SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
PACKAGED ICE, 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)(1) and 0-11.
1) Title of each class 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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[ ] 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.
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[LOGO]
PACKAGED ICE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 1999
TO THE SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders of
Packaged Ice, Inc., to be held at the Hilton Austin North & Towers, 6000 Middle
Fiskville Road, Austin, Texas 78752, at 9:30 a.m., Central Daylight Time, on
Thursday, June 17, 1999, for the following purposes:
1 To elect eight directors of Packaged Ice to hold office until the next
annual meeting of shareholders and until their respective successors
are duly elected and qualified;
2 To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as Packaged Ice's independent accountants for
the fiscal year ending December 31, 1999;
3 To transact such other business as may properly be brought before the
meeting or any adjournment(s) thereof.
Holders of record of Packaged Ice's common stock at the close of business
on May 3, 1999, will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
Shareholders who do not expect to attend the meeting are requested to sign
and return the enclosed proxy, for which a postage-paid, return envelope is
enclosed. The proxy must be signed and returned to be counted.
By Order of the Board of Directors,
JAMES F. STUART
CHAIRMAN OF THE BOARD
Houston, Texas
May 18, 1999
<PAGE>
PACKAGED ICE, INC.
8572 KATY FREEWAY, SUITE 101
HOUSTON, TEXAS 77024
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PROXY STATEMENT
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1999 ANNUAL MEETING OF SHAREHOLDERS
------------------------
The Board of Directors of Packaged Ice, Inc. is soliciting the enclosed
proxy to be used at the 1999 Annual Meeting of Shareholders to be held at the
Hilton Austin North & Towers, 6000 Middle Fiskville Road, Austin, Texas 78752,
at 9:30 a.m. Central Daylight Time, on Thursday, June 17, 1999. This Proxy
Statement and the related proxy are to be sent or given to the shareholders of
Packaged Ice of record on May 3, 1999. Any shareholder giving a proxy may revoke
it at any time provided written notice of such revocation is received by the
Secretary of Packaged Ice before such proxy is voted; otherwise, if received in
time, properly completed proxies will be voted at the meeting in accordance with
the instructions specified thereon. Shareholders attending the Annual Meeting
may revoke their proxies and vote in person.
Holders of record at the close of business on May 3, 1999, of Packaged
Ice's common stock, $.01 par value, will be entitled to notice of and to vote at
the Annual Meeting. Each shareholder is entitled to one vote per share on all
matters submitted to a vote of the shareholders at the meeting. On May 3, 1999,
there were outstanding and entitled to vote 17,959,159 shares of common stock,
which is the only class of voting securities.
Packaged Ice's Annual Report for the fiscal year ended December 31, 1998,
including financial statements, is being mailed with this Proxy Statement to all
shareholders entitled to vote at the Annual Meeting. The Annual Report does not
constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
(ITEM 1)
At the Annual Meeting, eight directors are to be elected to hold office
until the next annual meeting of the shareholders and until their respective
successors have been elected and qualified. All of the director nominees, except
David J. Losito, are currently directors of Packaged Ice. Proxies cannot be
voted for a greater number of persons than the number of nominees named on the
enclosed form of proxy. A plurality of the votes cast in person or by proxy by
the holders of common stock is required to elect a director. Accordingly, under
Texas law, abstentions and "broker non-votes" would not have the same legal
effect as a vote against a particular director. A broker non-vote occurs if a
broker or other nominee does not have discretionary authority and has not
received instructions with respect to a particular item. Shareholders may not
cumulate their votes in the election of directors. The Board of Directors
recommends a vote "FOR" each of the eight nominees described below.
The following information regarding the director nominees of Packaged Ice,
their principal occupations, employment history and directorships in certain
companies is as reported by the respective individuals.
DIRECTOR NOMINEES
JAMES F. STUART, age 57, Chairman of the Board of Directors, Chief
Executive Officer and a founder of Packaged Ice, served as President of the
company from 1990 until January 1997, when he was elected Chairman of the Board
of Directors and Chief Executive Officer.
A.J. LEWIS III, age 43, became President and Secretary of Packaged Ice in
January 1997. Mr. Lewis has been a shareholder and director of Packaged Ice
since 1991, and was a member of the Audit Committee of the Board of Directors
prior to the initial public offering of the company's stock earlier this year.
Mr. Lewis acquired Mission Party Ice, Inc. ("Mission"), in 1988 and was its
president and the sole director until
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Packaged Ice purchased it in April 1997. He founded Southwest Texas Packaged
Ice, Inc., in 1991 and was its president and a director from inception until its
acquisition by Packaged Ice in April 1997. Since 1989, Mr. Lewis has been a
director and president of Southwest Texas Equipment Distributors, Inc., which is
a distributor of Hoshizaki ice equipment. See "Certain Relationships and
Related Transactions."
STEVEN P. ROSENBERG, age 40, has been a shareholder and director of
Packaged Ice since 1991 and is a member of the Audit Committee of the Board of
Directors. Since August 1997 Mr. Rosenberg has been Chairman of the Board of
Nutricept, Inc., a development stage company engaged in the manufacture and
distribution of dietary supplements, and is Chief Executive Officer of Fuel
Marketing Solutions. From 1992 to February 1997, Mr. Rosenberg was President of
Arrow Industries, now a wholly owned subsidiary of ConAgra.
