Janet Rheault 2/10/98 12,000 $5.88 $ 7.32 $5.88 6 yrs. 9 mos.
William K. Dix 2/10/98 35,000 $5.88 $ 9.38 $5.88 9 yrs.
Alan Dobies 2/10/98 10,000 $5.88 $ 7.32 $5.88 6 yrs. 9 mos.
Alan Dobies 2/10/98 10,000 $5.88 $ 9.38 $5.88 9 yrs.
Alan Dobies 8/18/94 12,500 $5.63 $21.00 $5.63 7 yrs. 2 mos.
Alan Dobies 8/18/94 2,500 $5.63 $18.57 $5.63 8 yrs. 4 mos.
Ellen Destray Kane 8/18/94 70,000 $5.63 $ 7.25 $5.63 9 yrs. 6 mos.
Ellen Destray Kane 8/18/94 25,000 $5.63 $21.00 $5.63 7 yrs. 2 mos.
Ellen Destray Kane 8/18/94 5,000 $5.63 $18.57 $5.63 8 yrs. 4 mos.
</TABLE>
REPORT OF COMPENSATION COMMITTEE AND PERFORMANCE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee's function is determining and overseeing the
Company's policies with respect to the compensation of the executive officers of
the Company. The Performance Compensation Committee administers the Company's
Stock Option Plan and awards compensation intended to qualify for the exception
for performance based compensation under Section 162(m) of the Internal Revenue
Code. The Committees' goal is to have a competitive compensation plan which
provides appropriate incentives to executive officers based upon the performance
of the Company and which attracts and retains key managers. The Committees
currently intend to structure executive compensation in a manner that will
enable the Company to deduct such compensation under the federal income tax
laws.
The compensation of the Company's Chairman and Chief Executive Officer,
Sidney Craig, the Company's Vice Chairman and President, Jenny Craig, the
Company's Senior Vice President, Treasurer and Chief Financial Officer, Michael
L. Jeub, the Company's Senior Vice President, Marketing, Leslie A. Koll, and the
Company's Senior Vice President, Operations, Janet Rheault, was determined
pursuant to the Company's employment agreements with these officers which are
summarized below under "Employment Agreements."
The following description of the Company's compensation policy applies to
the executive officers other than the Chairman and Chief Executive Officer and
Vice-Chairman and President.
The compensation program of the Company for executive officers during
fiscal 1998 consisted of cash compensation in the form of base salary, the
Management Deferred Bonus Program described below, and an award of stock options
under the Company's Stock Option Plan. The fiscal 1998 base salaries for
executive officers of the Company were determined in accordance with their
employment agreements, or by the Chief Executive Officer of the Company.
Executive officers of the Company are eligible to participate in the
Management Deferred Bonus Program which provides for a bonus pool to be
determined by the Board of Directors which cannot exceed 1% of operating income
and specified percentages of the increase, if any, in operating income over the
prior year. Amounts awarded under the Management Deferred Bonus Program are paid
25% in cash approximately
7
<PAGE> 10
90 days after the end of the fiscal year with the remaining 75% deferred for
five years and vesting 20% in each of those years.
The stock option component of executive officer compensation is to reward
management for performance over the long term as reflected in the Company's
stock price. Stock options only produce value to executives if the price of the
Company's stock appreciates, thereby directly linking the interests of
executives with those of stockholders. The amount of stock options awarded to
executive officers during fiscal 1998 was based upon recommendations of the
Chief Executive Officer and took into account, where applicable, the number of
options previously granted to an executive officer. In granting options and
establishing the amount of the grant, the Performance Compensation Committee
considered the recipient's position with the Company and subjective evaluations
of the recipient's individual performance and potential contribution. Options
granted during fiscal 1998 were at exercise prices equal to market price on the
date of grant.
