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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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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[ ] 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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4) Date Filed:
[PACKAGED ICE LOGO]
PACKAGED ICE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
TO THE SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders of
Packaged Ice, Inc., to be held in the lobby conference room of our Houston
office, 8584 Katy Freeway, Houston, Texas 77024, at 9:30 a.m. Central Daylight
Time, on Thursday, May 25, 2000, for the following purposes:
1. to elect six 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 accountant for the fiscal year
ending December 31, 2000;
3. to consider and vote upon a proposal to approve the 2000 Employee Stock
Purchase Plan; and
4. 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 April 14, 2000, 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
April 14, 2000
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PACKAGED ICE, INC.
8572 KATY FREEWAY, SUITE 101
HOUSTON, TEXAS 77024
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
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The Board of Directors of Packaged Ice, Inc. is soliciting the enclosed
proxy to be used at the 2000 Annual Meeting of Shareholders to be held in the
lobby conference room of our Houston office, 8584 Katy Freeway, Houston, Texas
77024, at 9:30 a.m. Central Daylight Time, on Thursday, May 25, 2000. This Proxy
Statement and the related proxy card are to be sent or given to the shareholders
of Packaged Ice on or about April 24, 2000. 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 April 14, 2000, 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 March 31,
2000, there were outstanding and entitled to vote 19,308,709 shares of common
stock, which is the only class of voting securities.
Packaged Ice's Annual Report for the fiscal year ended December 31, 1999,
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, six 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 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 and
Packaged Ice's Articles of Incorporation and Bylaws, 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 six
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 58, 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 44, 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 Packaged Ice's stock earlier this year.
Mr. Lewis acquired Mission Party Ice, Inc., in 1988 and was its president and
the sole director until Packaged Ice purchased it in April 1997. He
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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 41, has been a shareholder and director of
Packaged Ice since 1991. Since 1997 Mr. Rosenberg has been a private investor
through SPR Ventures, and is Chief Executive Officer of Fuel Marketing
Solutions, Inc. From 1992 to February 1997, Mr. Rosenberg was President of Arrow
Industries, now a wholly owned subsidiary of ConAgra.
RICHARD A. COONROD, age 69, has been a director since 1995 and is a member
of the Compensation and Audit Committees 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 Michael Foods, Inc., since
1994.
ROBERT G. MILLER, age 49, has been a director of Packaged Ice since April
1997 and is a member of the Compensation and Audit Committees. 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.
DAVID J. LOSITO, age 42, has been a director of Packaged Ice since June
1999 and is a member of the Compensation and Audit Committees. Mr. Losito is a
Managing Director of Ponte Capital LLC, a boutique merchant bank. From January
1999 to August 1999, he was an Executive Vice President of EPS Solutions, a
business services firm. 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 eleven meetings during the fiscal year ended
December 31, 1999. 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, a Compensation Committee, a Special
Committee and a Corporate Governance and Nominating Committee.
The Compensation Committee oversees the compensation of Packaged Ice's
senior management and grants under Packaged Ice's stock option plans. In
addition, the Compensation Committee oversees the 2000 Employee Stock Purchase
Plan. During the 1999 fiscal year, the Compensation Committee was comprised of
Messrs. Coonrod, Sands, Losito, Miller and Stuart, and held one meeting. Mr.
Sands resigned from the Board of Directors and the Compensation Committee in
October 1999. Mr. Stuart resigned from the Compensation Committee in January
1999. The membership of the Compensation Committee is restricted to outside
directors. Currently the Compensation Committee is comprised of Messrs. Miller,
Losito and Coonrod.
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 1999 fiscal year, the Audit Committee was
comprised of Messrs. Lewis, Biggs and Rosenberg, and held one meeting. Mr. Lewis
resigned from the Audit Committee in January 1999. Mr. Rosenberg resigned from
the Audit Committee in December 1999. Mr. Biggs resigned from the Board of
Directors and the Audit Committee in February 2000. Currently the Audit
Committee is comprised of Messrs. Miller, Losito and Coonrod.