RICHARD A. COONROD, age 68, has been a director since 1995 and is a member
of the Compensation Committee of the Board of Directors. Mr. Coonrod was
designated to be elected as a director by The Food Fund Limited Partnership, a
Minneapolis-based limited partnership specializing in food-related investments
and a shareholder of Packaged Ice. Mr. Coonrod has been a general partner of The
Food Fund Limited Partnership since 1989 and has been President of Coonrod
Agriproduction Corporation, a food and agribusiness consulting and investment
firm, since 1985. Mr. Coonrod has been a director of Orange-Co, Inc. since 1987,
and has been a director of Michael Foods, Inc., since 1994.
ROBERT G. MILLER, age 48, has been a director of Packaged Ice since April
1997. Mr. Miller is a private investor and was Chairman of the Board of
Directors of Southwestern Ice, Inc., from February 1992 until its acquisition by
Packaged Ice. From 1980 to 1992, Mr. Miller was President and Chief Executive
Officer of Glacier Water, Inc., a publicly traded water vending company.
ROD J. SANDS, age 51, is a director of Packaged Ice and is a member of the
Compensation Committee of the Board of Directors. Mr. Sands has been a Managing
Director of Silver Brands Partners, L.P., since 1997. Mr. Sands is a limited
partner in Silver Brands, and a member of its investment committee. From 1992 to
1997, Mr. Sands served as President and Chief Operating Officer of Pace Foods,
Inc., a leading producer of picante sauce products.
ARTHUR E. BIGGS, age 69, is a shareholder and director of Packaged Ice, and
has been a member of the Audit Committee of the Board of Directors since the
initial public offering of the company's common stock earlier this year. Mr.
Biggs has been a private investor since March 1998 and was Chairman of the Board
of Directors of Artic Ice preceding its acquisition by Packaged Ice in March
1998. From 1974 to 1982, Mr. Biggs was Executive Vice President and Chief
Operating Officer of Mobil Chemical Co. and served as President of Mobil
Chemical Co. from 1983 to 1986. Mr. Biggs initiated his career with McKinsey &
Company, Inc. in 1957.
DAVID J. LOSITO, age 41, was named Executive Vice President of Corporate
Development of EPS Solutions Corporation in January 1999. EPS Solutions of Costa
Mesa, California, is the nation's only fully integrated provider of continuous
profit improvement solutions for business functions. Previously, Mr. Losito
served from 1992 to 1999 in the Corporate Finance Department of Jefferies &
Company, Inc., most recently in the capacity as Managing Director.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held nine meetings during the fiscal year ended
December 31, 1998. Packaged Ice's directors are elected annually and hold office
until the next annual meeting of shareholders or until their successors are
elected and qualified. Directors are not compensated for their services as
directors. Directors are reimbursed, however, for ordinary and necessary
expenses incurred in attending board or committee meetings.
Packaged Ice has an Audit Committee and a Compensation Committee.
The Compensation Committee oversees the compensation of Packaged Ice's
senior management and grants under the company's stock option plans. During the
1998 fiscal year, the Compensation Committee was comprised of Messrs. Sands,
Coonrod and Stuart, and held three meetings.
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The Audit Committee reviews and reports to the Board of Directors the scope
and results of audits by Packaged Ice's outside auditor. The committee also
recommends the firm of certified public accountants to serve as Packaged Ice's
independent public accountants, subject to nomination by the Board of Directors
and approval of the shareholders, authorizes all audit and other professional
services rendered by the auditor and periodically reviews the independence of
the auditor. The membership of the Audit Committee is now restricted to those
directors who are not active or retired officers or employees of the company.
During the 1998 fiscal year, the Audit Committee was comprised of Stephen
Sefton, a former director who resigned in June 1998, and Messrs. Lewis and
Rosenberg, and held two meetings. At the closing of the initial public offering,
Mr. Biggs replaced Mr. Lewis on the Audit Committee.
EXECUTIVE OFFICERS
The following table sets forth certain information as of May 3, 1999
regarding Packaged Ice's executive officers. Each of these officers has been
elected to serve until his successor is duly appointed or elected or until his
earlier removal or resignation from office. No arrangement or understanding
exists between any of these officers and any other person pursuant to which they
were or are to be selected as an officer.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
James F. Stuart...................... 57 Chief Executive Officer
A. J. Lewis III...................... 43 President and Secretary
Jimmy C. Weaver...................... 45 Executive Vice President and Chief Operating Officer
James C. Hazlewood................... 51 Chief Financial Officer
H. D. Wiginton....................... 61 Senior Vice President -- Marketing
Leonard A. Bedell.................... 54 Senior Vice President -- Central Operations
Graham D. Davis...................... 44 Senior Vice President -- Western Operations
Neil D. Showalter.................... 41 Senior Vice President -- Mid-Atlantic Operations
William H. Gibbons................... 56 Treasurer
</TABLE>
JAMES F. STUART, Chairman of the Board of Directors, Chief Executive
Officer and a founder of Packaged Ice, served as President of the company from
1990 until January 1997, when he was elected Chairman of the Board of Directors
and Chief Executive Officer.
