<PAGE>
================================================================================
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 Section 240.14a-11(c) or Section 240.14a-12
GLACIER WATER SERVICES, 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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
GLACIER WATER SERVICES, INC.
2261 Cosmos Court
Carlsbad, California 92009
_________________________
NOTICE OF ANNUAL MEETING
To Be Held at the offices of
Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars, Second Floor
Los Angeles, California 90067
June 2, 1999
To Our Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Glacier Water Services, Inc. (the "Company") will be held at 9:00
a.m. (Los Angeles time) on Wednesday, June 2, 1999, at the offices of Kayne
Anderson Investment Management, Inc., 1800 Avenue of the Stars, Second Floor,
Los Angeles, California, 90067 for the following purposes:
1. To elect six directors to serve for a term of one year until the next
Annual Meeting of Stockholders and until their respective successors have
been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the 1999 fiscal year; and
3. To consider and vote upon such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Holders of the Company's common stock, par value $.01 per share, as of the
close of business on April 12, 1999, the record date fixed by the Board of
Directors, are entitled to notice of and to vote at the Annual Meeting. The
Company's Board of Directors and officers urge that all stockholders of record
exercise their right to vote at the Annual Meeting personally or by proxy.
Accordingly, we are sending you the enclosed Proxy Statement and proxy card, as
well as the fiscal year 1998 Annual Report.
Whether or not you plan to attend the Annual Meeting, please indicate your
vote on the accompanying proxy card and sign, date and return it as promptly as
possible in the enclosed self-addressed, postage-paid envelope.
Your prompt response will be appreciated.
By Order of the Board of Directors
/s/ Jerry A. Gordon
Jerry A. Gordon
President and Chief Operating Officer
Carlsbad, California
May 4, 1999
<PAGE>
GLACIER WATER SERVICES, INC.
2261 Cosmos Court
Carlsbad, California 92009
----------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 2, 1999
------------------------
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Glacier Water
Services, Inc. (the "Company") to be used at the Annual Meeting of Stockholders
on Wednesday, June 2, 1999 (the "Annual Meeting"). This Proxy Statement, the
enclosed form of proxy and the fiscal year 1998 Annual Report are being sent to
stockholders on or about May 4, 1999.
At the Annual Meeting, stockholders will be asked to consider and vote upon the
following items:
1. The election of six directors to serve for a term of one year until
the next Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the 1999 fiscal year; and
3. To consider and vote upon such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The fiscal year 1998 Annual Report that accompanies this Proxy Statement is
not to be regarded as proxy soliciting material.
The Board of Directors of the Company believes that election of its director
nominees and ratification of the appointment of Arthur Andersen LLP as the
Company's independent auditors are in the best interests of the Company and its
stockholders and recommends to the stockholders of the Company the approval of
each of these proposals.
1
<PAGE>
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed form
received by the Board of Directors prior to the Annual Meeting will be voted at
the Annual Meeting in accordance with the specifications made therein by the
stockholders, unless authority to do so is withheld. If no specification is
made, shares represented by duly executed and unrevoked proxies will be voted
FOR the election as directors of the nominees listed herein, FOR the
ratification of Arthur Andersen LLP as the Company's independent auditors and,
with respect to any other matter that may properly come before the Annual
Meeting, in the discretion of the persons voting the respective proxies.
No provision for rights of appraisal or similar rights of dissenters are
applicable with respect to the matters to be voted upon at the Annual Meeting.
Execution of a proxy will not in any way affect a stockholder's right to
attend the meeting and vote in person, and any stockholder giving a proxy may
revoke it at any time prior to its exercise at the Annual Meeting by giving
notice of such revocation either personally or in writing to the Secretary of
the Company at the Company's executive offices, located at the address set forth
above, by subsequently executing and delivering another proxy or by voting in
person at the Annual Meeting.
The Company has retained ChaseMellon Shareholder Services to assist in
soliciting proxies from brokers and nominees for the Annual Meeting. The
estimated cost for these services is $20,000 and will be borne by the Company.
It is contemplated that this solicitation will be primarily by mail. In
addition, some of the officers, directors and employees of the Company may
solicit proxies by telephone, facsimile, telegraph or cable; such persons will
not be compensated for such solicitation.
Only holders of record of the Company's common stock, $.01 par value (the
"Common Stock"), as of the close of business on April 12, 1999 (the "Record
Date"), will be entitled to notice of and to vote at the Annual Meeting. On the
Record Date, there were outstanding 2,853,869 shares of Common Stock. Each
share of Common Stock is entitled to one vote on all matters presented at the
Annual Meeting.
Vote Required
The election of the director nominees requires a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under Delaware law, the Company's
Certificate of Incorporation and the Company's Bylaws, shares as to which a
stockholder abstains or withholds from voting on the election of directors and
shares as to which a broker indicates that it does not have discretionary
authority to vote ("broker non-votes") on the election of directors will not be
counted as voting thereon and therefore will not affect the election of the
nominees receiving a plurality of the votes cast.
The ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company for the 1999 fiscal year require the affirmative vote of
the holders of at least a majority of the aggregate outstanding shares of Common
Stock represented at the meeting.
