<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
International Home Foods, Inc.
---------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------------
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
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(3) Per unit price or other underlying value of transaction computed
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<PAGE> 2
INTERNATIONAL HOME FOODS, INC.
1633 LITTLETON ROAD
PARSIPPANY, NEW JERSEY 07054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 6, 1998
To the Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of International Home Foods, Inc. (the "Company") on Wednesday, May 6, 1998, at
2:00 p.m., local time, at Hotel Crescent Court, 100 Crescent Court, Dallas,
Texas. The meeting will be held for the following purposes:
(1) To elect three directors as Class I directors of the Company, each to
serve for a three year term ending at the Annual Meeting of
stockholders in 2001 and until their successors are duly elected and
qualified or their earlier resignation or removal;
(2) To approve the International Home Foods, Inc. 1997 Stock Option Plan
and to authorize and approve an amendment thereto to increase the
number of shares of Common Stock for which options may be granted
thereunder from 8,444,021 to 13,444,021;
(3) To ratify the selection of Coopers & Lybrand, L.L.P. as independent
auditors of the Company for fiscal 1998; and
(4) To transact any other business that may properly come before the
meeting.
This notice is accompanied by a form of proxy, a Proxy Statement and the
Company's 1997 Annual Report to stockholders. These items of business are more
fully described in the Proxy Statement.
The close of business on April 2, 1998, has been fixed as the record date
to determine stockholders entitled to receive notice of and to vote at the
Annual Meeting and any adjournments. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection by any stockholder for any
purpose germane to the meeting during ordinary business hours for ten days
before the meeting at the Company's offices at the address on this notice and at
the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE PROXY CARD TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
return envelope is enclosed for that purpose. You may revoke your proxy at any
time before the shares to which it relates are voted at the Annual Meeting, and
you may still vote in person if you attend the Annual Meeting. Please note,
however, that if your shares are held in the name of a broker, bank or other
nominee and you wish to attend the Annual Meeting, you must obtain a proxy
issued in your name from that broker, bank or other nominee.
By Order of the Board of Directors,
C. Dean Metropoulos
Chairman of the Board and Chief
Executive Officer
Parsippany, New Jersey
April 8, 1998
<PAGE> 3
INTERNATIONAL HOME FOODS, INC.
1633 LITTLETON ROAD
PARSIPPANY, NEW JERSEY 07054
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of International Home Foods, Inc. (the "Company")
requests your Proxy for use at the Annual Meeting of Stockholders to be held on
Wednesday, May 6, 1998, at 2:00 p.m., local time, at the Hotel Crescent Court,
100 Crescent Court, Dallas, Texas, and at any adjournments thereof. By signing
and returning the enclosed Proxy, you authorize the persons named on the Proxy
to represent you and vote your shares at the Annual Meeting. This Proxy
Statement and Proxy were first mailed or given to stockholders of the Company on
or about April 10, 1998.
If you attend the Annual Meeting, you may vote in person. If you are not
present at the Annual Meeting, your shares can be voted only if you have
returned a properly signed Proxy or are represented by another proxy. You may
revoke the enclosed Proxy at any time before it is exercised at the Annual
Meeting by (a) signing and submitting a later dated proxy to the Secretary of
the Company, (b) written notice of revocation to the Secretary of the Company,
or (c) voting in person at the Annual Meeting.
VOTING AND QUORUM
The only outstanding voting security of the Company is its common stock,
par value $.01 per share ("Common Stock"). On April 2, 1998, the record date for
the Annual Meeting, there were 77,336,778 shares of Common Stock outstanding and
entitled to be voted at the Annual Meeting.
Each share of Common Stock outstanding on the record date is entitled to
one vote. The presence in person or by proxy of a majority of the shares of
Common Stock outstanding on the record date is required to constitute a quorum
at the Annual Meeting. If a quorum is not present, the stockholders entitled to
vote who are present in person or represented by proxy at the Annual Meeting
have the power to adjourn the Annual Meeting from time to time, without notice
other than an announcement at the Annual Meeting, until a quorum is present. At
any adjourned Annual Meeting at which a quorum is present, any business may be
transacted that might have been transacted at the Annual Meeting as originally
notified. Abstentions and broker non-votes will count in determining if a quorum
is present at the Annual Meeting. 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.
Proxies in the accompanying form that are properly signed and returned will
be voted at the Annual Meeting in accordance with the instructions on the Proxy.
Any properly executed Proxy on which no contrary instructions have been
indicated about a proposal will be voted as follows with respect to the
proposal: FOR the election of the three persons named in this Proxy Statement as
the Board of Directors' nominees for election to the Board of Directors; FOR
approval of the 1997 Stock Option Plan and the authorization and approval of an
amendment thereto to increase the number of shares of Common Stock for which
options may be granted thereunder from 8,444,021 to 13,444,021; FOR ratification
of the selection of Coopers & Lybrand, L.L.P. as independent auditors of the
Company for 1998; and in accordance with the discretion of the holders of the
Proxy with respect to any other business that properly comes before the
stockholders at the Annual Meeting. The Board of Directors knows of no matters,
other than those previously stated, to be presented for consideration at the
Annual Meeting. The persons named in the accompanying Proxy may also, at their
discretion, vote the Proxy to adjourn the Annual Meeting from time to time.
<PAGE> 4
PROPOSAL ONE -- ELECTION OF DIRECTORS
The members of the Company's Board of Directors are divided into three
classes serving staggered three-year terms. The terms of Class I directors
expire at this Annual Meeting. Three directors are to be elected as Class I
directors at this annual meeting.
The Board of Directors has designated L. Hollis Jones, John R. Muse and
Roger T. Staubach as nominees for election as Class I directors of the Company
at the Annual Meeting. If elected, each nominee for Class I director will serve
until expiration of his term at the 2001 annual meeting of stockholders and
until his successor is elected and qualified. Each nominee is currently a
director of the Company. For information about each nominee, see "Directors and
Executive Officers."
The Board of Directors has no reason to believe that any of its nominees
will be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to serve, your Proxy will be voted for the election of a substitute
nominee recommended by the current Board of Directors, or the number of the
Company's directors will be reduced.
The election of directors requires the affirmative vote of a plurality of
the shares of Common Stock present or represented by proxy and entitled to vote
at the Annual Meeting. Accordingly, abstentions and broker non-votes will not
have any effect on the election of a particular director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THESE NOMINEES.
PROPOSAL TWO -- ADOPTION OF THE COMPANY'S
1997 STOCK OPTION PLAN
The Company's Board of Directors proposes that the stockholders of the
Company approve the terms of the Company's 1997 Stock Option Plan (the "Stock
Option Plan"). The Company has used stock options as a key element of its
overall compensation program for employees of the Company. The Board of
Directors and the compensation committee of the Board of Directors believe that
it is important to have equity-based incentives available to attract and retain
quality employees. Accordingly, the Board of Directors has approved subject to
stockholder approval, an amendment to the Stock Option Plan increasing by
5,000,000 the number of shares of Common Stock reserved for issuance under the
Stock Option Plan.
Currently, the maximum number of shares of Common Stock that may be issued
pursuant to stock options granted under the Stock Option Plan is 8,444,021
(subject to adjustment in certain circumstances). Of that number, 600,802 shares
remain available for grant as of April 8, 1998. The proposed amendment would
increase the number of shares of Common Stock available under the Stock Option
Plan by 5,000,000 (to a maximum of 13,444,021). Specifically, the proposed
amendment would amend Section 3 of the Stock Option Plan by amending and
restating the initial sentence of Section 3 to read as follows:
"Subject to the adjustments provided in Section 10, the maximum
aggregate number of shares of Common Stock, $.01 par value of the
Company (the "Common Stock") in respect of which Options may be granted
for all purposes under the Plan shall be 13,444,021 shares."