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The Special Committee was established by the Board of Directors on October
29, 1999. The primary responsibility of this committee is to monitor and review
any unsolicited inquiries or offers submitted to Packaged Ice which propose
transactions resulting in a change in control of Packaged Ice such as
o a plan and agreement of merger, share exchange or other business
combination which would cause of change of control;
o an agreement to sell all or substantially all of the assets of
Packaged Ice; or
o an agreement to issue additional common or preferred stock which
would cause a change of control.
Membership in the Special Committee must consist of at least three members and
is open to any of the members of the Board of Directors of Packaged Ice. During
the 1999 fiscal year the Special Committee was comprised of Messrs. Rosenberg,
Losito and Stuart and held no meetings. Currently the Special Committee is
comprised of Messrs. Rosenberg, Losito and Stuart.
The Corporate Governance and Nominating Committee was established by the
Board of Directors on December 13, 1999 and is comprised of Messrs. Stuart,
Coonrod and Miller. The primary responsibility of this committee is to review
the size, composition and effectiveness of the Board of Directors of Packaged
Ice and to consider corporate governance matters and recommend proposals
regarding corporate governance. Membership in the Corporate Governance and
Nominating Committee will consist of no less than three members, at least two of
which will be non-management directors. During 1999 the Corporate Governance and
Nominating Committee held no meetings.
EXECUTIVE OFFICERS
The following table sets forth certain information as of April 14, 2000
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.
NAME AGE POSITION
- ---- --- --------
James F. Stuart..... 58 Chief Executive Officer
A. J. Lewis III..... 44 President and Secretary
Jimmy C. Weaver..... 46 Executive Vice President and Chief Operating Officer
James C. Hazlewood.. 52 Chief Financial Officer (Principal Accounting and
Financial Officer)
H. D. Wiginton...... 62 Senior Vice President - Marketing
Leonard A. Bedell... 55 Senior Vice President - Central Operations
Graham D. Davis..... 45 Senior Vice President - Western Operations
Neil D. Showalter... 42 Senior Vice President - Mid-Atlantic Operations
Steven J. Janusek... 28 Treasurer
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 Packaged Ice 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.
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JIMMY C. WEAVER became Executive Vice President and Chief Operating
Officer of Packaged Ice 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 Packaged Ice's Chief Financial Officer. Mr.
Hazlewood joined Packaged Ice 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 is a CPA who
initiated his career with Arthur Andersen LLP.
H.D. WIGINTON is Packaged Ice's Senior Vice President - Marketing. From
September 1991 until he joined Packaged Ice in November 1996, Mr. Wiginton was
Executive Vice President of Tower Marketing, a Texas-based, regional food
brokerage concern.
LEONARD A. BEDELL is Packaged Ice's Senior Vice President - Central
Operations. Mr. Bedell joined Packaged Ice 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 Tidel Technologies, Inc. Mr. Bedell is a CPA who initiated his
career with Arthur Andersen LLP.
GRAHAM D. DAVIS became Packaged Ice'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.
STEVEN J. JANUSEK became Packaged Ice's Treasurer in February 2000. Mr.
Janusek joined Southwestern Ice, Inc. in July 1994 and from January 1996 served
as the Corporate Controller of Southwestern until its merger with Packaged Ice
in April 1997. Mr. Janusek has served as Corporate Controller of Packaged Ice
since January 1998.
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, 2000. 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 will 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
and Packaged Ice's Articles of Incorporation, 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.
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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.
APPROVAL OF 2000 EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3)
On December 13, 1999, the Board of Directors adopted the 2000 Employee
Stock Purchase Plan. The plan is conditioned upon the approval of the
shareholders, and failure to receive shareholder approval will render the plan
and all outstanding options issued thereunder void and of no effect. The Plan
must be approved by an 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 and Packaged Ice's Articles of Incorporation, 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"
approval of the plan.
PURPOSE OF THE PLAN
The purpose of the plan is to provide eligible employees of the company
and its designated subsidiaries with the opportunity to acquire an interest in
Packaged Ice through the purchase of the company's common stock. The plan is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended.