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company fixes the number of directors
at not less than one nor more than nine, with the exact number to be set by
resolution of the Board of Directors. The Board of Directors has set the
authorized number of directors at six, and proposes the election of six
directors to hold office until the next Annual Meeting and until their
successors are duly elected and qualified. Unless authority to vote for
directors has been withheld in the proxy, the persons named in the enclosed
proxy intend to vote at the Annual Meeting for the election of the six nominees
presented below. Except as set forth below, persons named as proxies may not
vote for the election of any person to the office of director for which a bona
fide nominee is not named in the Proxy Statement. All nominees have consented
to serve as a director for the ensuing year. Although the Board of Directors
does not contemplate that any of the nominees will be unable to serve, if any
nominee withdraws or otherwise becomes unavailable to serve, the persons named
in the enclosed proxy will vote for any substitute nominee designated by the
Board of Directors.
The names and certain information concerning the persons to be nominated as
directors by the Board of Directors at the Annual Meeting are set forth below.
2
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF
---
THE NOMINEES NAMED BELOW.
NOMINEES FOR DIRECTORS FOR TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
Name and Age as of the Position, Principal Occupation, Business
June 2, 1999 Meeting Date Experience and Directorships
- ------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Douglas C. Boyd, 53 Mr. Boyd has been a director of the Company since June 1997. Mr. Boyd is the President and
Chief Executive Officer of Boyd Communications, an integrated marketing communications
company based in Los Angeles, California. Mr. Boyd has served in such capacity since 1972.
Jerry A. Gordon, 53 Mr. Gordon has been the Company's President and Chief Operating Officer since September
1994, and a director of the Company since June 1997. Mr. Gordon joined the Company in June
1993 as Vice President of Marketing. From 1992 to 1993 Mr. Gordon was a business consultant
specializing in management operations in start-up companies.
Richard A. Kayne, 54 Mr. Kayne has been a director of the Company since March 1995. Mr. Kayne currently serves as
President and Chief Executive Officer of Kayne Anderson Investment Management, Inc. and its
broker-dealer affiliate, KA Associates, Inc., as Administrative Manager of Kayne Anderson
Investment Management, LLC and as President of KA Limited, Inc. Mr. Kayne has been with
Kayne Anderson Investment Management since 1985 when it was founded by Mr. Kayne and John E.
Anderson. Mr. Kayne is also a Director of Foremost Insurance Corporation of America and The
Right Start, Inc., Kayne Anderson Investment Management, Inc. KA Associates, Inc. and KA
Limited Inc.
Scott H. Shlecter, 46 Mr. Shlecter has been a director of the Company since June 1997. Mr. Shlecter is the
President Emeritus and a founder of the North American practice of L.E.K. Consulting, an
international business consulting firm. Mr. Shlecter served as President of L.E.K.
Consulting
from 1974 to January 1, 1999.
Robert V. Sinnott, 50 Mr. Sinnott has been a director of the Company since April 1993. Mr. Sinnott currently
serves as a Senior Vice President of Kayne Anderson Investment Management and has served in
such capacity since 1992. Mr. Sinnott is also a Director of Plains Resources Inc.
Jerry R. Welch, 48 Mr. Welch has been a director of the Company since October 1991, the Chairman of the Board
since April 1993 and was appointed Chief Executive Officer in September 1994. From October
1991 until his resignation in September 1992, Mr. Welch served as the Company's Chief
Executive Officer. He also served as Chairman of the Board from January 1992 through
September 1992. Mr. Welch currently serves as a Senior Vice President of Kayne Anderson
Investment Management and has served in such capacity since January 1993. Mr. Welch is also
the Chairman of the Board and Chief Executive Officer of The Right Start, Inc., a retailer
of products for infants and young children. Kayne Anderson Investment Management holds an
equity ownership position in The Right Start, Inc.
</TABLE>
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors is responsible for the overall affairs of the
Company. The Board of Directors met a total of five times during the 1998
fiscal year, including regularly scheduled and special meetings. The Board of
Directors has a standing Audit Committee, Compensation Committee and a
Nominating Committee. The current members of each of the Board's committees are
listed below. No member of the Board of Directors, the Audit Committee, the
Compensation Committee or the Nominating Committee attended fewer than 75% of
the meetings of the Board or such Committees except Peter B. Foreman who is
retiring from the Company's Board of Directors.
The Audit Committee
The members of the Audit Committee for the 1998 fiscal year were Messrs.
Shlecter, Sinnott and Peter B. Foreman. The Audit Committee met in March 1998.
The Audit Committee, which is composed solely of outside directors, meets
periodically with the Company's independent auditors and management to discuss
accounting principles, financial and accounting controls, the scope and results
of the annual audit, internal controls and other matters; advises the Board on
matters related to accounting and auditing; and reviews management's selection
of independent auditors. The independent auditors have complete access to the
committee, without management present, to discuss results of their audit and
their observations on adequacy of internal controls, quality of financial
reporting, and other accounting and auditing matters.
3
<PAGE>
The Compensation Committee
The members of the Compensation Committee for fiscal year 1998 were Messrs.
Boyd, Foreman and Kayne. The Compensation Committee reviews and takes action
regarding terms of compensation, employment contracts and pension matters that
concern officers and key employees of the Company. The Compensation Committee
is also responsible for the administration and award of stock options under the
Company's stock option plans. The Compensation Committee met in April 1998 and
January 1999 to determine the compensation of the executive officers and key
employees of the Company.