A.J. LEWIS III became President and Secretary of the company in January
1997. Mr. Lewis has been a shareholder and director of the company since 1991.
Mr. Lewis acquired Mission in 1988 and was its president and the sole director
until the company purchased it in April 1997. He founded Southwest Texas
Packaged Ice, Inc. in 1991 and was its president and a director from inception
until the company purchased it in April 1997. Since 1989, Mr. Lewis has been a
director and president of Southwest Texas Equipment Distributors, Inc., which is
a distributor of Hoshizaki ice equipment.
JIMMY C. WEAVER became Executive Vice President and Chief Operating Officer
of the company on April 30, 1998. Mr. Weaver joined Reddy Ice Corporation in
September 1996 and was President of Reddy prior to its acquisition. From May
1993 until August 1996, Mr. Weaver was Vice President of Sales and Marketing of
Booth/Crystal Tips, a manufacturing division of Scotsman Industries based in
Dallas, Texas, that produces and sells ice making equipment.
JAMES C. HAZLEWOOD is the company's Chief Financial Officer. Mr. Hazlewood
joined the company in October 1997. From September 1996 until October 1997, Mr.
Hazlewood was Chief Financial Officer of Harrison Electronics, Inc., a privately
owned electronics distribution company based in Stafford, Texas. From September
1994 until September 1996, Mr. Hazlewood was Chief Financial Officer at Intile
Designs, Inc., a publicly held, wholesale distributor of floor coverings
headquartered in Houston, Texas. From September 1993 to September 1994, Mr.
Hazlewood was an independent consultant. Mr. Hazlewood initiated his career with
Arthur Andersen LLP.
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<PAGE>
H.D. WIGINTON is the company's Senior Vice President -- Marketing. From
September 1991 until he joined the company in November 1996, Mr. Wiginton was
Executive Vice President of Tower Marketing, a Texas-based, regional food
brokerage concern.
LEONARD A. BEDELL is the company's Senior Vice President -- Central
Operations. Mr. Bedell joined the company in January 1998. From March 1995 until
December 1997, Mr. Bedell was a management consultant specializing in operations
and profitability improvement and merger and acquisition projects for businesses
engaged in the distribution, delivery, equipment rental and event production
industries. From January 1992 until March 1995, Mr. Bedell was Executive Vice
President, Chief Financial Officer and a member of the Board of Directors of
American Medical Technologies. From March 1990 to December 1991, Mr. Bedell was
President and Chief Executive Officer of Medcon, Inc., a medical transportation
and disposal company.
GRAHAM D. DAVIS became the company's Senior Vice President -- Western
Operations in April 1998. Mr. Davis joined Reddy in 1977 as Controller. For the
five years prior to joining Packaged Ice, Mr. Davis was Executive Vice President
of Operations of Reddy.
NEIL D. SHOWALTER became the company's Vice President -- Mid-Atlantic
Operations in August 1998. Mr. Showalter joined Cassco Ice & Cold Storage, Inc.,
a division of WLR Foods, Inc., in 1989 and became President of that division in
1996. In November 1997, he was designated the Vice-President of Finance for WLR,
and became its Chief Financial Officer in June 1998. Before joining Cassco, Mr.
Showalter served as a CPA for McGladrey & Pullen, a public accounting firm, from
1979 to 1989.
WILLIAM H. GIBBONS became the company's Treasurer in July 1998. Prior to
joining the company, Mr. Gibbons was the President of William H. Gibbons, a sole
proprietorship, providing financial consulting services to domestic and
international oil and gas companies since 1991. His clientele included private
and public companies, with financial consulting services focused on financing,
treasury and reporting activities.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2)
Pursuant to the Audit Committee's recommendation, the Board of Directors
has appointed Deloitte & Touche LLP, independent accountants, to audit the
consolidated financial statements of Packaged Ice for the year ending December
31, 1999. Packaged Ice has been advised that no member of Deloitte & Touche LLP
has any direct financial interest or material indirect financial interest in
Packaged Ice or any of its subsidiaries or, during the past three years, has had
any connection with Packaged Ice or any of its subsidiaries as a promoter,
underwriter, voting trustee, director, officer or employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the common stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under Texas
law, an abstention would have the same legal effect as a vote against this
proposal, but a broker non-vote would not be counted for purposes of determining
whether a majority had been achieved. The Board of Directors recommends voting
"FOR" ratification of this appointment.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement and will be
available to respond to appropriate questions.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
company's Chief Executive Officer and four additional highly compensated
executive officers (the "Named Executive Officers") for the three years ended
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-------------------- OPTIONS/ ALL OTHER
NAME/PRINCIPAL POSITION YEAR SALARY BONUS SARS COMPENSATION
- ------------------------------------- ----- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
James F. Stuart...................... 1998 $209,269 $302,500 60,000 $ 5,000(1)
Chairman, Chief Executive Officer 1997 125,000 50,000 30,000 2,500(1)
1996 125,000 -- -- 1,827(1)
A. J. Lewis III,..................... 1998 192,884 280,000 50,000 5,000(1)
President 1997 (2) 83,173 50,000 25,000 1,663(1)
Jimmy C. Weaver...................... 1998 (3) 120,961 166,500 56,000 7,000(5)
Executive Vice President, Chief
Operating Officer
James C. Hazlewood................... 1998 118,891 74,750 8,333 4,985(5)
Chief Financial Officer 1997 (4) 14,873 -- 20,000 738(5)
H. D. Wiginton....................... 1998 131,775 65,734 8,333 9,556(1)(5)
Senior Vice President -- Marketing 1997 110,000 32,810 5,000 6,000(5)
1996 (6) 18,333 -- 6,000 1,000(5)
</TABLE>
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(1) Contributions to Packaged Ice's 401(k) plan made by the company.