ADMINISTRATION OF THE PLAN
The Employee Stock Purchase Plan is administered by a committee of at
least three members of the Board of Directors who have been appointed by the
board and who are "non-employee directors" within the meaning of Rule 16b-3
under Section 16 of the Securities Exchange Act of 1934, as amended. The
committee may select an administrator to whom its duties and responsibilities
hereunder may be delegated. The Compensation Committee will fulfill this
obligation. The committee has full power and authority, subject to the
provisions of the plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the plan, to interpret the provisions
and supervise the administration of the plan, and to take all action in
connection therewith or in relation thereto as it deems necessary or advisable.
Any decision reduced to writing and signed by a majority of the members of the
committee shall be fully effective as if it had been made at a meeting duly
held. Packaged Ice will pay all expenses incurred in the administration of the
plan. No member of the committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the plan,
and all members of the committee shall be fully indemnified by Packaged Ice with
respect to any such action, determination or interpretation.
ELIGIBILITY
Those eligible for participation in the Employee Stock Purchase Plan are
persons who, for tax purposes, are employees of Packaged Ice or one of the
subsidiaries designated to participate in the plan ("designated subsidiaries"),
are customarily scheduled to work more than twenty hours per week, and are
customarily employed five months or more in any calendar year.
Notwithstanding the foregoing, an eligible employee may not be granted an
option if, upon such grant, he or she would own and/or hold immediately
thereafter, by applying the rules of Section 424(d) of the Code in determining
stock ownership shares, outstanding options to purchase shares possessing 5% or
more of the total combined voting power or value of all classes of shares of
Packaged Ice.
ENROLLMENT IN THE PLAN
For purposes of the Employee Stock Purchase Plan and subject to the
discretion of the committee, the "offering period" will be a period of time
commencing on the first business day of each calendar quarter (the "offering
date") and ending on the last business day of such quarter. The initial offering
period ended on March 31, 2000. The next offering period commenced on April 3,
2000 and a new offering period will commence on each
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offering date thereafter until the Employee Stock Purchase Plan is terminated
through the grant of all shares under the plan or the earlier termination by the
Board of Directors.
A person who is eligible to participate in the Employee Stock Purchase
Plan will cease to be eligible upon the earliest to occur of
o the date he or she is no longer an eligible employee;
o the first day of the offering period following the date on which he
or she ceases to contribute to the Employee Stock Purchase Plan; or
o the date on which he or she withdraws from the Employee Stock
Purchase Plan.
CONTRIBUTIONS TO THE PLAN
A person who elects to participate in the Employee Stock Purchase Plan
must submit a proper authorization form instructing Packaged Ice to deduct from
his or her compensation an amount selected by that person, up to any limit
imposed by the committee, that will be used to purchase common stock under the
Employee Stock Purchase Plan. A participant may increase or decrease such
payroll deduction effective as of the beginning of each offering period,
provided he or she files such request by the deadline to be announced by
Packaged Ice prior to the beginning of the next offering period or it will be
effective for the next following offering period. A participant may also make
one lump sum payment into his or her account per offering period, if not
specifically prohibited by the committee for that offering period, as long as he
or she has not had the maximum amount withheld during the offering period if
such an amount has been established by the committee.
Packaged Ice will not make any contributions under the Employee Stock
Purchase Plan. All contributions made under the Employee Stock Purchase Plan may
be used by Packaged Ice for any corporate purpose and the company will not be
obligated to segregate such contributions. No participant will be permitted to
purchase more than twenty-five thousand dollars $25,000 worth of shares during
any year.
The committee will maintain an account for each participant in the
Employee Stock Purchase Plan and will credit each participant's contributions to
his or her account. Amounts held in participant accounts will not earn interest.
SHARES SUBJECT TO THE PLAN
The aggregate number of shares of common stock which may be acquired upon
the exercise of options under the Employee Stock Purchase Plan will not exceed
two hundred fifty thousand 250,000, subject to adjustment in certain
circumstances. The source of shares subject to options may be treasury, open
market purchase, or new issue.