The Nominating Committee
The current members of the Nominating Committee are Messrs. Boyd, Sinnott
and Welch. The Nominating Committee recommends to the Board nominees for Board
membership and makes recommendations as to Board policies concerning the
selection, tenure and qualification of directors. The Nominating Committee
reviews the qualifications of, among others, those persons recommended for
nomination to the Board of Directors by stockholders. A stockholder suggesting
a nominee to the Board should send the nominee's name, biographical material,
beneficial ownership of the Company's stock and other relevant information in
writing to the Secretary of the Company in a timely manner as set forth in the
Company's Bylaws, accompanied by a consent of such nominee to serve as a
director if elected. Nominees must be willing to devote the time required to
serve effectively as a director and as a member of one or more Board committees.
In order to submit a nomination, a stockholder must be a holder of record on the
date of such submission and on the record date for determining stockholders
entitled to vote at the meeting at which the election will take place. The
Nominating Committee met in April 1999, for the purpose of nominating the
nominees named in this Proxy Statement.
4
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Position Age
- ---- -------- ---
<S> <C> <C>
Jerry R. Welch....... Chairman of the Board, Chief Executive Officer 48
and Director
Jerry A. Gordon...... President, Chief Operating Officer and Director 53
Glen A. Skumlien..... Executive Vice President, Operations 49
S. Dane Seibert...... Senior Vice President, Marketing 50
John T. Vuagniaux.... Senior Vice President, Operations 50
W. David Walters..... Chief Financial Officer, Vice President, Finance
and Secretary....... 50
Roger J. Gilchrist... Vice President, Eastern Operations 50
Luz E. Gonzales...... Vice President, Human Resources 46
Brian T. Nakagawa.... Vice President, Technology & Information Systems 45
</TABLE>
The executive officers are elected by and serve at the discretion of the Board
of Directors until their successors are duly chosen and qualified.
Jerry R. Welch
Mr. Welch has been a director of the Company since October 1991, has been the
Chairman of the Board since April 1993 and was appointed Chief Executive Officer
in September 1994. He also served as Chairman of the Board from January 1992
through September 1992. From October 1991 until his resignation in September
1992, Mr. Welch served as the Company's Chief Executive Officer. Mr. Welch
currently serves as a Senior Vice President of Kayne Anderson Investment
Management and has served in such a capacity since January 1993. Mr. Welch is
also the Chairman of the Board and Chief Executive Officer of The Right Start,
Inc., a retailer of products for infants and young children. Kayne Anderson
Investment Management holds an equity ownership position in The Right Start,
Inc.
Jerry A. Gordon
Mr. Gordon has served as the President and Chief Operating Officer of Glacier
Water Services, Inc. since September 1994, and as a Director of the Company
since June 1997. Mr. Gordon joined the Company in June 1993 as Vice President
of Marketing. From 1992 to 1993, Mr. Gordon was a business consultant
specializing in management operations in start-up companies.
Glen A. Skumlien
Mr. Skumlien has served as Executive Vice President, Operations since
September 1994. From November 1991 to September 1994, Mr. Skumlien served as
Vice President-Operations.
S. Dane Seibert
Mr. Seibert has served as Senior Vice President of Marketing since joining
the Company in March 1995. From 1990 until joining the Company Mr. Seibert was
Corporate Vice President - International Marketing for Miller/Zell Inc.
John T. Vuagniaux
Mr. Vuagniaux has served as Senior Vice President, Operations since November
1996, after joining the Company in January 1995 as Vice President, Service
Support. From April 1994 to January 1995, Mr. Vuagniaux was owner of Logistics
Solutions, a consulting firm specializing in logistics and operations
management. From January 1992 to April 1994, Mr. Vuagniaux was Director of
Distribution for Blockbuster Entertainment Corporation.
5
<PAGE>
W. David Walters
Mr. Walters joined the Company in January 1999 as Chief Financial Officer
and Vice President, Finance and Secretary. From 1997 to 1999, Mr. Walters was
the Vice President Finance and Controller for the Penn Traffic Company. From
1996 to 1997, Mr. Walters was the Vice President, Controller for Bruno's, Inc.
From 1992 to 1996, Mr. Walters was the Chief Financial Officer for ABCO Markets,
Inc.
Roger J. Gilchrist
Mr. Gilchrist has served as Vice President, Eastern Operations since
February 1996. Mr. Gilchrist joined the Company in April 1988 as a District
Manager. In May 1993, Mr. Gilchrist assumed the position of Regional Sales
Manager for the Eastern Division.
Luz E. Gonzales
Mrs. Gonzales joined the Company in February 1995 as Vice President of
Human Resources. From 1981 to February 1995, Mrs. Gonzales was Corporate
Director of Human Resources for Southwest Water Company, a water service
company.