A description of the Stock Option Plan, including information regarding persons
eligible for participation in the plan and the tax effects of the plan, is set
forth under "Management Compensation -- Stock Option Plan."
Approval of the Stock Option Plan (and the proposed amendment thereto)
requires the affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at the Annual Meeting.
Accordingly, an abstention will have the same effect as a vote against approval
of the Stock Option Plan. Broker non-votes will not have any effect on the
approval of the Stock Option Plan (or the proposed amendment thereto).
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT
TO THE INCENTIVE PLAN.
2
<PAGE> 5
PROPOSAL THREE -- SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand, L.L.P. as the
Company's independent accountants for 1998. Coopers & Lybrand, L.L.P. has served
as the Company's independent accountants since December 1996. Prior to that
time, Arthur Andersen LLP served as the Company's independent accountants. See
"Additional Information -- Change in Independent Accountants." The Company
expects that representatives of Coopers & Lybrand, L.L.P. will be present at the
Annual Meeting to respond to appropriate questions and will have an opportunity
to make a statement if they desire to do so.
Ratification of the selection of Coopers & Lybrand, L.L.P. as the Company's
independent accountants requires the affirmative vote of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting. Accordingly, an abstention will have the same effect as a
vote against the ratification of the selection of Coopers & Lybrand, L.L.P.
Broker non-votes will not have any effect on approval of the ratification of the
selection of Coopers & Lybrand, L.L.P. If the independent accountants are not
ratified, the Board of Directors will consider the appointment of other
independent accountants. The Board of Directors may terminate the appointment of
Coopers & Lybrand, L.L.P. as independent accountants without the approval of the
Company's stockholders whenever the Board of Directors deems termination
necessary or appropriate.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C. Dean Metropoulos............ 51 Chairman of the Board and Chief Executive Officer
John H. Bess................... 46 President and Chief Operating Officer
N. Michael Dion................ 40 Senior Vice President and Chief Financial Officer
M. Kelley Maggs................ 46 Senior Vice President, Secretary and General Counsel
Michael J. Cramer.............. 45 Vice President and Assistant Secretary
Lynne M. Misericordia.......... 34 Treasurer
Thomas O. Hicks................ 52 Director
L. Hollis Jones................ 43 Director
Michael J. Levitt.............. 39 Director
M. L. Lowenkron................ 66 Director
Alan B. Menkes................. 38 Director
John R. Muse................... 47 Director
Roger T. Staubach.............. 56 Director
Charles W. Tate................ 53 Director
</TABLE>
The Board of Directors is divided into three classes. Directors of each
class are elected for three-year terms, with the terms of the three classes
staggered so that directors from a single class are elected at each annual
meeting of stockholders. Messrs. Jones, Muse and Staubach are Class I directors
whose terms of office expire at this Annual Meeting of stockholders; Messrs.
Menkes, Levitt and Lowenkron are Class II directors whose terms of office expire
at the annual meeting of stockholders in 1999; and Messrs. Hicks, Tate and
Metropoulos are Class III directors whose terms of office expire at the annual
meeting of stockholders in 2000.
Executive officers are generally appointed by the Board of Directors to
serve, subject to the discretion of the Board of Directors, until their
successors are appointed. A brief biography of each director and executive
officer follows:
C. Dean Metropoulos has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since November 1996. Mr. Metropoulos is
also the Chairman of the Board and Chief Executive Officer of C. Dean
Metropoulos & Co., a management services company, and served as Chairman and
Chief
3
<PAGE> 6
Executive Officer of The Morningstar Group, Inc. from 1994 through November
1997. From 1983 through 1993, Mr. Metropoulos served as President and Chief
Executive Officer of Stella Foods, Inc. Prior to 1983, Mr. Metropoulos served in
several executive positions with GTE Corporation, including Vice President and
General Manager-Europe, and Vice President and Controller-GTE International. Mr.
Metropoulos also serves as a director of Atrium Companies, Inc.
John H. Bess joined the Company in September 1997 as President and Chief
Operating Officer. From 1975 until joining the Company, Mr. Bess held numerous
positions with Procter & Gamble, most recently serving as Vice President and
Managing Director of Worldwide Strategic Planning. Mr. Bess is a graduate of
Clark University and received an M.B.A. in marketing from New York University.
N. Michael Dion joined the Company as a Senior Vice President and its Chief
Financial Officer in December 1996. Prior to joining the Company, Mr. Dion
served as the Vice President of Finance for C. Dean Metropoulos & Co. and for
LBJ Holdings, Inc., a Connecticut based baking company. Prior to joining C. Dean
Metropoulos & Co., Mr. Dion was the Vice President of Finance for Stella Foods,
Inc. from 1990 through December 1994. Mr. Dion is a Certified Public Accountant
and holds a B.S. in Business Administration and Finance and Accounting from the
University of Vermont.
M. Kelley Maggs joined the Company as Senior Vice President and General
Counsel in November 1996. Prior to joining the Company, Mr. Maggs served as Vice
President, Secretary and General Counsel for Stella Foods, Inc. from 1993
through 1996. Before joining Stella he was in private law practice from 1979
through 1993. Mr. Maggs holds a B.A. from Niagara University and a J.D. from
George Mason University.
Michael J. Cramer joined the Company in January 1997 and became a Vice
President in January 1998. Mr. Cramer has also served as Executive Vice
President and General Counsel of C. Dean Metropoulos & Co. since 1994 and, in
connection therewith, served as Executive Vice President and General Counsel of
The Morningstar Group, Inc. from June 1994 through November 1997. Prior to 1994,
Mr. Cramer was Executive Vice President of Administration and General Counsel of
Stella Foods, Inc. Mr. Cramer is a graduate of the State University of New York
at Albany and received his J.D. from Marquette University.
Lynne M. Misericordia has held several positions since joining the Company
in August 1985, and was named Treasurer of the Company in November 1996. Ms.
Misericordia received her B.A. from Babson College.
Thomas O. Hicks has been a Director of the Company since November 1996. Mr.
Hicks has been Chairman and Chief Executive Officer of Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse"), a private investment firm specializing in
acquisitions, recapitalizations and other principal investing activities, since
co-founding the firm in 1989. Prior to forming Hicks Muse, Mr. Hicks co-founded
Hicks & Haas Incorporated in 1983 and served as its Co-Chairman and Co-Chief
Executive Officer through 1989. Mr. Hicks also serves as a director of several
portfolio companies in which Hicks Muse has invested, including Chancellor Media
Corporation, Berg Electronics Corp. and Sybron International Corporation, is
Vice Chairman of the Board of Regents of the University of Texas System and
serves as Chairman of the University of Texas Investment Management Company. Mr.
Hicks is also the Chairman of the Board and owner of the Dallas Stars Hockey
Club, a member of the National Hockey League.
L. Hollis Jones became a Director of the Company on January 3, 1997. Since
March of 1998, Mr. Jones has served as President of Hollis Jones, Inc., a
management consulting firm. From August of 1995 until November of 1997, Mr.