NUMBER OF OPTIONS AND METHOD OF EXERCISE
On each offering date, Packaged Ice will grant to each participant an
option to purchase the maximum number of full shares of common stock equal to
the amount such participant has contributed to the Employee Stock Purchase Plan
during the offering period (plus any dividends paid on such shares held in such
participant's account) divided by 85% of the lower of
o the fair market value of a share of common stock on the offering
date or
o the fair market value of a share of common stock on the exercise
date.
If the total number of shares which would otherwise be subject to options
granted under the Employee Stock Purchase Plan on an offering date exceeds the
number of shares available under the Employee Stock Purchase Plan, the committee
will make a pro rata allocation of the remaining shares available for grant in
as uniform a
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manner as is practicable and as the committee determines to be equitable. In
such event, the committee will provide participants with written notice of such
reduction of the number of option shares affected thereby and will reduce the
rate of payroll deductions, if necessary.
For purposes of the Employee Stock Purchase Plan, "fair market value" as
of a particular date means (i) the last reported sale price (on that date) of
the common stock on the Nasdaq National Market or such other established stock
exchange or national market system on which the common stock is listed; or (ii)
if the common stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its fair market value will be the mean of the
closing bid and asked prices for the common stock on the date of such
determination, as reported in the Wall Street Journal or such other source as
the board deems reliable; or (iii) in the absence of an established market for
the common stock, the fair market value thereof will be determined in good faith
by the Board.
For purposes of the Employee Stock Purchase Plan, "exercise date," or the
date on which options issued under the Employee Stock Purchase Plan will be
exercised, means the last business day prior to the next offering date in which
payroll deductions are made under the plan.
SALE OF COMMON STOCK
All common stock purchased upon exercise of an option will be registered
in the participant's name or, at such participant's election, in his or her name
and that of another person as joint tenants with rights of survivorship. Shares
of common stock received upon a stock dividend or stock-split will be treated as
having been purchased on the exercise date of the shares of common stock to
which they relate. All such common stock will remain in the participant's
account until such time as he or she requests a voluntary withdrawal. As
promptly as practicable after receipt by the committee of a written request from
a participant for withdrawal of common stock, Packaged Ice will arrange the
delivery to the participant of a stock certificate representing the shares of
common stock he or she wishes to withdraw. Withdrawals may be made no more
frequently than once each plan year unless approved by the committee in its sole
discretion. A participant can sell his or her stock at any time; however, the
tax consequences will vary depending on when he or she sells his or her stock.
WITHDRAWAL FROM THE PLAN
A participant may withdraw all, but not less than all, of the payroll
deductions, cash dividends and lump-sum payment amounts credited to his or her
account (that have not been used to purchase shares of common stock) under the
Employee Stock Purchase Plan at any time by giving written notice to Packaged
Ice that is received prior to the exercise date. All such amounts credited to a
participant's account will be paid to such participant promptly after receipt of
his or her notice of withdrawal and such participant's option for the offering
period in which the withdrawal occurs will be automatically terminated. No
further payroll deductions for the purchase of shares of common stock will be
made for the participant during that offering period, any additional cash
dividends during that offering period will be distributed to the participant,
and no further lump-sum payments for that offering period will be accepted. If a
participant withdraws from an offering period, payroll deductions will not
resume at the beginning of the next offering period unless the participant
delivers to Packaged Ice a new authorization form. A participant's withdrawal
from an offering period will not have any effect upon his or her eligibility to
participate in a succeeding offering period or in any similar plan which may
later be adopted by Packaged Ice.
EFFECT OF TERMINATION OF EMPLOYMENT
Upon a termination of employment for any reason, all payroll deductions,
cash dividends and any lump-sum payment credited to a participant's account that
have not been used to purchase shares of common stock will be returned (and any
future cash dividends will be distributed) to the participant or, in the case of
his or her death, to the person or persons entitled to them pursuant to his or
her beneficiary designation, and in the absence of such designation, to the
executor or administrator or his or her estate, or if there is no executor or
administrator, to his or her spouse or to any one or more of his or her
dependents or relatives, and such participant's option will be automatically
terminated.