Brian T. Nakagawa
Mr. Nakagawa has served as Vice President, Technology and Information
Systems since February 1996, after joining the Company as Director of Technology
and Information Systems in June 1995. Prior to joining the Company Mr. Nakagawa
was the owner of New Frontier Technologies, an information systems consulting
company.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary of Compensation
The table below presents information concerning the compensation of the
Chief Executive Officer of the Company and the four executive officers of the
Company (the "Named Executive Officers") who received over $100,000 as
compensation for services rendered to the Company during fiscal year 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Commpensation Awards
---------------------------------------------- -------------------------
Name Other Securities All
And Annual Underlying Other
Principal Salary Bonus (1) Compensation(2) Options Compensation
Position Year ($) ($) ($) (#) ($)
- -------------------------- ---- --------------- --------- --------------- ------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch Chairman 1998 -- -- -- 3,455 $82,000
of the Board and Chief 1997 -- -- -- 7,317 $82,000
Executive Officer(3,4) 1996 -- -- -- 6,700 $82,000
Jerry A. Gordon 1998 $193,432 -- -- 33,333 --
President and Chief 1997 $177,175 -- -- 6,000 --
Operating Officer 1996 $168,027 $45,000 -- 10,000 --
S. Dane Seibert 1998 $167,564 -- -- 22,222 --
Senior Vice President, 1997 $156,912 -- -- 6,000 --
Marketing (5) 1996 $140,374 $61,250 -- 7,000 --
Glen A. Skumlien 1998 $137,577 -- -- 22,222 --
Executive Vice 1997 $129,066 -- -- 6,000 --
President 1996 $117,046 $26,250 -- 3,000 --
John T. Vuagniaux 1998 $125,163 -- -- 22,222 --
Senior Vice President, 1997 $117,519 -- -- 6,000 --
Operations 1996 $100,548 $22,500 -- 10,000 --
</TABLE>
(1) Except as indicated in (5), amounts represent bonuses earned in fiscal 1996
and paid in 1997.
(2) Other Annual Compensation did not exceed the lesser of $50,000 or 10% of
the Named Executive Officer's salary and bonus.
(3) All Other Compensation for Mr. Welch represents fees for his services as
Chief Executive Officer.
(4) Long-Term Compensation Awards for Mr. Welch include 3,455 options received
in 1998, 4,317 options received in 1997, and 5,200 options received in 1996
in lieu of director's fees of $18,000 in each year.
(5) $35,000 of Mr. Seibert's 1996 bonus was paid in 1996; the remaining $26,250
was paid in 1997.
7
<PAGE>
Option Grants in Fiscal 1998
The following table presents certain information regarding stock option
grants to each of the Named Executive Officers during the fiscal year ended
January 3, 1999.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term
---------------------- ------------------
Number of
Securities Percent of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration 5% 10%
Name (#) Fiscal Year ($/Share) Date ($) ($)
---- --- ----------- ------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch 3,455 1.49% $29.75 2003 $ 28,397 $ 62,752
Jerry A. Gordon 33,333 14.41% $31.25 2008 $655,088 $1,660,129
S. Dane Seibert 22,222 9.61% $31.25 2008 $436,725 $1,106,752
Glen A. Skumlien 22,222 9.61% $31.25 2008 $436,725 $1,106,752
John T. Vuagniaux 22,222 9.61% $31.25 2008 $436,725 $1,106,752
</TABLE>
Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values
The following table presents certain information regarding stock option
exercises during fiscal 1998 and fiscal year-end option values of unexercised
options for each of the Named Executive Officers.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised in-the-Money
Options Options
Shares Acquired at FY-End at FY-End
on Exercise Value Realized # Exercisable/ $ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
<S> <C> <C> <C> <C>
Jerry R. Welch -- -- 27,043/6,080 $ 212,438/$7,593
Jerry A. Gordon -- -- 64,000/45,333 $652,125/$47,500
S. Dane Seibert -- -- 27,500/37,722 $178,500/$73,500
Glen A. Skumlien -- -- 28,000/28,222 $ 311,125/$9,000
John T. Vuagniaux -- -- 21,500/36,722 $126,000/$62,000
</TABLE>
8
<PAGE>
Compensation of Directors
Mr. Welch, the Chairman of the Board and Chief Executive Officer, receives
$25,000 per quarter for his services as such. The other directors are
compensated for their services at $4,500 per quarter. All members of the Board
of Directors may elect to defer all or a portion of their annual compensation
and receive instead options to purchase common stock of the Company at the fair
market value on the date the options are granted. All members of the Board of
Directors are reimbursed for all expenses incurred in connection with their
serving on the Board.
1994 Stock Compensation Program
The Company adopted its 1994 Stock Compensation Program (the "Program") to
provide a means of encouraging certain officers, employees, directors, advisors
and consultants of the Company and its subsidiaries or any parent company to
obtain a proprietary interest in the enterprise and thereby create an additional
incentive for such persons to further the Company's growth and development. The
Program provides for the granting of options to certain officers, employees,
directors, advisors and consultants of the Company and its subsidiaries or any
parent company to purchase shares of the Company's common stock. The following
description of the Program is qualified in its entirety by the full text of the
Program, copies of which have been filed with the Securities and Exchange
Commission.
The Program is divided into two parts. Part I is the 1994 Employee Stock
Option Plan and Part II is the 1994 Non-Employee Director Stock Option Plan. As
described in further detail herein, Part I provides for discretionary grants of
stock options to officers, employees, advisors and consultants of the Company.