During fiscal 1998, the Performance Compensation Committee offered
optionees, including certain executive officers, the opportunity to replace
existing options with new options at an exercise price equal to the market price
on the date of grant of the new options. The Performance Compensation Committee
took this action because it believed that the stock options held by these
persons, at prices in excess of market value, no longer served as an effective
incentive or retention device. The Committee believed that the grant of new
options with new vesting periods and at the then current market price would
serve to restore the incentive and retention objectives of stock options and was
in the best interests of the Company and its stockholders. See the table
"Ten-Year Option/SAR Repricings" above for certain information with respect to
the options granted to the named executive officers who received new options.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE PERFORMANCE COMPENSATION COMMITTEE
Andrea Van de Kamp Andrea Van de Kamp
Robert Wolf Robert Wolf
Marvin Sears
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements, effective November 5, 1991,
with each of Sidney and Jenny Craig, members of its Board of Directors and
indirect principal stockholders, and the Company's Chairman and Chief Executive
Officer and Vice-Chairman and President, respectively. Each of the employment
agreements was for a term of three years (which has been extended as described
below), and provides for compensation of $500,000 plus an annual bonus of .5% of
operating income if operating income increases by 16% or more over the prior
year, and 1% of operating income if operating income increases by 25% or more
over the prior year, provided that the annual bonus is to be pro rated for the
fiscal year in which the employment agreements terminate. Each of the employment
agreements has been extended on the same terms and conditions, such extensions
to be automatic, on a year-by-year basis, subject to the right of either party
to terminate the employment agreement at the end of any employment year during
the extended term by written notice given 60 days prior to the termination date.
The Company entered into an employment agreement with Mr. LaBonte providing
for his employment as President and Chief Executive Officer of the Company
through June 30, 1998. Mr. LaBonte's annual base salary was $750,000. Under the
employment agreement, in 1995 the Company loaned Mr. LaBonte $1,500,000 interest
free for the purpose of purchasing a principal residence in the vicinity of Del
Mar, California. Mr. LaBonte resigned as the President and Chief Executive
Officer and as a director of the Company in October 1997. In connection with his
resignation, Mr. LaBonte will receive his former salary ($750,000 annually)
through December 31, 1998, the $1,500,000 loan by the Company was forgiven by
the Company and the Company agreed to pay Mr. LaBonte $1,000,000 in
consideration of the cancellation of stock options for 1,000,000 shares of
common stock of the Company held by him.
The Company has entered into an employment agreement with Michael L. Jeub
providing for his employment as Senior Vice President, Treasurer and Chief
Financial Officer. Mr. Jeub's annual base salary under the agreement is $250,000
with a bonus at the discretion of the Board. If the Company terminates Mr.
Jeub's employment without cause, all stock options held by him which are not
then exercisable become exercisable. If the Company terminates Mr. Jeub's
employment without cause, or if Mr. Jeub terminates his
8
<PAGE> 11
employment within ninety (90) days following a change of control of the Company,
Mr. Jeub is entitled to receive a severance payment equal to one year's salary
payable in twelve (12)equal monthly installments.
The Company has entered into an employment agreement with Leslie A. Koll
providing for his employment as Senior Vice President of Marketing of the
Company. Mr. Koll's annual base salary under the agreement is $250,000 with a
bonus at the discretion of the Board. If the Company terminates Mr. Koll's
employment without cause, all stock options held by him which are not then
exercisable become exercisable. If the Company terminates Mr. Koll's employment
without cause, or if Mr. Koll terminates his employment within ninety (90) days
following a change of control of the Company, Mr. Koll is entitled to receive a
severance payment equal to one year's salary payable in twelve (12) equal
monthly installments.
The Company has entered into an employment agreement with Janet Rheault
providing for her employment as Senior Vice President, Operations of the
Company. Ms. Rheault's annual base salary under the agreement is $200,000 with a
bonus at the discretion of the Board. If the Company terminates Ms. Rheault's
employment without cause, all stock options held by her which are not then
exercisable become exercisable. If the Company terminates Ms. Rheault's
employment without cause, or if Ms. Rheault terminates her employment within
ninety (90) days following a change of control of the Company, Ms. Rheault is
entitled to receive a severance payment equal to one year's salary payable in
twelve (12) equal monthly installments.
STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage change in
cumulative total stockholder return for the Company's Common Stock compared to
the cumulative total return of the Standard & Poor's 500 Stock Index and the Dow
Jones Consumer & Household Services Index. The graph and the values set forth in
the table below assume $100.00 invested in Common Stock of the Company, the S&P
500 Index and the Dow Jones Consumer & Household Services Index on June 30,
1993.
<TABLE>
<CAPTION>
Dow Jones
Consumer &
Jenny Craig S & P 500 Household Services
<S> <C> <C> <C>
Jun-93 100.00 100.00 100.00
Jun-94 38.67 101.41 114.52
Jun-95 53.17 127.84 129.76
Jun-96 115.21 161.09 161.09
Jun-97 44.71 216.99 178.60
Jun-98 39.07 282.43 233.67
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MEASUREMENT PERIOD (FISCAL YEAR COVERED) 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Jenny Craig, Inc. 100.00 39 53 115 45 39
S&P 500 100.00 101 128 161 217 282
Dow Jones Consumer & Household Services 100.00 115 136 161 179 234
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 12
COMPENSATION OF DIRECTORS
Outside directors are paid $5,000 per quarter plus $2,000 for each meeting
of the Board of Directors and each meeting of a committee of the Board of
Directors which takes place other than on the date of a Board meeting.
Directors, including non-employee directors, are eligible to receive
non-qualified options to purchase the Company's Common Stock under the Company's
Stock Option Plan. Non-employee directors who became directors prior to November
1, 1996 received an option for 5,000 shares upon joining the Board and receive a
grant of 500 shares on each anniversary thereof. In February 1998, the Board of
Directors replaced options to purchase common stock of the Company held by Ms.
Van de Kamp and Messrs. Bice, Sears and Wolf at various exercise prices with
options at the exercise price of $5.88 per share, the mean of the high and low
sales prices of a share of common stock of the Company on the date the Board
took such action. Ms. Van de Kamp received options to purchase 11,500 shares at
$5.88 per share in exchange for the termination of an equivalent number of
options at prices ranging from $7.07 to $9.38 per share; Mr. Wolf received
options to purchase 16,000 shares at $5.88 per share in exchange for the
termination of an equivalent number of options at prices ranging from $7.19 to
$9.75 per share; Mr. Bice received options to purchase 16,000 shares at $5.88
per share in exchange for termination of an equivalent number of options at
prices ranging from $7.19 to $9.75 per share; and Mr. Sears received options to
purchase 18,000 shares at $5.88 per share in exchange for termination of an
equivalent number of options at prices ranging from $7.44 to $21.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently composed of Andrea Van de Kamp,
Scott Bice, and Marvin Sears, and the Performance Compensation Committee is
currently composed of Ms. Van de Kamp and Mr. Bice. Marvin Sears, a director and
Secretary of the Company, is a partner in the law firm Proskauer Rose LLP,
counsel to the Company during fiscal 1998 and currently. See "Certain
Transactions."
CERTAIN TRANSACTIONS
Sidney and Jenny Craig own all of the outstanding stock of Jenny Craig
Weight Loss Centres (N.Z.) Limited, a New Zealand corporation which owns the 16
franchised Centres in New Zealand. For the year ended June 30, 1998 aggregate
gross revenues to the Company from the New Zealand operation amounted to
$5,440,000.
In May 1998, the Company engaged Bob Wolf Partners & Co., a business 50%
owned by Robert Wolf, a director of the Company, to assist the Company in an
advertising agency review. A fee of $60,000 and reimbursement of approximately
$20,200 in out of pocket costs has been paid by the Company in connection with
the review which has been completed.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, acting on the recommendation of its Audit
Committee, has selected the firm of KPMG Peat Marwick LLP to conduct an audit,
in accordance with generally accepted auditing standards, of the Company's
financial statements for the fiscal year ending June 30, 1999. KPMG Peat Marwick
LLP has served as independent auditors for the past fourteen fiscal years. A
representative of that firm is expected to be present at the Annual Meeting to
respond to appropriate questions and will be given an opportunity to make a
statement if so desired. This selection is being submitted for ratification at
the meeting. SJF, which beneficially owned 13,838,600 shares of the Company's
Common Stock as of the Record Date (representing approximately 66.9% of the
Common Stock outstanding as of the Record Date) intends to vote for ratification
of the independent auditors, thereby assuring such ratification.