Jones served as the President and Chief Operating Officer of The Morningstar
Group, Inc., and from November of 1997 until March of 1998, Mr. Jones held the
same positions with Suiza Foods Corp., Morningstar's successor. From January
1994 until July 1995, Mr. Jones was President of his own management consulting
firm. From February 1983 until forming his management consulting firm, Mr. Jones
held various positions of increasing responsibility at Campbell Taggart, Inc., a
subsidiary of Anhauser-Busch, including Vice President-General Manager of its
bakery division from June 1992 to January 1994 and President of its diversified
division from June 1991 to June 1992.
Michael J. Levitt has been a Director of the Company since November 1996.
Mr. Levitt is a Managing Director and Principal of Hicks Muse. Before joining
Hicks Muse, Mr. Levitt was a Managing Director and
4
<PAGE> 7
Deputy Head of Investment Banking with Smith Barney Inc. from 1993 through 1995.
From 1986 through 1993, Mr. Levitt was with Morgan Stanley & Co. Incorporated,
most recently as a Managing Director responsible for the New York based
Financial Entrepreneurs Group. Mr. Levitt also serves as a director of several
portfolio companies in which Hicks Muse has invested.
M. L. Lowenkron has been a Director of the Company since November 1996.
From January 1995 through June 1996, Mr. Lowenkron served as President and Chief
Executive Officer of G. Heileman Brewing Co. Mr. Lowenkron served as Chairman of
the Board and Chief Executive Officer of A&W Brands, Inc. from December 1991 to
October 1993, and served as President of A&W and its predecessors from 1980 to
December 1991. Mr. Lowenkron also serves as a Director of Hat Brands, Inc. and
Depuy Inc., and as First Vice Chairman of the National Easter Seal Society.
Alan B. Menkes has been a Director of the Company since November 1996. Mr.
Menkes is a Managing Director and Principal of Hicks Muse. Before joining Hicks
Muse in 1992, Mr. Menkes was employed by The Carlyle Group, a Washington
D.C.-based private investment firm, most recently as a Senior Vice President.
Mr. Menkes also serves as a director of several portfolio companies in which
Hicks Muse has invested. Mr. Menkes also serves as a vice president and
assistant secretary of the Company.
John R. Muse has been a director of the Company since March 1998. Mr. Muse
is a Managing Director and Principal of Hicks Muse. Before joining Hicks Muse in
1989, Mr. Muse was with Prudential Securities, heading its investment/merchant
banking activities for the Southwest region of the United States. Prior to
joining Prudential Securities, from 1980 to 1984, Mr. Muse served as a Senior
Vice President and Director of Schneider, Bernet & Hickman, Inc. and was
responsible for its investment banking activities. Mr. Muse serves as a director
of several portfolio companies in which Hicks Muse has invested and of Suiza
Foods Corp. Mr. Muse also serves as a director of the Southern Methodist
University Edwin L. Cox School of Business.
Roger T. Staubach has been a Director of the Company since November 1996.
Since 1983, Mr. Staubach has served as the Chairman and Chief Executive Officer
of The Staubach Company, a diversified real estate company. Mr. Staubach also
serves as a director of Halliburton Company, Brinker International, Inc. and
Columbus Realty Trust, and as a trustee of American AAdvantage Funds.
Charles W. Tate has been a Director of the Company since November 1996. Mr.
Tate is President of Hicks Muse, which he joined as Managing Director and
Principal in 1991. Prior to that date, Mr. Tate was with Morgan Stanley & Co.
Incorporated from 1972 where he was Managing Director in both its Merchant
Banking Division and Mergers and Acquisitions Department. Mr. Tate also serves
as a director of several portfolio companies in which Hicks Muse has invested,
including Berg Electronics Corp.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors held 4 meetings during 1997. No director attended
fewer than 75% of such meetings.
The Board of Directors has three standing committees: the executive
committee, the audit committee and the compensation committee. The executive
committee, which did not meet separately from the full Board during 1997, is
authorized to exercise the powers of the Board of Directors during the intervals
between meetings of the Board of Directors and is from time to time delegated
certain authority in matters pertaining to the Company. The audit committee,
which met one time during 1997, recommends to the Board of Directors the
engagement of the Company's independent accountants and reviews the plans for,
and the results and scope of, the annual auditing engagement. The compensation
committee, which met once during 1997, determines the compensation of executive
officers, including bonuses, and administers the Stock Option Plan. The
executive committee consists of Messrs. Menkes, Metropoulos and Tate. The audit
committee consists of Messrs. Staubach and Lowenkron. The compensation committee
consists of Messrs. Tate, Lowenkron and Staubach. No director attended fewer
than 75% of the meetings of committees of the Board of Directors on which he
served during 1997.
5
<PAGE> 8
MANAGEMENT COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table summarizes the compensation
earned during each of the last three fiscal years to (i) the Company's Chief
Executive Officer, (ii) the Company's four most highly compensated executive
officers other than the Chief Executive Officer, who were serving as executive
officers at the end of 1997 and (iii) one person who would have been one of the
Company's four most highly compensated executive officers other than the Chief
Executive Officer had he been an executive officer at the end of 1997 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
C. Dean Metropoulos.................................... 1997 $1,150,544 $1,375,000 164,777 $ 500,000
Chief Executive Officer 1996 150,000 -- 3,518,342 --
1995 -- -- -- --
John H. Bess........................................... 1997 100,492 55,000 469,112 25,086
President and Chief Operating Officer 1996 -- -- -- --
1995 -- -- -- --
N. Michael Dion........................................ 1997 239,473 120,000 93,822 38,713
Senior Vice President and Chief Financial Officer 1996 23,446 -- -- 1,571
1995 -- -- -- --
M. Kelley Maggs........................................ 1997 199,657 70,250 75,057 55,845
Senior Vice President, Secretary and General Counsel 1996 42,154 -- -- 775
1995 -- -- -- --
Michael J. Cramer...................................... 1997 149,377 100,000 10,000 106,273
Vice President and Assistant Secretary 1996 -- -- 187,644 --
1995 -- -- -- --
Stephen Van Tassel(2).................................. 1997 191,449 50,250 93,822 10,400
General Manager -- Snack Foods 1996 179,900 60,000 5,000(3) 5,535
1995 174,800 -- 7,000(3) 6,209
</TABLE>
- ---------------
(1) Messrs. Metropoulos, Bess, Dion, Maggs and Cramer were reimbursed moving
expenses during 1997 of $500,000, $20,591, $28,844, $48,399 and $101,471,
respectively. The remainder of the amounts shown as other compensation
represent employer contributions to savings and retirement plans.
(2) Mr. Van Tassel resigned from the Company effective April 30, 1998.
(3) Prior to November 1, 1996 the Company was a wholly owned subsidiary of
American Home Products Corporation. Amounts represent options granted by
American Home Products to acquire shares of common stock of American Home
Products.
6
<PAGE> 9
Option Grants in 1997. The following table sets forth information regarding
the Stock option grants the Company made to the Named Executive Officers during
1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS DATE OF PRICE APPRECIATION FOR
UNDERLYING GRANTED TO GRANT OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE MARKET EXPIRATION -----------------------
GRANTED IN 1997 PRICE PRICE DATE 5% 10%
---------- ---------- -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Dean Metropoulos....................... 164,777 3.01% $12.79 $18.01 11-01-2007 2,726,465 $5,589,780
John H. Bess.............................. 469,112 8.57% 17.10 17.10 09-08-2007 8,065,958 15,805,789
N. Michael Dion........................... 93,822 1.71% 5.33 5.33 01-01-2007 314,492 796,985
M. Kelley Maggs........................... 75,057 1.37% 5.33 5.33 01-01-2007 251,592 637,583
Michael J. Cramer......................... 10,000 0.18% 12.79 18.01 11-01-2007 165,464 339,233
Stephen Van Tassel........................ 93,822 1.71% 5.33 5.33 01-01-2007 314,492 796,985
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the options
if they are exercised at the end of the option term. Those gains are based
on assumed rates of Stock price appreciation of 5% and 10% compounded
annually from the date the option was granted through the expiration date.