Such stock options may be either incentive stock options (each, an "ISO") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified stock options that are not intended to be, or do not qualify as,
ISOs (each, an "NSO"), provided, however, that ISOs may only be granted to
-------- -------
employees of the Company. Part II provides for the non-discretionary annual
grant of options to purchase 1,500 shares of the Company's common stock to each
non-employee director of the Company. Stock options granted under Part II may
only be NSOs. An ISO or NSO that is issued or issuable under the Program may be
referred to herein as an "Option"; and the Common Stock issued or issuable upon
exercise of an Option shall be referred to herein as "Stock". The holder of an
Option may be referred to herein as a "holder" or "optionee". The Program is
not an "employee benefit plan" under Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and, therefore, is not subject to the
provisions of ERISA. The Program is not a qualified plan under Section 401(a)
of the Code.
Additionally, under both Parts I and II of the Program, directors of the
Company who are paid a fee for their services as directors ("Directors' Fees")
will be allowed to make an election (a "Deferral Election") to receive
Directors' Fees (excluding reimbursement of expenses) in the form of options
("Deferral Election Stock Options") to acquire the Company's common stock. The
Deferral Election Stock Options shall be granted on the date of the Company's
Annual Meeting in each year for which a Deferral Election has been made. The
number of Deferral Election Stock Options granted to an electing director shall
be an amount whose value, as determined by an independent valuation expert
retained by the Compensation Committee, is equivalent on the date of the grant
to the cash compensation which the director would otherwise have been entitled
to receive for such year. In general, Deferral Election Stock Options will vest
and become exercisable one year from the date of grant (or such longer period as
the Compensation Committee may set) and will be exercisable at a price per share
equal to the closing price of the Company's common stock on the exchange on
which it is traded at the close of business on the first trading day preceding
the date of grant. Deferral Election Stock Options will become immediately
exercisable upon a director's death or disability or upon a Change of Control.
If a director's membership on the Board of Directors ends for any reason other
than death, disability or a Change in Control, then the number of Deferral
Election Stock Options granted for the year in which the membership ends shall
be reduced to reflect the amount of compensation actually earned by the director
in that year and the remaining Deferral Election Stock Options granted in that
year shall be immediately exercisable. Once any Deferral Election Stock Options
become exercisable, they shall remain exercisable for the lesser of (i) five
years after the date of grant or (ii) one year after the director's membership
on the Board of Directors ends for any reason. Deferral Election Stock Options
granted to non-employee directors may only be NSOs.
The Program is administered by the Compensation Committee consisting of two
or more disinterested members (non-employee directors who are only eligible for
formula grants and Deferral Election Stock Options under Part II of the
Program). The Compensation Committee may, from time to time and subject to the
provisions of the Program, adopt rules and regulations relating thereto and make
all other determinations as it
9
<PAGE>
deems necessary or desirable for the administration of the Program. The Program
is to be administered in accordance with Rule 16b-3 under the Exchange Act.
The Compensation Committee may from time to time modify or amend the
Program as it deems necessary or desirable but may not change an Option already
granted without the written consent of the holder of such Option (or Stock
issued on exercise thereof), except pursuant to the adjustments for changes in
capital structure and certain business combinations described below and provided
that the terms and provisions of the Program which determine the eligibility of
non-employee directors under Part II and the amount, price and timing of the
formula grants and Deferral Elections under Part II may not be amended more than
once every six months except to conform with changes in the Code or ERISA. In
addition, unless approved at an annual meeting or a special meeting by the
holders of at least a majority of the outstanding shares of Common Stock
entitled to vote thereon, no amendment or change shall be made in the Program
materially increasing the total number of shares which may be issued under the
Program.
The Program will continue in effect until March 17, 2004 or until such
earlier time as (i) Options have been granted and exercised with respect to all
shares that are available under the Program or (ii) the Program is terminated by
the Compensation Committee. The Compensation Committee shall have the right to
suspend or terminate the Program at any time, but such suspension or termination
shall not affect the exercise of Options then outstanding under the Program.
The maximum numbers of shares of common stock issuable under Parts I and II
of the Program are currently 525,000 and 180,000 respectively, subject to
adjustment as described below. Such shares of common stock may be authorized
and unissued shares or may be treasury shares. If any Options terminate or
expire without having been exercised in full, the shares which were subject to
the unexercised portion of such Options shall be available for issuance under
the Plan. As of January 3, 1999, 4,500 options had been exercised under Part
I, and 6,000 shares had been exercised under Part II of the Program. 438,175
and 95,413 shares were reserved for issuance subject to outstanding options
under Part I and II of the Program, respectively, and 82,325 and 78,587 shares
were reserved for future grants of stock options under Parts I and II of the
Program, respectively.
In the event of changes in the common stock by virtue of a stock dividend,
stock split, reverse stock split, reclassification, combination or exchange of
shares, or by reason of a merger, consolidation, recapitalization or
reorganization involving the Company, the Compensation Committee will
appropriately and proportionately adjust the maximum number and kind of shares
as to which Options may be granted under the Program and will make a
corresponding adjustment in the number and kind of shares issuable upon exercise
of outstanding Options.