(2) Represents partial year compensation of an annual salary of $125,000. No
compensation is provided for prior years, as Mr. Lewis' employment commenced
April 1997.
(3) Represents partial year compensation at an annual salary of $185,000. No
compensation is provided for prior years, as Mr. Weaver's employment
commenced April 1998.
(4) Represents partial year compensation at an annual salary of $105,000. No
compensation is provided for prior years, as Mr. Hazlewood's employment
commenced October 1997.
(5) Automobile allowance.
(6) Represents partial year compensation at an annual salary of $110,000, as Mr.
Wiginton's employment commenced November 1996.
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<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding the number of
stock options to purchase shares of the company's common stock granted to the
Named Executive Officers during the year ended December 31, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE OF ASSUMED
NUMBER OF OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED IN PER SHARE FOR OPTION TERM
OPTIONS FISCAL EXERCISE OR EXPIRATION ----------------------
GRANTED 1998 BASE PRICE DATE 5% 10%
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James F. Stuart......................... 30,000 8.3 $ 13.00 5/1/2008 $ 245,269 $ 621,560
30,000 8.3 15.00 6/19/2008 283,003 717,184
A. J. Lewis III......................... 30,000 8.3 13.00 5/1/2008 245,269 621,560
20,000 5.5 15.00 6/19/2008 188,467 478,123
Jimmy C. Weaver......................... 40,000 11.0 14.00 5/1/2008 352,181 892,496
16,000 4.4 15.00 6/19/2008 150,935 382,498
James C. Hazlewood...................... 8,333 2.3 15.00 6/19/2008 78,609 199,210
H. D. Wiginton.......................... 8,333 2.3 15.00 6/19/2008 78,609 199,210
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides certain information regarding the exercise of
stock options to purchase shares of the company's common stock during the year
ended December 31, 1998, by the Named Executive Officers, and the fiscal
year-end value of stock options held by such officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON ---------------------------- ----------------------------
EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
James F. Stuart......................... -- 6,000 84,000 -- --
A. J. Lewis III......................... -- 5,000 70,000 -- --
Jimmy C. Weaver......................... -- -- 56,000 -- --
James C. Hazlewood...................... -- 4,000 24,333 -- --
H. D. Wiginton.......................... -- 3,400 15,933 -- --
</TABLE>
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(1) Based on a price per share of $6.125, the closing sale price of the Packaged
Ice's stock on the Nasdaq National Market on March 31, 1999. The company's
common stock was not publicly traded in 1998 therefore no public sales price
is available for 1998. The value of in-the-money options is calculated as
the difference between the fair market value of the common stock underlying
the options at fiscal year end and the exercise price of the options.
Exercisable options refer to those options that are exercisable as of
December 31, 1998, while unexercisable options refer to those options that
become exercisable at various times thereafter.
STOCK OPTION PLANS
1998 STOCK OPTION PLAN. Packaged Ice has adopted the 1998 Stock Option
Plan. One million shares of common stock are subject to issuance under the 1998
Option Plan. The 1998 Option Plan provides for the grant of stock options
(including incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options), stock
appreciation rights ("SARs") and other stock awards (including restricted
stock awards and stock bonuses) to any officer, director or employee of the
company, its subsidiaries, affiliates or any consultant or advisor engaged by
the company who renders bona fide services to the company or the company's
subsidiaries or affiliates in connection with their businesses. The Compensation
Committee, which is comprised of "disinterested persons" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934, administers the 1998 Option
Plan.
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Packaged Ice's full Board of Directors must submit any grant of options to a
member of the Compensation Committee for approval. Such member of the
Compensation Committee will not participate in the vote approving such grant.
The Compensation Committee may grant stock options on such terms, including
vesting and payment forms, as it deems appropriate in its discretion; provided,
that no option may be exercised later than ten years after its grant, and the
purchase price for incentive stock options and non-qualified stock options shall
not be less than 100% and 85% of the fair market value of the Common Stock at
the time of grant, respectively. The Compensation Committee may grant SARs on
such terms, including payment forms, as the Compensation Committee deems
appropriate, provided that a SAR granted in connection with a stock option
becomes exercisable and lapse according to the same vesting schedule and lapse
rules established for the stock option (which shall not exceed ten years from
the date of grant). A SAR shall not be exercisable during the first six months
of its term and is exercisable subject to any other conditions on exercise
imposed by the Compensation Committee. Unless terminated by the Board of
Directors, the 1998 Option Plan continues for ten years from the date of
adoption. Upon the occurrence of an event constituting a change in control of
the company, in the sole discretion of the Compensation Committee, all options,
SARs and other awards will become immediately exercisable in full for the
remainder of their terms and restrictions on stock granted pursuant to a
restricted stock award will lapse.