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A person's status as an employee is not considered terminated in the case
of a leave of absence agreed to in writing by Packaged Ice (including, but not
limited to, military and sick leave), provided that such leave is for a period
of not more than ninety days or re-employment is guaranteed by contract or
statute after such period.
NOTICES
The Administrator will distribute to participants a quarterly statement
detailing the number of shares such participant has purchased under the Employee
Stock Purchase Plan and the price at which such shares have been purchased.
VOTING OF SHARES
Common stock held for a participant in an account is voted as such
participant directs.
TERMINATION OR AMENDMENT OF THE PLAN
The Employee Stock Purchase Plan may be terminated or amended at any time
by Packaged Ice's board of directors. Except as otherwise described in this
section, no such termination can adversely affect options previously granted and
no such amendment can make any change to an option granted which adversely
affects participants' rights. If stockholder approval is required to comply with
any law, regulation or stock exchange rule, no amendment will be effective
unless approved by the stockholders of Packaged Ice.
ADJUSTMENT OF AWARDS FOR CERTAIN CORPORATE EVENTS
In the event of any increase, reduction, change or exchange of shares of
common stock for a different number or kind of our shares or other securities by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, stock dividend, stock split or reverse stock split, combination
or exchange of shares, repurchase of shares, change in corporate structure,
distribution of an extraordinary dividend or otherwise, the committee will
conclusively determine the appropriate equitable adjustments, if any, to be made
under the Employee Stock Purchase Plan, including without limitation adjustments
to the number of shares of common stock which have been authorized for issuance
under the Employee Stock Purchase Plan but have not yet been placed under
option, as well as the price per share of common stock covered by each option
under the Employee Stock Purchase Plan which has not yet been exercised.
TRANSFER AND ASSIGNMENT OF AWARDS
Neither any payroll deduction credited to a participant's account nor any
rights with regard to the exercise of any option or to receive common stock
under the Employee Stock Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way except by will or by the laws of descent and
distribution. Any such attempt will be without effect, except that the company
may treat such act as an election to withdraw from the Employee Stock Purchase
Plan.
GOVERNMENTAL REGULATIONS
The company's obligation to sell or deliver shares of common stock with
respect to options granted under the Employee Stock Purchase Plan will be
subject to all applicable laws, rules and regulations, including all applicable
Federal and state securities laws, and the obtaining of all approvals by
governmental agencies as may be deemed necessary or appropriate by the
committee.
TAX WITHHOLDING UPON EXERCISE OF OPTIONS
No federal income tax is due to be withheld or paid upon the exercise of
an option under this plan.
8
<PAGE>
TAX CONSEQUENCES
The Employee Stock Purchase Plan is not qualified under Section 401(a) of
the Internal Revenue Code. The options granted under the Employee Stock Purchase
Plan are intended to be statutory stock options under Section 423 of the
Internal Revenue Code. There will be no tax due on the exercise date upon
purchase of shares under the Employee Stock Purchase Plan.
The tax treatment of the shares a participant purchases under his or her
options will depend on how long he or she holds the shares after purchase. If a
participant holds stock for more than one year after the exercise date AND for
more than two years after the offering date, or if he or she dies while owning
the shares, the participant will realize ordinary income on a sale (or a
disposition by way of gift or upon death) to the extent of the lesser of: (1)
15% of the fair market value of the stock on the offering date (or the purchase
price discount if the purchase price is based solely on the exercise date fair
market value); or (2) the actual gain (the amount by which the fair market value
of the shares on the date of sale, gift or death, exceeds the purchase price).
All additional gain upon the sale of stock is treated as long-term capital gain.
If the stock is sold and the sale price is less than the purchase price, there
is no ordinary income, and the participant will have a long-term capital loss
for the difference between the sale price and the purchase price. Ordinary
income recognized by a participant upon a qualifying disposition constitutes
taxable compensation. Packaged Ice is not entitled to a tax deduction for the
amount of such income.