Option Exercises and Fiscal Year End Values. The following table provides
information about the number of shares issued upon option exercises by the Named
Executive Officers during 1997, and the value realized by the Named Executive
Officers. The table also provides information about the number and value of
options held by the Named Executive Officers at December 31, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT YEAR-END YEAR-END(1)
ACQUIRED ON ---------------------------- ---------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Dean Metropoulos............... -- -- 3,683,119 -- $78,502,445 --
John H. Bess...................... -- -- -- 469,112 -- $8,134,402
N. Michael Dion................... -- -- 31,274 62,548 708,982 1,417,963
M. Kelley Maggs................... -- -- 25,019 50,038 567,181 1,134,361
Michael J. Cramer................. -- -- 197,644 -- 4,205,210 --
Stephen Van Tassel................ -- -- 31,274 62,548 708,982 1,417,963
</TABLE>
- ---------------
(1) Value based on the December 31, 1997 closing price of the Common Stock on
the New York Stock Exchange of $28.00 per share.
COMPENSATION OF DIRECTORS
Directors who are officers, employees or otherwise affiliates of the
Company do not receive compensation for their services as directors.
Non-employee directors receive an annual retainer of $24,000, plus $3,000 for
attending each meeting of the Board of Directors, and $1,000 for attending each
committee meeting. At the option of each director, the compensation may be paid
in any of three methods: (i) in options granted under the Stock Option Plan,
(ii) in cash, or (iii) one-half in cash and one-half in options. Directors of
the Company are entitled to reimbursement of their reasonable out-of-pocket
expenses in connection with their travel to and attendance at meetings of the
board of directors or committees thereof. In connection with their appointment
as directors, Messrs. Lowenkron and Staubach were each granted non-qualified
stock options under the Stock Option Plan to purchase 18,764 shares of Common
Stock for $5.33 per share and Mr. Jones was granted a non-qualified stock option
under the Stock Option Plan to purchase 1,906 shares of Common Stock for $5.33
per share. These options are fully vested and expire 10 years from date of
grant.
7
<PAGE> 10
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Hicks Muse and C. Dean Metropoulos have established an exclusive
relationship to pursue acquisitions of food companies that Mr. Metropoulos will
manage. Pursuant to an arrangement with Hicks Muse, Mr. Metropoulos is
compensated for his services directly by the companies he manages. Effective
September 1, 1997, Mr. Metropoulos receives from the Company annual compensation
for his services of $1,375,000 and is entitled to receive an annual bonus of up
to the same amount. In addition, Mr. Metropoulos receives an equity position,
typically in the form of stock options, in the companies he manages. At the time
the Company was acquired by Hicks Muse (see "Certain Relationships and Related
Transactions -- IHF Acquisition and Related Agreements"), Mr. Metropoulos was
granted options to acquire 3,518,342 shares of Common Stock presently
exercisable at $6.40 per share.
MANAGEMENT BONUSES
Management and certain employees are eligible to receive annual bonuses.
The compensation committee of the Board of Directors determines the amount of
such bonuses.
STOCK OPTION PLAN
The Stock Option Plan gives certain individuals and key employees of the
Company who are responsible for the continued growth of the Company an
opportunity to acquire a proprietary interest in the Company, and thus to create
in such persons an increased interest in and a greater concern for the welfare
of the Company. The Stock Option Plan provides for the grant of options to
acquire up to 8,444,021 shares of Common Stock. Grants of stock options with
respect to 7,843,219 shares of Common Stock have been made under the Stock
Option Plan. The Board of Directors is now seeking stockholder approval to amend
the Stock Option Plan to increase the number of shares of Common Stock that may
be issued thereunder from 8,444,021 to 13,444,021.
The Stock Option Plan is administered by the Company's compensation
committee, which is currently comprised of Messrs. Tate, Lowenkron and Staubach.
The compensation committee has authority, subject to the terms of the Stock
Option Plan (including the formula grant provisions and the provisions relating
to incentive stock options contained therein), to determine when and to whom to
make grants or awards under the Stock Option Plan, the number of shares to be
covered by the grants or awards, the types and terms of the grants and awards,
and the exercise price of stock options. Moreover, the compensation committee
will have the authority, subject to the provisions of the Stock Option Plan, to
establish such rules and regulations as it deems necessary for the proper
administration of the Stock Option Plan and to make such determinations and
interpretations and to take such action in connection with the Stock Option Plan
and any grants and awards thereunder as it deems necessary or advisable. The
compensation committee's determinations and interpretations under the Stock
Option Plan are final, binding and conclusive on all participants and need not
be uniform and may be made by the compensation committee selectively among
persons who receive, or are eligible to receive, grants and awards and awards
under the Stock Option Plan.
Grants of "incentive stock options" within the meaning of section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options (options which do not qualify under section 422 of the Code) may
be made under the Stock Option Plan to key employees. Grants of non-qualified
stock options may be made to eligible non-employees (as defined in the Stock
Option Plan).
The exercise price per share of Common stock under each option is fixed by
the compensation committee on the date of grant; provided, however, that the
exercise price of an incentive stock option granted to a person who, at the time
of grant, owns shares of the Company which possessing more than 10% of the total
combined voting power of all classes of stock of the Company may not be less
than 110% of the fair market value of a share of Common Stock on the date of
grant. No option is exercisable after the expiration of ten years from the date
of grant, unless, as to any non-qualified stock option, otherwise expressly
provided in the option agreement; provided, however, that no incentive stock
option granted to a person who, at the time of grant, owns stock of the Company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company is exercisable after the expiration of five years from the
date of grant.
8
<PAGE> 11
In the event of a change of control or sale of the Company, all outstanding
stock options may, subject to the sole discretion of the compensation committee,
become exercisable in full at such time or times as the compensation committee
may determine. Each stock option accelerated by the compensation committee would
terminate on such date (not later than the stated exercise date) as the
compensation committee determines.
Unless an option or other agreement provides otherwise, upon the date of
death of an optionee (or upon the termination of an optionee because of such
optionee's disability), the person who acquires the right to exercise the option
of such optionee (or the optionee in the case of disability) must exercise such
option within 180 days after the date of death (or termination in the case in
disability), unless a longer period is expressly provided in such incentive
stock option or a shorter period is established by the compensation committee,
but in no event after the expiration date of such option. Following an
optionee's termination of employment for cause, all stock options held by such
optionee will immediately be canceled as of the date of termination of
employment. Following an optionee's termination of employment other than for
cause, such optionee must exercise his stock option within 30 days after the
date of such termination, unless a longer period is expressly provided in such
stock option or a shorter period is established by the compensation committee,
provided that no incentive stock option shall be exercisable more than three
months after such termination.
The option exercise price may be paid in cash, or, in the discretion of the
compensation committee, by the delivery of shares of Common Stock then owned by
the participant, or by a combination of these methods.
Also, in the discretion of the compensation committee, payment may be made
by delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price.
Except as otherwise expressly provided in any non-qualified stock option,
stock options may be transferred by a participant only by will or by the laws of
descent and distribution and may be exercised only by the participant during his
lifetime.