At December 31, 1998, the company had outstanding options for 243,070
shares of common stock at a weighted exercise price of $15.00 (of which 2,600
were exercisable) under the 1998 Option Plan. All options granted under the 1998
Option Plan to date have a five-year vesting period. All of the outstanding
options were granted at the exercise price of $15.00, which the Board of
Directors determined to be greater than or equal to the fair market value of the
common stock on the date of grant. To date, no options have been exercised under
the 1998 Option Plan.
1994 STOCK OPTION PLAN. The company adopted the 1994 Stock Option Plan on
July 26, 1994, and amended the plan pursuant to an amendment effective December
1997. Under the 1994 Option Plan, options to purchase up to 400,000 shares of
common stock may be granted to employees, outside directors and consultants and
advisers to the company or any subsidiary. The purposes of the 1994 Option Plan
are to further the growth, development and financial success of Packaged Ice by
providing additional financial incentives to key personnel and to retain and
attract qualified individuals who will contribute to the company's overall
success. Shares that by reason of the expiration of an option (other than
because of exercise) or which are no longer subject to purchase pursuant to an
option granted under the 1994 Option Plan may be reoptioned thereunder. The 1994
Option Plan is currently administered by the Compensation Committee, which has
the authority to set specific terms and conditions of options granted under the
1994 Option Plan. Options granted under the 1994 Option Plan are non-qualified
options and are not intended to be "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended. Stock options granted under
the 1994 Option Plan may be granted for a term not to exceed ten years and are
not transferable other than by will or the laws of descent and distribution.
Each option may be exercised within the term of the option pursuant to which it
was granted (so long as the optionee, if an employee, continues to be employed
by the company). In addition, an option may be exercised as to vested shares
within 90 days after the termination of employment of the optionee (except in
the case of a termination for cause, in which case the option automatically
expires on termination), and upon a termination in case of death, disability or
eligible retirement, all options will become exercisable and may be exercised
until the earlier of the first anniversary of such event or the stated
expiration date.
The exercise price of all stock options must be at least equal to the fair
market value of the common stock on the date of grant. Stock options may be
exercised by payment in cash of the exercise price with respect to each share to
be purchased, or by a method in which a concurrent sale of the acquired stock is
arranged, with the exercise price payable in cash from such sale proceeds.
At December 31, 1998, the company had outstanding options for 391,200
shares of common stock at a weighted average exercise price of $10.87 (of which
73,400 were exercisable) under the 1994 Option Plan. All options granted under
the 1994 Option Plan are currently exercisable. All of the outstanding options
were granted at exercise prices determined by the Board of Directors to be equal
to the fair market value of
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the common stock on the date of grant. To date, options to purchase 6,300 shares
of common stock have been exercised under the 1994 Option Plan. An additional
2,500 options may be issued under the 1994 Option Plan.
DIRECTOR COMPENSATION
Directors of Packaged Ice are elected annually and hold office until the
next annual meeting of shareholders or until their successors are elected and
qualified. Directors are not compensated for their services as directors.
Directors are reimbursed, however, for ordinary and necessary expenses incurred
in attending board or committee meetings.
EMPLOYMENT AGREEMENTS
JAMES F. STUART, Packaged Ice's Chairman of the Board of Directors and
Chief Executive Officer, has entered into an employment agreement, effective
August 1, 1998, with a term of two years, which establishes a base salary of
$225,000 per year and provides for certain cash bonus incentives relating to the
company's performance. Mr. Stuart's employment agreement also provides that, in
certain circumstances, he will receive severance payments equal to two years of
his then current base salary upon termination of his employment by Packaged Ice.
Mr. Stuart is subject to a non-competition agreement for three years after
voluntary or involuntary termination of his employment.
A. J. LEWIS III, Packaged Ice's President and Secretary, has entered into
an employment agreement, effective August 1, 1998, with a term of one year,
which establishes a base salary of $200,000 per year and provides for certain
cash bonus incentives relating to Packaged Ice's performance. Mr. Lewis'
employment agreement also provides that, in certain circumstances, he will
receive severance payments equal to one year of his then current base salary
upon termination of his employment by Packaged Ice. Mr. Lewis is subject to a
non-competition agreement for three years after voluntary or involuntary
termination of his employment.
JIMMY C. WEAVER, Packaged Ice's Executive Vice President and Chief
Operating Officer, has entered into an employment agreement, effective May 1,
1998, with a term of two years, which establishes a base salary of $185,000 per
year, provides for certain cash bonus incentives relating to Packaged Ice's
performance and grants Mr. Weaver the right to purchase 40,000 shares of Common
Stock under the 1994 Option Plan at an exercise price of $14 per share. Mr.