The Board of Directors recommends that stockholders vote FOR ratification
of KPMG Peat Marwick LLP as independent auditors for the Company.
10
<PAGE> 13
OTHER MATTERS; STOCKHOLDER PROPOSALS
The Board of Directors is not aware presently of any matters to be
presented at the Annual Meeting other than the matters set forth herein. If,
however, other matters are properly brought before the Annual Meeting, the
enclosed proxy gives discretionary authority to the persons named therein to act
in accordance with their best judgment on such matters. Stockholder proposals
intended to be included in the proxy materials relating to the Annual Meeting of
Stockholders expected to be held in 1999 must be received by the Company not
later than June 7, 1999. A stockholder who intends to submit a proposal for the
Company's 1999 annual meeting that the stockholder does not intend to request be
included in the Company's proxy materials in accordance with SEC rules must give
notice to the Company prior to August 21, 1999. If the stockholder does not
provide the Company with timely notice of such a proposal, the persons
designated as management proxies on the Company's proxy card may exercise their
discretionary authority to vote on that proposal. If the stockholder does
provide the Company with timely notice of such a proposal, depending on the
circumstances, management's proxies may not be able to exercise their
discretionary authority to vote on the proposal. All stockholder proposals
should be addressed to the Secretary of the Company.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended June 30, 1998 is being mailed herewith to all
stockholders of record.
By order of the Board of Directors
Marvin Sears
Secretary
La Jolla, California
October 6, 1998
11
<PAGE> 14
PROXY
JENNY CRAIG, INC.
11355 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF JENNY CRAIG, INC.
CALLED FOR THURSDAY, NOVEMBER 5, 1998
The undersigned hereby appoints Sidney Craig, Jenny Craig, and Marvin Sears,
and each of them, as proxies, each with full power of substitution, and hereby
authorizes each of them to vote and represent as designated below all shares of
common stock of Jenny Craig, Inc. held of record by the undersigned at the
Annual Meeting of Stockholders of Jenny Craig, Inc. to be held at the Sheraton
Grand Torrey Pines Hotel, 10950 North Torrey Pines Road, La Jolla, California
92037, on Thursday, November 5, 1998, at 2:00 p.m. (Pacific Standard Time) and
at any and all adjournments or postponements thereof.
(Continued and to be signed on reverse side)
- -----------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
[JENNY CRAIG LOGO]
<PAGE> 15
Please mark ___
your votes as
indicated in X
this example. ___
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR all
nominees WITHHOLD
listed to AUTHORITY
the right to vote
(except as for all
marked to nominees
the contrary) listed
1. ELECTION OF DIRECTORS: [ ] [ ] NOMINEES: Sidney Craig, Jenny Craig, Marvin Sears, Scott Bice,
Andrea Van de Kamp, Robert Wolf
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
________________________________________________________________________
FOR AGAINST ABSTAIN
2. Proposal to approve [ ] [ ] [ ] 3. In their discretion, upon any and THIS PROXY WHEN PROPERLY EXECUTED
the appointment of KPMG all such other matters as may WILL BE VOTED IN THE MANNER DIRECTED
Peat Marwick LLP as properly come before the meeting HEREIN. IF NO DIRECTION IS MADE, THIS
independent auditors. or any adjournment or postponement PROXY WILL BE VOTED FOR THE ELECTION
thereof. OF DIRECTORS AND FOR PROPOSAL 2.
Signature _______________________________ Signature (if held jointly) ________________________________ Dated: _____________, 1998
NOTE: Please date this Proxy and sign exactly as your name appears thereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. The signer hereby
revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof.
- ------------------------------------------------------------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY TEARING OFF THE TOP PORTION
OF THIS SHEET AND RETURNING IT IN THE ENCLOSED POSTPAID ENVELOPE
</TABLE>