If a participant sells the stock or otherwise dispose of it, including by
way of gift (but not death, bequest or inheritance), within either the one-year
or two-year holding periods discussed above (in either case, a "disqualifying
disposition"), the participant will realize ordinary income at the time of sale
or other disposition taxable to the extent that the fair market value of the
stock on the exercise date was greater than the purchase price. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or if a gratuitous transfer is made. The
difference, if any, between the proceeds of sale and the fair market value of
the stock at the date of purchase is a capital gain or loss (which is long-term
if the stock has been held more than one year). Ordinary income recognized by a
participant upon a disqualifying disposition constitutes taxable compensation.
Subject to the limitations of ss.162(m) of the Code, Packaged Ice will
receive a deduction for federal income tax purposes to the extent that a
participant realizes ordinary income on a disqualifying disposition. Packaged
Ice will not receive a deduction if a participant meets the holding period
requirements discussed above.
In general, a participant will recognize ordinary income upon the payment
of dividends with respect to shares of common stock issued under this Employee
Stock Purchase Plan whether or not such shares are held in his or her account or
held by the participant outside the Employee Stock Purchase Plan.
The federal tax consequences of participating in the Employee Stock
Purchase Plan that are described in this section are based on an analysis of the
current provisions of the Internal Revenue Code and the regulations promulgated
thereunder, all of which are subject to change. The discussion addresses only
federal income tax consequences to participants as citizens or residents of the
United States for federal income tax purposes. Participants may also be subject
to local taxes in the jurisdiction in which they work and/or reside.
REOFFERS AND RESALES
If a participant is Packaged Ice's "affiliate" as that term is defined
under Rule 144 under the Securities Act, any shares of common stock acquired by
such participant under the Employee Stock Purchase Plan will be subject to the
restrictions on resale set forth in Rule 144 under the Securities Act. The
certificate(s) representing such share(s) may bear a legend indicating that the
transfer of such shares is restricted. Participants who are affiliates may
resell the shares of common stock acquired under the Employee Stock Purchase
Plan pursuant to (1) the applicable provisions of Rule 144 (without regard to
the applicable holding period requirement), (2) any other applicable exemption
from the registration requirements of the Securities Act, or (3) a registration
statement with respect to such shares under the Securities Act. Generally,
participants who are not our affiliates may freely sell the shares of common
stock acquired under the Employee Stock Purchase Plan without regard to the
requirements of Rule 144 or the registration requirements of the Securities Act.
9
<PAGE>
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, 1999, 1998 and 1997:
<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......................... 1999 $225,000 $ 101,250 22,941 $ 3,200(1)
Chairman, Chief Executive Officer 1998 209,269 302,500 60,000 3,200(1)
1997 125,000 50,000 30,000 2,500(1)
A. J. Lewis III, President.............. 1999 200,000 90,000 15,294 3,200(1)
1998 192,884 280,000 50,000 3,200(1)
1997(2) 83,173 50,000 25,000 1,663(1)
Jimmy C. Weaver......................... 1999 185,000 72,150 12,235 12,000(6)
Executive Vice President, Chief 1998(3) 120,961 166,500 56,000 8,000(6)
Operating Officer
Graham D. Davis......................... 1999 156,000 46,800 7,953 12,000(6)
Senior Vice President - 1998(4) 106,605 101,400 30,400 8,000(6)
Western Operations
Neil D. Showalter....................... 1999 156,000 42,120 7,953 3,200(1)
Senior Vice President - 1998(5) 63,000 39,000 10,400 720(1)
Mid-Atlantic Operations
</TABLE>
- -----------
(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's 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 $156,000. No
compensation is provided for prior years, as Mr. Davis's employment
commenced April 1998.
(5) Represents partial year compensation at an annual salary of $156,000. No
compensation is provided for prior years, as Mr. Showalter's employment
commenced August 1998.