Weaver's employment agreement provides that, in certain circumstances, he will
receive severance payments equal to six months of his then current base salary
upon termination of his employment by Packaged Ice. Mr. Weaver is subject to a
non-competition agreement for two years after voluntary or involuntary
termination of his employment.
JAMES C. HAZLEWOOD, Packaged Ice's Chief Financial Officer, entered into an
employment agreement effective November 1, 1997, which establishes a base salary
of $105,000 per year. In addition, Mr. Hazlewood is eligible for certain cash
bonus incentives relating to Packaged Ice's performance. Mr. Hazlewood's
employment agreement provides that, in certain circumstances, he will receive
severance payments of one year of his then current base salary upon termination
of his employment by Packaged Ice. Mr. Hazlewood is subject to a non-competition
agreement for two years after voluntary or involuntary termination of his
employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer or director of Packaged Ice serves as an executive
officer, director, or member of a compensation committee of any other entity,
for which an executive officer, director, or member of such entity is a member
of the Board of Directors or the Compensation Committee of Packaged Ice.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation of the executive officers named in the Summary Compensation Table.
The Compensation Committee has furnished the following report on executive
compensation in connection with the Annual Meeting.
8
<PAGE>
COMPENSATION PHILOSOPHY
As members of the Compensation Committee, it is our duty to administer the
executive compensation program for Packaged Ice. The Compensation Committee is
responsible for establishing appropriate compensation goals for the executive
officers of Packaged Ice, evaluating the performance of such executive officers
in meeting such goals and making recommendations to the Board of Directors with
regard to executive compensation. The company's compensation philosophy is to
ensure that executive compensation be directly linked to continuous improvements
in corporate performance, achievement of specific operations, financial and
strategic objectives and increases in shareholder value. The Compensation
Committee regularly reviews the compensation packages of Packaged Ice's
executive officers, taking into account factors which it considers relevant,
such as business conditions within and outside the industry, Packaged Ice's
financial performance, the market composition for executives of similar
background and experience, and the performance of the executive officer under
consideration. The particular elements of Packaged Ice's compensation programs
for executive officers are described below.
COMPENSATION STRUCTURE
The base compensation for the executive officers of Packaged Ice named in
the Summary Compensation Table is intended to be competitive with that paid in
comparable situated industries, taking into account the scope of
responsibilities and internal relationships. The goals of the Compensation
Committee in establishing Packaged Ice's executive compensation program are:
(1) To compensate the executive officers of Packaged Ice fairly and its
subsidiaries for their contributions to Packaged Ice's short-term
and long-term performance. The elements of Packaged Ice's executive
compensation program are (a) annual base salaries, (b) annual
bonuses and (c) equity incentives.
(2) To allow Packaged Ice to attract, motivate and retain the
management personnel necessary to Packaged Ice's success by
providing an executive compensation program comparable to that
offered by companies with which Packaged Ice competes for
management personnel. The Compensation Committee bases its
evaluation on the scope of the executive's responsibilities, a
subjective evaluation of the executive's performance and the length
of time the executive has been in the position.
EXECUTIVE COMPENSATION DEDUCTIBILITY
The company intends that amounts paid pursuant to Packaged Ice's
compensation plans generally will be deductible compensation expenses. The
Compensation Committee does not currently anticipate that the amount of
compensation paid to executive officers will exceed the amounts specified as
deductible pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended.
Compensation Committee
of the Board of Directors
James F. Stuart
Rod J. Sands
Richard A. Coonrod
PERFORMANCE GRAPH
Packaged Ice's stock was not publicly traded until after the initial public
offering of its stock earlier this year. The information necessary to present a
performance graph is therefore not available.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the beneficial
ownership of the outstanding common stock of Packaged Ice by (a) each person who
is known to Packaged Ice to own beneficially more than 5% of the outstanding
common stock of the company, (b) each director and director nominee of Packaged
Ice, (c) each Named Executive Officer named in the Summary Compensation Table
(see "Executive Compensation") and (d) all executive officers, and director
nominees of Packaged Ice as a group. Unless otherwise indicated, (i) the persons
listed in the table below have sole voting and investment powers with respect to
the shares indicated and (ii) each person's address is 8572 Katy Freeway, Suite
101, Houston, Texas 77024, except as indicated otherwise.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
------------------- -------------------
<S> <C> <C>
James F. Stuart (1).................. 414,700 2.3
A. J. Lewis III (2).................. 454,943 2.5
Jimmy C. Weaver (3).................. 44,000 *
James C. Hazlewood (4)............... 21,000 *
H.D. Wiginton (5).................... 19,500 *
Steven P. Rosenberg.................. 438,423 2.4
5430 LBJ Freeway, Suite 1600
Dallas, Texas 75219
Richard A. Coonrod (6)............... 91,161 *
5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Robert G. Miller (7)................. 309,040 1.7
30518 Via Maria Elena
Bonsall, California 92003
Rod J. Sands (8)..................... 688,092 3.8
5121 Broadway
San Antonio, Texas 78209
Arthur E. Biggs...................... 233,849 1.3
3210 St. Charles Place
Boca Raton, Florida 33434
David J. Losito (9).................. 11,368 *
695 Town Center Drive, Suite 700
Costa Mesa, California 92626
Norwest Equity Partners V............ 820,449 4.6
222 South Ninth St., Suite 2800
Minneapolis, Minnesota
55402-3388
Culligan Water Technologies, Inc.