Upon the occurrence of a Change of Control (as defined below), Options held
by individuals who are employed by the Company (or who are members of the Board)
as of the date of such Change of Control or who were terminated (or removed from
the Board) in anticipation of such Change of Control shall immediately vest and
become exercisable and in the event of a Change of Control of the type described
in (i) below, such individuals shall have the right to require the Company to
repurchase their Options for the difference between the fair market value of the
underlying stock and the exercise price of the Options. "Change of Control" for
purposes of this provision means (i) the acquisition by a person or entity other
than the Company, any officer or director of the Company or Kayne Anderson
Investment Management, Inc., of over 50% of the Company's stock, (ii) approval
by the shareholders of a merger, reorganization or consolidation that results in
new ownership of the Company or (iii) approval by the shareholders of a
liquidation of the Company or the disposition of substantially all of its
assets.
In the event the employment by the Company or any parent or subsidiary of
the Company (or membership on the Board) of an optionee under the Program is
terminated for any reason (other than death, disability, or termination for
Cause), any Option held by such optionee may be exercised, during its term,
within a period of 90 days after the date of such termination of employment (or
membership on the Board) to the extent such option was exercisable at the time
of such termination of employment (or membership on the Board), or, with respect
to optionees under Part I only, within such other period, and subject to such
terms and conditions, as may be
10
<PAGE>
prescribed by the Compensation Committee. In the event the employment by the
Company or any parent or subsidiary of the Company (or membership on the Board)
of an optionee under the Program is terminated due to death or disability, such
Optionee's Options shall immediately vest and become exercisable within a period
of one year after the date of such termination of employment (or membership on
the Board) or, with respect to optionees under Part I only, within such other
period, and subject to such terms and conditions, as may be prescribed by the
Compensation Committee. In the event such optionee was terminated (or removed
from the Board) for Cause, all unexercised Options held by such optionee shall
be forfeited and canceled. "Cause" is defined as (i) the willful failure to
perform duties other than due to physical or mental incapacity, (ii) conviction
for a felony, (iii) misconduct which is material injurious to the Company or
(iv) the willful commission of any fraud on the Company. Notwithstanding the
foregoing, Deferral Election Stock Options generally will remain exercisable for
the lesser of (i) 5 years after the date of grant of such options or (ii) one
year after the director's membership on the Board ends for any reason.
The Company has registered under the applicable securities laws the Stock
to be issued upon exercise of any Options and as a result such shares will be
freely transferable under the Securities Act of 1933, as amended (the
"Securities Act"); provided that shares of common stock acquired upon the
exercise of Options held by "affiliates" (as defined in the Securities Act) of
the Company may be resold by them only in compliance with Rule 144 under the
Securities Act or as otherwise permitted under the Securities Act.
Certain Relationships and Related Party-Transactions
Kayne Anderson Investment Management, Inc. currently manages a significant
portion of the Company's investment portfolio. Jerry R. Welch, the Chairman of
the Board of Directors and Chief Executive Officer of the Company, and Robert
Sinnott and Richard Kayne, members of the Board of Directors of the Company, are
also employed as senior executives of Kayne Anderson Investment Management, Inc.
During fiscal 1998, the Company paid investment management fees of $103,000 to
Kayne Anderson Investment Management, Inc.
During fiscal 1998, the Company paid consulting fees of $46,000 to L.E.K.
Consulting Group. Scott H. Shlecter, a member of the Company's Board of
Directors, is the President Emeritus and founder of the North American practice
of L.E.K. Consulting Group.
On January 29, 1999, Peter B. Foreman, who is retiring from the Company's
Board of Directors as of June 2, 1999, sold 59,905 shares of the Company's
common stock to the Company at a price of $26.35 per share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who own more than 10% of
the Company's common stock to file reports of ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission. Executive officers, directors and 10%
stockholders are required by the Commission to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, directors and
greater than 10% beneficial owners have complied with all the filing
requirements applicable to them with respect to transactions during fiscal 1998,
except that a Form 3 was not timely filed for W. David Walters relating to his
status as an executive officer of the Company.
No director, officer, affiliate or beneficial owner of the Company, or any
associate thereof, is a party adverse to the Company or any of its subsidiaries
in any lawsuit nor has a material adverse interest thereto.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION/1/
Compensation Philosophy
The Compensation Committee's executive compensation philosophy is to
provide competitive levels of compensation while establishing a strong, explicit
link between executive compensation and the achievement of the Company's annual
and long-term performance goals, rewarding above-average corporate performance,
recognizing individual initiative and achievement, and assisting the Company in
attracting and retaining highly-skilled management. This philosophy has been
adhered to by developing incentive pay programs which provide competitive
compensation and mirror Company performance. Both short-term and long-term
incentive compensation are based on direct, explicit links to Company
performance and the value received by stockholders.
Fiscal 1998 Executive Compensation
Cash compensation includes base salary and annual bonuses. Base salaries
are set at competitive levels, with reference to the responsibilities undertaken
by personnel and their experience. Annual salary adjustments are determined by
reference to the Company's and the individual's performance, as well as the
competitive marketplace generally. Annual bonuses are awarded based primarily
on management's ability to achieve specified earnings levels.
Stock-Based Incentives
The Compensation Committee believes that it is essential to align the
interests of the executives and other management personnel responsible for the
growth of the Company with the interests of the Company's stockholders. The
Compensation Committee believes that this alignment is best accomplished through
the provision of stock-based incentives. Therefore, the Company has
periodically granted stock options to officers, salaried employees, advisors,
consultants and non-employee directors under the Company's stock option plans.