(6) Automobile allowance.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding the number of
stock options to purchase shares of Packaged Ice's common stock granted to the
Named Executive Officers during the year ended December 31, 1999:
10
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
NUMBER OF PERCENTAGE ANNUAL RATE OF STOCK
SECURITIES OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS PER SHARE FOR OPTION TERM
OPTIONS GRANTED IN EXERCISE OR EXPIRATION ---------------------
GRANTED FISCAL 1999 BASE PRICE DATE 5% 10%
---------- ----------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
James F. Stuart...... 22,941 12.4 $ 8.00 3/2/09 115,420 292,496
A. J. Lewis III...... 15,294 8.3 8.00 3/2/09 76,947 194,998
Jimmy C. Weaver...... 12,235 6.6 8.00 3/2/09 61,556 155,996
Graham D. Davis...... 7,953 4.3 8.00 3/2/09 40,013 101,400
Neil D. Showalter.... 7,953 4.3 8.00 3/2/09 40,013 101,400
</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, 1999, 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................ -- 66,000 46,941 -- --
A. J. Lewis III................ -- 59,000 31,294 -- --
Jimmy C. Weaver................ -- 43,200 25,035 -- --
Graham D. Davis................ -- 23,671 14,682 -- --
Neil D. Showalter.............. -- 3,671 14,682 -- --
</TABLE>
- ---------------
(1) Based on a price per share of $3.875, the closing sale price of the
Packaged Ice's stock on the Nasdaq National Market on April 12, 2000. 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, 1999, 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, as amended, administers the 1998 Option
Plan. 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
cannot be less than one hundred percent 100% and eighty-five percent 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
11
<PAGE>
granted in connection with a stock option becomes exercisable and lapses
according to the same vesting schedule and lapse rules established for the stock
option (which cannot exceed ten years from the date of grant). A SAR is not
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, 1999, the company had outstanding options for 415,289
shares of common stock at a weighted exercise price of $11.94 (of which 49,131
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 exercise prices determined by the Board of Directors to
be 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. Packaged Ice 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 Packaged Ice 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 such options 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 Packaged Ice or its subsidiary). In
addition, an option may be exercised as to vested shares within ninety 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, 1999, the company had outstanding options for 385,700
shares of common stock at a weighted average exercise price of $11.01 (all of
which 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 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.
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. Historically, directors of Packaged Ice have not been compensated for
their services as directors. However, the board of directors is considering a
non-employee director compensation policy and it is anticipated that the board
will adopt a non-employee director compensation policy during 2000. Directors
are reimbursed, however, for ordinary and necessary expenses incurred in
attending board or committee meetings.
12
<PAGE>
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, 1999, 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.
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
13
<PAGE>
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 based 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
Richard A. Coonrod
Robert G. Miller
David J. Losito
14
<PAGE>
PERFORMANCE GRAPH
The following chart shows a comparison of cumulative total stockholder
returns for the Common Stock of Packaged Ice, the Nasdaq U. S. Composite Index
and the composite peer group for the year ended December 31, 1999. Since
Packaged Ice's stock has been publicly traded only during 1999, the information
necessary to present a five-year performance chart is not available.
COMPARISON OF CUMULATIVE STOCKHOLDER TOTAL RETURN (1)
AMONG PACKAGED ICE, RUSSELL 2000 INDEX AND COMPOSITE PEER GROUP
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1/29/99 12/31/99
------- --------
Packaged Ice, Inc.......... 100.0 38.1
Russell 2000 Index......... 100.0 118.2
Peer Group (2)............. 100.0 64.5
- ----------
(1) Total return assumes $100 invested on January 29, 1999 in Common Stock of
Packaged Ice, Inc., the Russell 2000 Index and the composite peer group.
(2) Packaged Ice maintains as its peer group the following companies: Aurora
Foods, Inc., Interstate Baking Corporation, Fresh Del Monte Produce Inc.,
The Earthgrains Company, Vlasic Foods International, Inc., Coca-Cola
Bottling, and The Boston Beer Group, Inc. This peer group was selected
because of common food industry characteristics (particularly as a
consolidator), market capitalization and shares outstanding.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, 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>
SHARES BENEFICIALLY PERCENTAGE OF SHARES
OWNED BENEFICIALLY OWNED
------------------- --------------------
<S> <C> <C>
James F. Stuart (1)................................ 432,288 2.2
A. J. Lewis III (2)................................ 518,002 2.7
Jimmy C. Weaver (3)................................ 49,647 *
Graham D. Davis (4)................................ 24,671 *
Neil D. Showalter (5).............................. 6,171 *
Steven P. Rosenberg................................ 438,423 2.3
5323 Spring Valley Road #100
Dallas, Texas 75240
Richard A. Coonrod (6)............................. 91,161 *
5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Robert G. Miller (7)............................... 409,040 2.1