(10)............................... 1,972,968 9.9
One Culligan Parkway
Northbrook, Illinois 60062-6209
Silver Brands Partners, L.P. (11).... 673,092 3.7
200 Concord Plaza, Suite 620
San Antonio, Texas 78216
Ares Leveraged Investment Fund,
L.P................................ 1,183,398 6.6
1999 Avenue of the Stars, Suite
1900
Los Angeles, California 90067
All directors and executive officers
as a group
(15 people)........................ 2,722,708 15.0
</TABLE>
- ------------
* Less than 1%.
(FOOTNOTES ON FOLLOWING PAGE)
10
<PAGE>
(1) Includes options to purchase 60,000 shares of common stock at a weighted
average price of $11.50 per share.
(2) Includes (i) options to purchase 55,000 shares of common stock at a
weighted average price of $11.64 per share, (ii) 5,000 shares of common
stock held by Mr. Lewis, as Trustee, (iii) 25,000 shares owned by Southwest
Texas Equipment Distributors, Inc., a corporation owned by Mrs. A. J. Lewis
III and (iv) 69,350 shares held by Mr. and Mrs. Lewis as tenants in common.
(3) Includes options to purchase 40,000 shares of common stock at a weighted
average price of $14.00 per share.
(4) Includes options to purchase 20,000 shares of common stock at a weighted
average price of $10.00 per share.
(5) Includes (i) options to purchase 11,000 shares of common stock at a
weighted average price of $8.64 per share, and (ii) 500 shares owned by
Mrs. H. D. Wiginton.
(6) Mr. Coonrod does not own any shares of record. However, as general partner
of The Food Fund, Mr. Coonrod may be deemed to be the beneficial owner of
the shares held by The Food Fund. Mr. Coonrod disclaims any such beneficial
ownership.
(7) Includes options to purchase 22,500 shares of common stock at $10.00 per
share.
(8) Mr. Sands owns 15,000 shares of record. As a limited partner of Silver
Brands Partners and a member of its investment committee, Mr. Sands may be
deemed to have indirect beneficial ownership of the common stock that
Silver Brands Partners owns. Mr. Sands disclaims any such beneficial
ownership.
(9) Includes 11,368 shares of common stock issuable upon exercise of currently
exercisable warrants.
(10) Includes 1,972,968 shares of common stock issuable upon exercise of
currently exercisable warrants.
(11) Christopher Goldsbury, Jr. is a director, majority limited partner and
controlling shareholder of the corporate general partner of Silver Brands
Partners. As a result, Mr. Goldsbury may be deemed to have indirect
beneficial ownership of the common stock that Silver Brands Partners owns.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS WITH A. J. LEWIS III. Mrs. A. J. Lewis III owns Southwest Texas
Equipment Distributors, Inc., an ice equipment sales and rental company, which
has the exclusive right to supply Hoshizaki ice cubers to Packaged Ice under an
agreement dated September 9, 1991. Mr. Lewis owns real estate on which Mission's
facilities are located. Packaged Ice leases these facilities from Mr. Lewis for
$355,200 per year until February 28, 2008. The lease agreement was made in an
arms'-length negotiation submitted to the disinterested members of Packaged
Ice's Board of Directors, who voted in favor of the agreement upon review of the
relevant information.
INDEMNITY AGREEMENTS. Packaged Ice has entered into indemnification
agreements with each of its directors and certain of its executive officers. The
indemnification agreements provide that Packaged Ice shall indemnify these
individuals against certain liabilities (including settlements) and expenses
actually and reasonably incurred by them in connection with any threatened or
pending legal action, proceeding or investigation (other than actions brought by
or in the right of Packaged Ice) to which any of them is, or is threatened to
be, made a party by reason of their status as a director, officer or agent of
the company; provided that, with respect to a civil, administrative or
investigative (other than criminal) action, such individual acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of Packaged Ice, and with respect to any criminal proceedings, he
or she had no reasonable cause to believe his or her conduct was unlawful. With
respect to any action brought by or in the right of Packaged Ice, such
individuals may be indemnified, to the extent not prohibited by applicable laws
or as determined by a court of competent jurisdiction, against expenses actually
and reasonably incurred by them in connection with such action if they acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
the best interests of Packaged Ice. The agreements also require indemnification
of such individuals for all reasonable expenses incurred in connection with the
successful defense of any action or claim and provide for partial
indemnification in the case of any partially successful defense.
The company believes that the transactions referred to above are no less
favorable than transactions, which would have been obtained from unrelated third
parties. Any future transactions between the company
11
<PAGE>
and related parties will be approved by outside directors and will be on terms
no less favorable than those, which could have been obtained from unrelated
third parties.