Future awards, if any, that will be made to eligible participants in the
Stock Option Plan are subject to the discretion of the compensation committee
and, therefore, are not determinable at this time. The following table sets
forth, for certain executive officers and groups, the awards that have been
received under the Stock Option Plan through April 2, 1998.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES GRANTED UNDER
NAMED EXECUTIVE OFFICERS AND OFFICERS, STOCK OPTION PLAN
DIRECTORS AND EMPLOYEE GROUPS AS OF APRIL 2, 1998
-------------------------------------- --------------------
<S> <C>
C. Dean Metropoulos......................................... 3,683,119
John H. Bess................................................ 469,112
N. Michael Dion............................................. 93,822
M. Kelley Maggs............................................. 75,057
Michael J. Cramer........................................... 222,644
Stephen Van Tassel.......................................... 93,822
Current Executive Officers as a Group....................... 4,581,282
Current Non-Executive Directors as a Group.................. 39,434
Current Non-Executive Employees as a Group.................. 3,222,503
</TABLE>
RETIREMENT PLANS
The Company sponsors various retirement plans for substantially all of its
employees. In addition, the Company also sponsors a Section 401(k) defined
contribution plan for all non-union employees.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation provides
that no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of his
9
<PAGE> 12
fiduciary duty as a director, except for liability (i) for any breach of the
directors' duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or purchases or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions is
to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above.
The Company has entered indemnification agreements with each of its
directors and executive officers under which the Company will indemnify the
director or officer to the fullest extent permitted by law, and to advance
expenses, if the director or officer becomes a party to or witness or other
participant in any threatened, pending or completed action, suit or proceeding
(a "Claim") by reason of any occurrence related to the fact that the person is
or was a director, officer, employee, agent or fiduciary of the Company or a
subsidiary of the Company or another entity at the Company's request (an
"Indemnifiable Event"), unless a reviewing party (either outside counsel or a
committee appointed by the Board of Directors) determines that the person would
not be entitled to indemnification under applicable law. In addition, if a
change in control or a potential change in control of the Company occurs and if
the person indemnified so requests, the Company will establish a trust for the
benefit of the indemnitee and fund the trust in an amount sufficient to satisfy
all expenses reasonably anticipated at the time of the request to be incurred in
connection with any Claim relating to an Indemnifiable Event. The reviewing
party will determine the amount deposited in the trust. An indemnitee's rights
under his indemnification agreement will not be exclusive of any other rights
under the Company's Amended and Restated Certificate of Incorporation or Amended
and Restated By-laws or applicable law.
The Company believes that these provisions and agreements will assist the
Company in attracting and retaining qualified individuals to serve as directors
and officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the individuals that the Company needs to
maximize its return to stockholders. To meet this overall objective, the Company
provides compensation opportunities and incentive award payments based on
Company and individual performance. The primary components of the compensation
program are base salary, an annual cash bonus based on individual and Company
performance and a long-term opportunity to participate in increased stockholder
value through grants of stock options. Through the grant of stock options, the
Company attempts to provide each of its executives with a compensation package
that provides an opportunity to achieve total compensation above industry
averages for exceptional performance.
The compensation committee of the Board of Directors of the Company is
comprised solely of non-employee directors. The compensation committee reviews
and approves executive compensation. The compensation committee also grants
stock options and administers the Stock Option Plan. The compensation committee
believes that stock options are a superior incentive to motivate key employees
to act in the best interests of stockholders. While many publicly-held companies
have multiple long-term incentive plans, frequently including cash, stock
options and restricted stock, or combinations thereof, stock options are the
only continuing long-term incentive that the Company's executive officers
receive.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Hicks Muse and C. Dean Metropoulos & Co. have established an exclusive
relationship to pursue acquisitions of food companies that Mr. Metropoulos
manages. Pursuant to this relationship, Mr. Metropoulos is compensated for his
services directly by the companies he manages. Presently, International Home
Foods is the only Hicks Muse company under the management of Mr. Metropoulos.
10
<PAGE> 13
Mr. Metropoulos receives an equity position, typically in the form of stock
options, in the Hicks Muse companies he manages. At the time the Company was
acquired by Hicks Muse (see "Certain Relationships and Related
Transactions -- IHF Acquisition and Related Agreements") in November 1996, Mr.
Metropoulos was granted options to acquire 3,518,342 shares of Common Stock
exercisable at the fair market value of such shares on the date of grant.
Since being acquired by Hicks Muse, the Company has grown substantially
under the management of Mr. Metropoulos. The Company's 1997 sales of $1,222
million represents an almost 30% increase over 1996 sales. Under Mr.
Metropoulos' management, the Company has successfully completed the acquisition
and integration of six businesses. In addition, in November 1997 the Company
consummated the initial public offering of its common stock. As a result of Mr.
Metropoulos' central role in the management of the Company since its acquisition
by Hicks Muse, effective September 1, 1997, Mr. Metropoulos annual compensation
for his services with Company was increased to $1,375,000. He is also entitled
to receive an annual bonus of up to the same amount.
FEDERAL INCOME TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the other four most highly
compensated executive officers. The Company generally may deduct compensation to
such an officer only if the compensation does not exceed $1,000,000 during any
fiscal year or is "performance-based" as defined in Section 162(m) of the Code.
The compensation committee intends to design the Company's compensation programs
so that total compensation paid to any employee will not exceed $1,000,000 in
any one year, except for compensation payments in excess of $1,000,000 which
qualify as "performance-based." However, the Company may pay compensation which
is not deductible in limited circumstances when prudent management of the
Company so requires.
COMPENSATION COMMITTEE
Charles W. Tate
M. L. Lowenkron
Roger T. Staubach
11
<PAGE> 14
PERFORMANCE GRAPH
The Performance Graph compares the cumulative total return of the Company,
the NYSE Stock Market Index (United States companies) and the NYSE Food and
Kindred Products Index (United States companies). The graph assumes that $100
was invested in the stock or the index on November 19, 1997, the date of the
Company's initial inclusion on the New York Stock Exchange, and also assumes
reinvestment of dividends. Historical stock price performance is not necessarily
indicative of future stock price performance.
INTERNATIONAL HOME FOODS, INC.
COMPARATIVE TOTAL RETURNS
NOVEMBER 19, 1997 THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
NYSE FOOD
NYSE STOCK AND KINDRED
INTERNATIONAL MARKET INDEX PRODUCTS
MEASUREMENT PERIOD HOME FOODS, (U.S. INDEX (U.S.
(FISCAL YEAR COVERED) INC.(1) COMPANIES) COMPANIES)
<S> <C> <C> <C>
11/19/97 100 100 100
11/28/97 106.7 101.1 101.0
12/31/97 124.4 103.7 105.0
</TABLE>
- ---------------
(1) Based upon stock price of $20.00 per share, the initial public offering
price per share of the Common Stock.
As of March 30, 1998, the closing price of the Company's Common Stock on
the New York Stock Exchange was $32.50 per share.