Fiscal 1998 President and Chief Executive Officer Compensation
Mr. Gordon's compensation as President of the Company for the fiscal year
1998 was determined by the Compensation Committee of the Board. For fiscal year
1998, the Compensation Committee determined that Mr. Gordon would be entitled to
receive base salary of $187,000 and a bonus of $65,000, subject to the Company's
achievement of specified earnings levels in fiscal year 1998. No bonus was
awarded to Mr. Gordon in fiscal 1998. In April 1998, the Compensation Committee
granted Mr. Gordon options to purchase 33,333 shares of the Company's common
stock.
During fiscal year 1998, Mr. Welch received $20,500 per quarter for his
services as Chief Executive Officer. Mr. Welch elected to defer the $4,500 per
quarter fee related to his service as Chairman of the Board, and in lieu of such
compensation, received options to purchase 3,455 shares of common stock of the
Company. Mr. Welch is also employed as a Senior Vice President of Kayne
Anderson Investment Management and as Chairman of the Board and Chief Executive
Officer of The Right Start, Inc., and devotes a substantial amount of his time
and attention to such employment.
Summary
After its review of the Company's existing programs, the Compensation
Committee believes that the total compensation program for executives of the
Company over the last fiscal year was competitive with the compensation programs
provided by other corporations with which the Company competes for management
talent. The Compensation Committee also believes that the annual bonuses and
stock-based incentives provided opportunities to participants that are
consistent with the returns that are generated on behalf of the Company's
stockholders.
- ------------------------
/1/ Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, this Performance Graph shall not be
incorporated by reference in any such filings.
12
<PAGE>
Limitation of Tax Deduction for Executive Compensation
The Omnibus Budget Reconciliation Act of 1993 (the "Act") prevents publicly
traded companies from receiving a tax deduction on compensation paid to proxy-
named executive officers in excess of $1 million annually, effective for
compensation paid after 1993. Although the Compensation Committee has not
adopted a policy relating to the Act, the Compensation Committee believes that
there will be little, if any, impact from this limitation to the Company.
COMPENSATION COMMITTEE:
Douglas C. Boyd
Peter B. Foreman
Richard A. Kayne
13
<PAGE>
PERFORMANCE GRAPH/2/
The following graph compares the Company's cumulative total stockholder
return on its Common Stock for the period from December 31, 1993, to January 3,
1999, with returns on, respectively, the American Stock Exchange Index and an
industry index consisting of the Dow Jones Industry Group Beverages, Soft
Drinks. The return lines assume a $100 investment in the Company's stock (or in
the basket of stocks represented by the given index) at the beginning of the
period presented.
GLACIER WATER SERVICES, INC. STOCK PERFORMANCE GRAPH
FROM JANUARY 1, 1994 THROUGH JANUARY 3, 1999
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Glacier Water Peer Group AMEX Market
(Fiscal Year Covered) Services Index Index
- ------------------- ---------- ---------- -----------
<S> <C> <C> <C>
Measurement Pt- 1994 $100.00 $100.00 $100.00
FYE 1995 $149.51 $105.96 $ 88.33
FYE 1996 $144.66 $155.55 $113.86
FYE 1997 $177.67 $205.74 $120.15
FYE 1998 $240.78 $269.21 $144.57
FYE 1999 $201.94 $278.50 $142.61
</TABLE>
ASSUMES $100 INVESTED ON JAN 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JAN 3, 1999
- ----------------------------
/2/ Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, this Performance Graph shall not be
incorporated by reference in any such filings.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1999 certain information
regarding the shares of Common Stock beneficially owned by each stockholder who
is known by the Company to beneficially own in excess of 5% of the outstanding
shares of Common Stock (in the case of Goldman, Sachs, based solely upon a
review of Schedules 13D and 13G filed with the Commission), by each director and
Named Executive Officer and by all executive officers and directors as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner(1) Ownership of Class
------------------------ --------- --------
<S> <C> <C>
Richard A. Kayne (2) 1,277,730 39.7%
Goldman, Sachs & Co. and The Goldman Sachs Group, 311,800 9.7%
L.P. (3)
Peter B. Foreman (4) 27,418 *
Jerry R. Welch (4)(5) 27,418 *
Scott H. Shlecter (4) 5,067 *
Robert V. Sinnott (4)(5) 27,418 *
Douglas C. Boyd (4) 5,067 *
Jerry A. Gordon (4) 70,500 2.1%
S. Dane Seibert (4) 38,350 1.2%
Glen A. Skumlien (4) 30,250 *
John T. Vuagniaux (4) 30,250 *
Executive officers and directors 1,587,468 45.7%
as a group (17 persons)
</TABLE>
__________________
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the stockholders named
in this table is: c/o Glacier Water Services, Inc., 2261 Cosmos Court,
Carlsbad, California 92009.
(2) The shares listed include 1,004,846 shares held by four investment
partnerships, 120,066 shares held by Mr. Kayne individually, 136,400 shares
held by six managed accounts and 16,418 stock options exercisable within 60
days of March 31, 1999 held by Mr. Kayne. Mr. Kayne has shared dispositive
and voting power with KAIM Non-Traditional, L.P. with respect to all of the
shares held by the investment partnerships and managed accounts. Mr. Kayne
has sole dispositive and voting power over the shares he holds
individually. Mr. Kayne disclaims beneficial ownership as to the shares
held in the managed accounts. The address for Richard A. Kayne is c/o
Kayne Anderson Investment Management, 1800 Avenue of the Stars, Second
Floor, Los Angeles, California 90067.