30518 Via Maria Elena
Bonsall, California 92003
David J. Losito (8)................................ 21,368 *
725 Toyopa Dr.
Pacific Palisades, California 90272
T. Rowe Price Associates Inc....................... 1,077,400 5.6
100 E. Pratt Street
Baltimore, Maryland 21202
Wellington Management Company, LLP................. 1,801,000 9.3
75 State Street
Boston, Massachusetts 02109
Banc of America Securities LLC..................... 1,702,136 8.1
200 N. College Street, re: NC1-004-03-43
Charlotte, North Carolina 28255
Ares Leveraged Investment Fund, L.P................ 1,183,398 6.1
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
All directors and executive officers............... 2,071,683 9.7
as a group (13 people)
</TABLE>
* Less than 1%.
(1) Includes options to purchase 70,588 shares of common stock at a weighted
average price of $11.57 per share.
(2) Includes (i) options to purchase 62,059 shares of common stock at a
weighted average price of $11.67 per share, (ii) 2,000 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.
16
<PAGE>
(3) Includes options to purchase 45,647 shares of common stock at a weighted
average price of $13.75 per share.
(4) Includes options to purchase 23,671 shares of common stock at a weighted
average price of $13.68 per share.
(5) Includes options to purchase 3,671 shares of common stock at a weighted
average price of $11.97 per share.
(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) Includes (i) 10,000 shares of common stock held by Mr. Losito, as Trustee
and (ii) 11,368 shares of common stock issuable upon exercise of currently
exercisable warrants at an exercise price of $0.01.
(9) Includes 1,702,136 shares of common stock issuable upon exercise of
currently exercisable warrants at an exercise price of $13.00.
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 will 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.
Packaged Ice 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 and related parties will be
approved by outside directors and will be on terms no less favorable than those
that 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 and (iii) initial public offering, the total proceeds of which
were $91,375,000.
17
<PAGE>
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, 1999, Packaged Ice's executive officers, directors and greater than
10% beneficial owners were not subject to Section 16(a) of the Exchange Act.
Packaged Ice believes that during the fiscal year ended December 31, 1999, its
directors, officers and greater than 10% beneficial owners complied with all
applicable filing requirements.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals to be presented at the 2001 Annual Meeting must be
received by Packaged Ice on or before December 16, 2000, for inclusion in the
proxy statement and proxy card relating to the meeting.
18
<PAGE>
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
April 14, 2000
<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 stockholders of Packaged Ice, Inc. to be held in the lobby conference
room of Packaged Ice's Houston office, 8584 Katy Freeway, Houston, Texas 77024,
at 9:30 a.m., Central Daylight Time, on Thursday, May 25, 2000, 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.
(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 STOCKHOLDERS
PACKAGED ICE, INC.
MAY 25, 2000
Please Detach and Mail in the Envelope Provided
Please mark your
A [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 of [ ] [ ] 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 David J. Losito
name on the line below
______________________________________________
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Deloitte &
Touche LLP as Packaged Ice's independent [ ] [ ] [ ]
accountants for the fiscal year ending
December 31, 2000.
3. Approval of the 2000 Employee Stock Purchase
Plan [ ] [ ] [ ]
4. In the discretion of the proxies, on any other matter which may properly
come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE PROPOSALS. AS TO ANY OTHER MATTER, SAID PROXIES SHALL VOTE IN ACCORDANCE
WITH THEIR BEST JUDGMENT.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
Signature:__________________ Signature if held jointly:______________________ Dated ___________, 2000
NOTE: Please sign exactly as name appears on your stock certificate. When shares are held by joint tenants,
both should sign. If acting as attorney, executor, trustee, or in any other representative capacity,
sign name and title.
</TABLE>