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the shares of the Company's Common Stock as of March 30, 1998, by
(i) each person the Company knows to be the beneficial owner of 5% or more of
the outstanding shares of Common Stock, (ii) each Named Executive Officer, (iii)
each director of the Company, and (iv) all executive officers and directors of
the Company as a group. Except as indicated in the footnotes to the table, the
Company believes that the persons named in the table have sole voting and
investment power with respect to the shares of Common Stock indicated.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED(1)
---------------- ------------ ------------
<S> <C> <C>
Hicks Muse Parties(2)....................................... 43,025,012 55.6%
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
AHP Subsidiary Holding Corporation.......................... 8,824,002 11.4%
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
C. Dean Metropoulos(3)...................................... 3,206,339 4.1%
John H. Bess(4)............................................. 5,500 *
N. Michael Dion(5).......................................... 42,378 *
M. Kelley Maggs(6).......................................... 26,019 *
Michael J. Cramer(7)........................................ 223,644 *
Stephen Van Tassel(8)....................................... 31,274 *
Lynne M. Misericordia(9).................................... 18,062 *
Thomas O. Hicks(10)......................................... 43,239,055 55.9%
M. L. Lowenkron(11)......................................... 42,563 *
Roger T. Staubach(12)....................................... 50,027 *
L. Hollis Jones(13)......................................... 3,786 *
Charles W. Tate(14)......................................... 152,141 *
Alan B. Menkes(14).......................................... 40,963 *
John R. Muse(14)............................................ 151,013 *
Michael J. Levitt(14)....................................... 40,963 *
All executive officers and directors as a group (15
persons)(15).............................................. 47,242,453 61.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Percentage of ownership is based on 77,330,760 shares of Common Stock
outstanding on March 30, 1998. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or disposition power with respect to securities.
(2) Includes (i) 42,092,466 shares owned of record by Hicks, Muse, Tate & Furst
Equity Fund III L.P., a limited partnership of which the ultimate general
partner is Hicks, Muse Fund III Incorporated ("Fund III Inc."); (ii)
721,413 shares owned of record by HM/3 Coinvestors, L.P., a limited
partnership of which the ultimate general partner is Fund III Inc.; and
(iii) 211,133 shares owned of record by HM3/IH Partners L.P., a limited
partnership of which the ultimate general partner is Fund III Inc. Thomas
O. Hicks is the Chief Executive Officer, Chief Operating Officer,
President, Secretary and Chairman of the Board of Fund III Inc.
Accordingly, Mr. Hicks may be deemed to be the beneficial owner of the
Common Stock held by Hicks, Muse, Tate & Furst Equity Fund III, L.P., HM/3
Coinvestors, L.P., and HM3/IH Partners, L.P. Mr. Hicks disclaims beneficial
ownership of the shares of Common Stock not owned of record by him.
13
<PAGE> 16
(3) Includes 2,768,350 shares issuable to Mr. Metropoulos upon the exercise of
stock options that are currently exercisable.
(4) Excludes 469,112 shares subject to stock options that are not exercisable
within 60 days.
(5) Includes 31,274 shares subject to stock options that are exercisable within
60 days. Excludes 62,548 shares subject to stock options that are not
exercisable within 60 days.
(6) Includes 25,019 shares subject to stock options that are exercisable within
60 days. Excludes 50,038 shares subject to stock options that are not
exercisable within 60 days.
(7) Includes 222,644 shares issuable to Mr. Cramer upon the exercise of stock
options that are currently exercisable.
(8) Includes 31,274 shares subject to stock options that are exercisable within
60 days. Excludes 62,548 shares subject to stock options that are not
exercisable within 60 days.
(9) Includes 18,062 shares subject to stock options that are exercisable within
60 days. Excludes 25,018 shares subject to stock options that are not
exercisable within 60 days.
(10) Includes (i) the shares of Common Stock discussed in note (2) above, (ii)
190,785 shares held of record by Mr. Hicks, and (iii) 23,258 shares held of
record by trusts of which Mr. Hicks serves as the sole trustee. Mr. Hicks
disclaims beneficial ownership of the shares of Common Stock not owned of
record by him.
(11) Includes 18,764 shares issuable upon the exercise of stock options that are
currently exercisable.
(12) Includes 18,764 shares issuable upon the exercise of stock options that are
currently exercisable.
(13) Includes 1,906 shares issuable upon the exercise of stock options that are
currently exercisable.
(14) Messrs. Tate, Menkes, Muse and Levitt are officers of Fund III Inc. None of
Mr. Tate, Mr. Menkes, Mr. Muse or Mr. Levitt has the power to vote or
dispose of the Common Stock of Fund III Inc.
(15) Includes 3,130,505 shares issuable upon the exercise of stock options that
are currently exercisable or exercisable within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE IHF ACQUISITION AND RELATED AGREEMENTS
Effective on November 1, 1996, an affiliate ("Hicks Muse Holding") of Hicks
Muse acquired 80% of the outstanding capital stock of the Company from American
Home Products Corporation ("American Home Products") for approximately $1,225.6
million in cash in a transaction treated as a recapitalization for financial
accounting purposes (the "IHF Acquisition"). Concurrently with this acquisition,
the Company acquired all of the outstanding capital stock of Heritage Brands
Holding, Inc. ("Heritage") from an affiliate of Hicks Muse for approximately
$70.8 million in cash, comprised of approximately $40.8 million used to repay
existing indebtedness of Heritage and approximately $30.0 million to acquire the
equity of Heritage. The acquisition of Heritage was treated as a purchase for
financial accounting purposes. The purchase price for Heritage was determined by
the Company based upon the historic operations of Heritage and the benefits the
Company believes will be realized from its acquisition. Heritage was formed in
1994 by the Hicks Muse affiliate to acquire (i) the Campfire marshmallow
business from Borden, Inc. for approximately $5.0 million and (ii) Angela
Maries', Inc., a manufacturer of marshmallow rice crisp bars for approximately
$35.0 million. In connection with the acquisition of the Company by Hicks Muse
Holding and the acquisition by the Company of Heritage, the Company incurred
approximately $1,070.0 million of indebtedness, consisting of $670.0 million of
borrowings under the Company's senior secured credit facilities and the issuance
of $400.0 million of aggregate principal amount of the Company's Senior
Subordinated Notes due 2006.
Election Agreement. In connection with the IHF Acquisition, Hicks Muse
Holding, American Home Products and the Company agreed that, for so long as
American Home Products beneficially owns at least five percent of the common
stock of the Company, Hicks Muse Holding and the Company will, at the request of
14
<PAGE> 17
American Home Products, use all reasonable efforts to cause there to be
nominated and elected to the Board of Directors of the Company one designee of
American Home Products.
Right of First Refusal. In connection with the IHF Acquisition, American
Home Products agreed not to sell or otherwise dispose of any of the Common Stock
it holds without first notifying Hicks Muse Holding and affording Hicks Muse
Holding an opportunity to offer to buy the shares on terms proposed by Hicks
Muse Holding until the earlier of (i) November 1, 2001 and (ii) the date on
which a third party acquires control of the Company. In the event that American
Home Products rejects Hicks Muse Holding's offer, American Home Products will be
permitted to sell not less than 90% of the shares it proposed to sell in its
notice to Hicks Muse Holding to a third party on per share terms no less
favorable to American Home Products than those set forth in Hicks Muse Holding's
offer; provided that, before selling such shares at a price per share less than
110% of the price per share set forth in Hicks Muse Holding's offer, American
Home Products will be required to offer to sell such shares to Hicks Muse
Holding at such higher price per share. These restrictions on transfer do not
apply to a sale of shares by American Home Products under a registration
statement filed under the Securities Act of 1933 (the "Securities Act") or under
Rule 144 under the Securities Act.