(3) The address for Goldman, Sachs & Co. and The Goldman, Sachs Group, L.P. is
85 Broad Street, New York, NY 10004.
(4) Shares beneficially owned include stock options exercisable within 60 days
of March 31, 1999 in the amount of 27,418 held by Mr. Foreman, 27,418 held
by Mr. Sinnott, 27,418 held by Mr. Welch, 70,500 held by Mr. Gordon, 38,250
held by Mr. Seibert, 30,250 held by Mr. Skumlien and 30,250 held by Mr.
Vuagniaux.
(5) Messrs. Welch and Sinnott are Senior Vice Presidents of Kayne Anderson
Investment Management; however, they disclaim beneficial ownership with
respect to any shares held by Kayne Anderson Investment Management or any
of its affiliates.
15
<PAGE>
SELECTION OF AUDITORS
The Board of Directors has appointed Arthur Andersen LLP Independent Public
Accountants, as independent auditors of the Company for the fiscal year ending
January 2, 2000, subject to ratification by the stockholders of the Company.
It is intended that, in the absence of contrary specifications, the shares
represented by proxies will be voted FOR the following resolution ratifying the
appointment of Arthur Andersen LLP.
"RESOLVED, that the stockholders of Glacier Water Services, Inc. hereby
ratify and approve the appointment of Arthur Andersen LLP as the independent
auditors of such Company for the fiscal year ending January 2, 2000."
The affirmative vote of the holders of at least a majority of the aggregate
outstanding shares of Common Stock represented at the meeting is required to
adopt the foregoing resolution. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting, will be given an opportunity to
make a statement on behalf of his firm if such representative so desires, and
will be available to respond to any appropriate questions of any stockholder.
Arthur Andersen LLP was the Company's independent auditor for the fiscal year
ended January 3, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
---
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING JANUARY 2, 2000.
ANNUAL REPORT
The Annual Report of the Company, including financial statements for the
fiscal year ended January 3, 1999, is being forwarded to each stockholder with
this Proxy Statement. Stockholders may obtain a copy of the Annual Report
without charge by writing to the Secretary of the Company.
OTHER MATTERS
The Board of Directors has no knowledge of any other matters which may come
before the Annual Meeting. If any other matters shall properly come before the
meeting, the persons named in the proxies will have discretionary authority to
vote the shares thereby represented in accordance with their best judgment.
PROPOSALS OF STOCKHOLDERS
Stockholder proposals, if any, which may be considered for inclusion in the
Company's proxy materials for the 2000 Annual Meeting must be received by the
Company at its offices at 2261 Cosmos Court, Carlsbad, California 92009 not
later than January 2, 2000. Any material received after January 2, 2000 shall
be considered as untimely presented.
Dated: May 4, 1999
16
<PAGE>
- --------------------------------------------------------------------------------
GLACIER WATER SERVICES, INC.
Annual Meeting of Stockholders--June 2, 1999
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of Glacier Water Services, Inc. (the "Company")
hereby appoints Jerry R. Welch and Jerry A. Gordon, and each of them, the true
and lawful attorneys, agents and proxies of the undersigned, with full power
of substitution to each of them, to vote all shares of Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
the Company to be held on June 2, 1999, and at any adjournment of such
meeting, with all powers which the undersigned would possess if personally
present, for the following purposes:
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED WILL
BE VOTED FOR THE ADOPTION OF EACH PROPOSAL DESCRIBED ON THE REVERSE SIDE AND
---
VOTED FOR THE ELECTION OF THE NOMINEES NAMED ON THE REVERSE HEREOF.
---
(Continued and to be Signed on the reverse side)
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C> <C>
[X] Please mark
your votes
as this
Item 1. ELECTION OF DIRECTORS
NOMINEES: JERRY R. WELCH SCOTT H. SHLECTER FOR each WITHHELD
DOUGLAS C. BOYD RICHARD A. KAYNE nominee AUTHORITY
JERRY A. GORDON ROBERT V. SINNOTT listed to vote for
(except as each
marked to the nominee
contrary): listed.
[_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominees, write
that nominee's name in the space provided below.
- ------------------------------------------------------------------------------------------------------------------------------------
Item 2. Ratification of the FOR AGAINST ABSTAIN
appointment of Arthur Andersen [_] [_] [_]
LLP as independent auditors of
the Company for the 1999 fiscal year.
Item 3. In their discretion upon [_] [_] [_]
such other matters as they
properly come before this meeting.
The undersigned hereby acknowledge receipt of the Notice of Annual Meeting and
Proxy Statement dated May 4, 1999.
Dated: _________________________________________________________________________
________________________________________________________________________________
(Signature)
________________________________________________________________________________
(Signature)
________________________________________________________________________________
(Print Name Here)
Please sign your name or names, exactly as stenciled. When signing as attorney,
executor, administrator, trustee, guardian or corporate officer, please give
your full title as such.
</TABLE>