COMPENSATION FROM JEFFERIES TO DAVID J. LOSITO. As a result of his role as
a Managing Director at Jefferies, since January 1, 1998, Mr. Losito has
received, and will receive, compensation in connection with fees and commissions
paid to Jefferies by Packaged Ice for investment banking services. As part of a
global settlement with Jefferies upon leaving for EPS Solutions in January 1999,
Mr. Losito was compensated for his role in Packaged Ice's (i) private offering
completed on January 28, 1998, of $145 million of aggregate principal amount of
9 3/4% Senior Notes due 2005, and (ii) subsequent private offering completed on
April 30, 1998 of $125 million of aggregate principal amount of 9 3/4% Senior
Notes due 2005. Mr. Losito will also receive compensation from the fees and
commissions received by Jefferies as a result of its serving as an underwriter
in Packaged Ice's initial public offering, the total proceeds of which were
$91,375,000. In addition, Mr. Losito has a verbal agreement with Jefferies by
which he will receive compensation from Jefferies as a result of Jefferies being
retained by Packaged Ice to provide investment banking services for transactions
which Packaged Ice may complete in 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Packaged Ice's officers and
directors, and persons who beneficially own more than 10% of the company's
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the regulations of the Commission require
such officers, directors and greater than 10% shareholders to furnish Packaged
Ice with copies of all such reports that they file. During the year ended
December 31, 1998, the Company's executive officers, directors and greater than
10% beneficial owners were not subject to Section 16(a) of the Exchange Act.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals to be presented at the 2000 Annual Meeting must be
received by the Company on or before January 19, 2000, for inclusion in the
proxy statement and proxy card relating to the meeting.
GENERAL
As of the date of this Proxy Statement, Packaged Ice's management does not
know of any business to be presented for consideration at the Annual Meeting
other than that described above. If any other business should properly come
before the Annual Meeting, it is intended that the shares represented by proxies
will be voted with respect thereto in accordance with the judgment of the
persons named in such proxies.
Packaged Ice will bear the cost of any solicitation of proxies by mail.
Arrangements may be made with brokerage firms and other custodians, nominees and
fiduciaries for the forwarding of material to and solicitation of proxies from
the beneficial owners of common stock held of record by such persons, and
Packaged Ice will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out of pocket expenses incurred by them in connection
therewith. In addition, Packaged Ice has retained American Stock Transfer and
Trust Company to perform a proxy search to determine the beneficial owners of
the common stock as of the record date and will reimburse such firm for its
expenses.
The accompanying form of proxy has been prepared at the direction of the
Packaged Ice Board of Directors and is sent to you at the request of the Board
of Directors. The proxies named therein have been designated by the Board of
Directors.
By Order of the Board of Directors,
JAMES F. STUART
CHAIRMAN OF THE BOARD
Houston, Texas
May 18, 1999
12
<PAGE>
COMMON STOCK PROXY
PACKAGED ICE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Packaged Ice, Inc. to be held at the Hilton Austin
North & Towers, 6000 Middle Fiskville Road, Austin, Texas 78752, at 9:30 a.m.,
Central Daylight Time, on Thursday, June 17, 1999, and the Proxy Statement in
connection therewith and (2) appoints James F. Stuart and A. J. Lewis III, and
each of them, the undersigned's proxies with the full power of substitution for
and in the name, place and stead of the undersigned to vote upon and act with
respect to all of the shares of common stock of Packaged Ice standing in the
name of the undersigned, or with respect to which the undersigned is entitled to
vote and act, at the meeting and at any adjournment thereof.
The undersigned directs that the undersigned's proxy be voted as follows:
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PACKAGED ICE, INC.
JUNE 17, 1999
Please Detach and Mail in the Envelope Provided
Please mark your
[X] votes as in this
example
<TABLE>
<CAPTION>
FOR ALL nominees
named at right
EXCEPT as marked
to the contrary below WITHHELD
<S> <C> <C> <C>
1. Election of Nominees: James F. Stuart
Directors for [ ] [ ] A. J. Lewis III
Packaged Ice Steven P. Rosenberg
Richard A. Coonrod
INSTRUCTION: To withhold authority to vote for Robert G. Miller
any individual nominee, print that nominee's Rod J. Sands
name on the line below Arthur E. Biggs
______________________________________________ David J. Losito
FOR AGAINST ABSTAIN
2. Ratification of the selection of Deloitte &
Touche LLP as independent auditors for [ ] [ ] [ ]
Packaged Ice for fiscal year 1999.
3. In the discretion of the proxies, on any other matters which may properly
come before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE, IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 ABOVE.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN TO VOTE OR ACT WITH
RESPECT TO THE COMMON STOCK OF THE COMPANY AND HEREBY RATIFIES AND CONFIRMS ALL
THAT THE PROXIES, THEIR SUBSTITUTES, OR ANY OF THEM MAY LAWFULLY DO BY VIRTUE
HEREOF.
Signature(s) of Shareholder:__________________ Signature(s) of Shareholder:______________________ Dated this_____ day of______, 1999
Note: Please date this proxy and sign your name exactly as it appears hereon and return promptly in the enclosed, pre-addressed,
stamped envelope. Where there is more than one owner, each should sign. When signing as attorney, administrator, executor,
guardian or trustee, please add your title as such. If executed by a corporation, the proxy should be signed by a duly
authorized officer.
</TABLE>