Co-Sale Rights. Hicks Muse Holding has agreed that, if it proposes to sell
or dispose of shares of Common stock in a single transaction or series of
related transactions, then it will offer to include in the proposed sale or
disposition a designated number of shares held by American Home Products not to
exceed the product of (i) the number of shares to be sold by Hicks Muse Holding
to the proposed transferee multiplied by (ii) a fraction the numerator of which
is the number of shares held by America Home Products and the denominator of
which is the number of shares held by each of Hicks Muse Holding and American
Home Products in the aggregate. If American Home Products accepts the offer,
Hicks Muse Holdings must reduce, to the extent necessary, the number of shares
it otherwise would have sold in the proposed sale so as to permit American Home
Products to sell the number of shares that it is entitled to sell under the
foregoing terms. American Home Products' "co-sale" rights described above do not
apply to (i) a sale pursuant to a public offering registered under the
Securities Act, (ii) a sale in accordance with Rule 144 under the Securities
Act, (iii) a sale to an affiliate of Hicks Muse or (iv) a sale or sales in a
single transaction or series of related transactions which, in the aggregate, do
not involve more than ten percent of the shares outstanding.
Registration Rights Agreement. American Home Products, Hicks Muse Holding
and the Company have entered into a Registration Rights Agreement under which
each of American Home Products and Hicks Muse Holding is entitled to exercise
three demand and seven "piggy-back" rights to require the Company to register
the common Stock of the Company held by them for sale under the Securities Act.
The demand rights may only be exercised commencing May 18, 1998. In addition,
the demand rights may only be exercised with respect to a number of shares that
is at least equal to the lesser of (i) five percent of the number of shares then
outstanding and (ii) that number of shares having an estimated aggregate
offering price of at least $20 million. The exercise of the demand and
piggy-back rights are subject to such other limitations and conditions as are
customary in registration rights agreements. American Home Products has
exercised one of its piggy-back rights in electing to participate in the
Company's initial public offering consummated in November 1997.
AHFP Holding Reorganization. In connection with the Company's initial
public offering of Common Stock consummated in November 1997, Hicks Muse Holding
distributed to its stockholders all of the shares of Common Stock held by it.
The rights and obligations of Hicks Muse Holding described under "Election
Agreement," "Rights of First Refusal" and "Registration Rights" above were
distributed along with the shares.
MONITORING AND OVERSIGHT AGREEMENT
In November 1996, the Company entered into a ten-year agreement (the
"Monitoring and Oversight Agreement") with an affiliate of Hicks Muse ("Hicks
Muse Partners") pursuant to which the Company will pay Hicks Muse Partners an
annual fee of $1.0 million for oversight and monitoring services to the Company.
The annual fee is adjustable at the end of each fiscal year to an amount equal
to 0.1% of the consolidated net sales of the Company, but in no event may the
fee be less than $1.0 million. Messrs. Hicks, Tate, Menkes,
15
<PAGE> 18
Muse and Levitt, directors of the Company, are each principals of Hicks Muse
Partners. In addition, the Company has agreed to indemnify Hicks Muse Partners,
its affiliates and shareholders, and their respective directors, officers,
agents, employees and affiliates from and against all claims, actions,
proceedings, demands, liabilities, damages, judgments, assessments, losses and
costs, including fees and expenses, arising out of or in connection with the
services rendered by Hicks Muse Partners thereunder. The Monitoring and
Oversight Agreement makes available the resources of Hicks Muse Partners
concerning a variety of financial and operational matters. The services that
have been and will continue to be provided by Hicks Muse Partners could not
otherwise be obtained by the Company without the addition of personnel or the
engagement of outside professional advisors. In management's opinion, the fees
provided for under the Monitoring and Oversight Agreement reasonably reflect the
benefits received and to be received by the Company.
FINANCIAL ADVISORY AGREEMENT
In November 1996, the Company entered into an agreement (the "Financial
Advisory Agreement") pursuant to which Hicks Muse Partners provides services as
financial advisor to the Company. Pursuant to the Financial Advisory Agreement,
Hicks Muse Partners is entitled to receive a fee equal to 1.5% of the
"transactional value" (as defined) for each "add-on transaction" (as defined) in
which the Company is involved. The term "transaction value" means the total
value of any add-on transaction, including, without limitation, the aggregate
amount of the funds required to complete the add-on transaction (excluding any
fees payable pursuant to the Financial Advisory Agreement and any fees, if any,
paid to any other person or entity for financial advisory, investment banking,
brokerage or any other similar services rendered in connection with such add-on
transaction) and including the amount of any indebtedness, preferred stock or
similar items assumed (or remaining outstanding). The term "add-on transaction"
means any future proposal for a tender offer, acquisition, sale, merger,
exchange offer, recapitalization, restructuring or other similar transaction
directly or indirectly involving the Company or any of its subsidiaries and any
other person or entity. The Financial Advisory Agreement makes available the
resources of Hicks Muse Partners concerning a variety of financial and
operational matters. The services that have been and will continue to be
provided by Hicks Muse Partners could not otherwise be obtained by the Company
without the addition of personnel or the engagement of outside professional
advisors. In management's opinion, the fees provided for under the Financial
Advisory Agreement reasonably reflect the benefits received and to be received
by the Company. The Company paid Hicks Muse Partners financial advisory fees of
approximately $3.6 million in 1997.
PRODUCTOS DEL MONTE
On October 1, 1997, the Company acquired Productos Del Monte S.A. de C.V.
("Productos Del Monte") from an affiliate of Hicks Muse for 3,127,415 shares of
Common Stock. Productos Del Monte is a leading manufacturer and marketer of
branded catsup, canned vegetables and bottled salsa in Mexico. Productos Del
Monte was acquired by a Hicks Muse affiliate in October 1996 from the Del Monte
Corporation for approximately $40.0 million. In connection with the acquisition
of Productos Del Monte by the Company, the Company succeeded to the rights of
the Hicks Muse affiliate under that lawsuit. The purchase price for Productos
Del Monte was determined by the Company based upon the historic operations of
Productos Del Monte and the benefits the Company believes will be realized from
its acquisition. The acquisition of Productos Del Monte was treated as a
combination of entities under common control. Accordingly, the historical
accounting values of Productos Del Monte were carried over for financial
accounting purposes. In the year ended December 31, 1997, the Company had sold
approximately $0.9 million of Ranch Style beans and PAM cooking spray to
Productos Del Monte. These sales were made at the Company's cost plus 10%.
C. DEAN METROPOULOS & CO.
C. Dean Metropoulos serves as an executive officer of the Company. Mr.
Metropoulos and certain employees of the Company, including Mr. Metropoulos'
brother, Evan Metropoulos, are also principals of C. Dean Metropoulos & Co., a
food company management firm. In this capacity, these individuals provided
during 1997 management services for The Morningstar Group, Inc. and Ghirardelli
Chocolate Company, an
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affiliate of Hicks Muse. The Company was reimbursed for the actual costs of
these services, as well as the actual cost of the overhead of the Company
incurred in connection therewith. The Company was reimbursed approximately $0.8
million pursuant to this arrangement in 1997.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors of the Company has appointed Messrs. Tate,
Lowenkron, and Staubach as members of its compensation committee. None of the
members of the compensation committee is or has been an officer or employee of
the Company. Mr. Tate is President of Hicks Muse, which in connection with the
IHF Acquisition beneficially acquired approximately 80% of the Common Stock. See
"Certain Relationships and Related Transactions." At March 30, 1998, the Hicks
Muse Parties continue to beneficially own approximately 55.6% of the outstanding
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management." Messrs. Lowenkron and Staubach have been granted options to
purchase Common Stock of the Company. See "Management
Compensation -- Compensation of Directors."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Based on the Company's review of forms furnished to the Company and
representations from reporting persons, the Company believes that all filing
requirements applicable to the Company's executive officers, directors and 10%
beneficial owners were complied with during 1997.
ADDITIONAL INFORMATION
SOLICITATION
This solicitation of proxies is made by the Board of Directors and will be
conducted primarily by mail. Officers, directors and employees of the Company
may solicit proxies personally or by telephone, telegram or other forms of wire
or facsimile communication. The Company may also request banking institutions,
brokerage firms, custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of Common Stock that those companies hold of
record. The costs of the solicitation, including reimbursement of such
forwarding expenses, will be paid by the Company.
STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the Company's
Annual Meeting of Stockholders to be held in 1999 must be received by the
Company at its executive offices, 1633 Littleton Road, Parsippany, New Jersey,
07054, no later than December 8, 1998, in order that they may be included in the
proxy statement and form of proxy for that meeting.
CHANGE IN INDEPENDENT ACCOUNTANTS
On December 13, 1996, the Company dismissed Arthur Andersen LLP as its
independent accountants. The decision to dismiss Arthur Andersen LLP was made by
the Company's management and was ratified by the Board of Directors. The reports
of Arthur Andersen LLP on the financial statements of the Company for fiscal
years 1994 and 1995 are unqualified and do not contain an adverse or disclaimer
of opinion and were not modified as to uncertainty, audit scope or accounting
principles. During 1994, 1995, and through the date of dismissal in 1996 there
were no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosures or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen LLP would have caused them to make reference to the
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subject matter of the disagreements in its reports. Coopers and Lybrand L.L.P.
was engaged as the Company's independent accountants in December 1996.
ANNUAL REPORT
The Company's annual report to stockholders for the year ended December 31,
1997, including financial statements, is being mailed herewith to all
stockholders entitled to vote at the Annual Meeting. The annual report does not
constitute a part of the proxy solicitation material. Copies of the Company's
annual report on Form 10-K are available without charge upon written request by
contacting the Company's Investor Relations Department, International Home
Foods, Inc., 1633 Littleton Road, Parsippany, New Jersey, 07054, or by calling
the Company's Investor Relations Department at 800-639-9865.
By Order of the Board of Directors,
C. Dean Metropoulos
Chairman of the Board and Chief
Executive Officer
Parsippany, New Jersey
April 8, 1998
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ADMISSION TICKET
INTERNATIONAL HOME FOODS, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998 AT 2:00 P.M.
HOTEL CRESCENT COURT
DALLAS, TEXAS
ADMITS ONE SHAREHOLDER AND UP TO TWO GUESTS
DIRECTIONS:
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From Ft. Worth/Arlington: From Airport I-35 Southbound:
I-30 East to 35E NORTH (Denton) SOUTH Airport Exit to 183 Dallas
Exit OAK LAWN - Turn RIGHT 183 East will Merge with 35 South
To Maple - Turn RIGHT Continue on I-35
To Hotel at MAPLE & McKINNEY Exit OAK LAWN - Turn LEFT
To MAPLE - Turn RIGHT
From Houston: To Hotel at MAPLE & McKINNEY
I-45 to 35E NORTH (Denton)
Exit OAK LAWN - Turn RIGHT From Austin:
To Maple - Turn RIGHT Take I-35 NORTH
To Hotel at MAPLE & McKINNEY Exit OAK LAWN - Turn RIGHT
To MAPLE - Turn RIGHT
From the Tollway: To Hotel at MAPLE & McKINNEY
Continue through SOUTH Toll Booth
Follow "Downtown" to the LEFT (Hines) From Shreveport/Longview/Tyler:
To PEARL STREET - Turn LEFT Take I-20 WEST into Mesquite
To CEDAR SPRINGS - Turn LEFT Pick up I-30 WEST
Hotel on the RIGHT To I-35 NORTH
Exit OAK LAWN - Turn RIGHT
From 75 (Central Expwy.): To MAPLE - Turn Right
75 SOUTH to Downtown To Hotel at MAPLE & McKINNEY
Exit 35E Waco to the RIGHT
Take PEARL Street Exit
Turn RIGHT on PEARL
To CEDAR SPRINGS - Turn RIGHT
Hotel on the RIGHT
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INTERNATIONAL HOME FOODS, INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL
HOME FOODS, INC. FOR THE ANNUAL MEETING ON MAY 6, 1998
The undersigned appoints C. Dean Metropoulos and M. Kelley Maggs, and each
of them, with full power of substitution in each, the proxies of the
undersigned, to represent the undersigned and vote all shares of International
Home Foods, Inc., Common Stock which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders to be held on May 6, 1998, and at any
adjournment or postponement thereof, as indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy will
be voted FOR proposals 1, 2 and 3.
(Continued, and to be signed and dated on reverse side.)
INTERNATIONAL HOME FOODS, INC.
P.O. BOX 11209
NEW YORK, N.Y. 10203-0209
<PAGE> 22
INTERNATIONAL HOME FOODS, INC.
1633 LITTLETON ROAD
PARSIPPANY, NEW JERSEY 07054
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1998
Dear Shareholder:
The Annual Meeting of Shareholders of International Home Foods, Inc. will be
held at 2:00 p.m. on Wednesday, May 6, 1998 at Hotel Crescent Court, Dallas,
Texas, for the following purposes:
1. To elect three directors as Class I directors of the Company, each to
serve for a three year term ending at the Annual Meeting of Stockholders
in 2001 and until their successors are duly elected and qualified or
their earlier resignation or removal.
2. To approve the International Home Foods, Inc. 1997 Stock Option Plan and
to authorize and approve an amendment thereto to increase the number of
shares of Common Stock for which options may be granted thereunder from
8,444,021 to 13,444,021.
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the Company for 1998.
4. To transact any other business that may properly come before the meeting.
Only holders of Common Stock of International Home Foods, Inc. of record at the
close of business on April 2, 1998 will be entitled to vote at the meeting or
any adjournment thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy/voting instruction card below, detach it from this letter and return it in
the postage paid envelope enclosed in this package. The giving of such proxy
does not affect your right to vote in person if you attend the meeting. The
prompt return of your signed proxy will aid the Company in reducing the expense
of additional proxy solicitation.
If you plan to attend the Annual Meeting in person, detach and bring this letter
to the meeting as an admission ticket for you and your guests. Directions to the
meeting are on the reverse side.
BY ORDER OF THE BOARD OF DIRECTORS
April 8, 1998 C. Dean Metropoulos
Chairman of the Board and
Chief Executive Officer
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DETACH PROXY CARD HERE
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<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ X ] WITHHOLD authority to vote [ X ] *EXCEPTIONS [ X ]
listed below for all nominees listed below.
Nominees: L. Hollis Jones, John R. Muse and Roger T. Staubach
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW).
*Exceptions
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2. To approve the Company's 1997 Stock Option Plan. 3. To ratify and approve the selection by the Board of Directors
of Coopers & Lybrand L.L.P. as independent public accountants for
the Company for the fiscal year ending December 31, 1998.
FOR [ X ] AGAINST [ X ] ABSTAIN [ X ]
FOR [ X ] AGAINST [ X ] ABSTAIN [ X ]
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
postponement thereof.
Change of Address and [ X ]
or Comments Mark Here
The signature on this Proxy should correspond exactly
with stockholders name as printed to the left. In the
case of joint tenants, co-executors, or co-trustees, both
should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give the full
title.
Dated: , 1998
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Signature
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Signature
(PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE VOTES MUST BE INDICATED
ENCLOSED ENVELOPE.) IN BLACK OR BLUE INK. [X]
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