<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998
REGISTRATION NO. 333-48235
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DEL MONTE FOODS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6719 13-3542950
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONE MARKET
SAN FRANCISCO, CALIFORNIA 94105
TELEPHONE: (415) 247-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WILLIAM R. SAWYERS, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
DEL MONTE FOODS COMPANY
ONE MARKET
SAN FRANCISCO, CALIFORNIA 94105
TELEPHONE: (415) 247-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JANET L. FISHER, ESQ. PAUL C. PRINGLE, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON BROWN & WOOD LLP
ONE LIBERTY PLAZA 555 CALIFORNIA STREET
NEW YORK, NEW YORK 10006 SAN FRANCISCO, CALIFORNIA 94104
TELEPHONE: (212) 225-2000 TELEPHONE: (415) 772-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
===========================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value (3) (3) $373,750,000 $110,256
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) A registration fee of $73,750 was paid upon the initial filing of this
Registration Statement.
(3) Not applicable pursuant to Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
DEL MONTE FOODS COMPANY
REGISTRATION STATEMENT ON FORM S-1
(Cross Reference Sheet Furnished Pursuant to Item 501(b) of Regulation S-K)
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-1 LOCATION IN PROSPECTUS
----------------------------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Outside Front Cover Page of Prospectus
2. Inside Front Cover Page of Prospectus.... Inside Front Cover Page of Prospectus;
Additional Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Prospectus Summary; Risk Factors; Selected
Consolidated Financial Data
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Outside Front Cover Page of Prospectus;
Underwriters
6. Dilution................................. Risk Factors; Dilution
7. Selling Security Holders................. Principal and Selling Stockholders
8. Plan of Distribution..................... Outside Front Cover Page of Prospectus;
Underwriters
9. Description of Securities to be
Registered............................... Description of Capital Stock
10. Interest of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrant............................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; Use of
Proceeds; Dividend Policy; Capitalization;
Dilution; Unaudited Pro Forma Financial Data;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Corporate History;
Management; Principal and Selling
Stockholders; Certain Relationships and
Related Transactions; Description of Capital
Stock; Description of Certain Indebtedness;
Shares Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
</TABLE>
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses, one to be
used in connection with an offering of Common Stock in the United States and
Canada (the "U.S. Prospectus") and one to be used in a concurrent offering of
Common Stock outside the United States and Canada (the "International
Prospectus"). The U.S. Prospectus and the International Prospectus will be
identical in all respects except for the front cover page.
The form of the U.S. Prospectus is included herein and the form of the
front cover page of the International Prospectus follows the back cover page of
the U.S. Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 18, 1998
17,567,567 SHARES
DEL MONTE FOODS COMPANY
COMMON STOCK
[DEL MONTE LOGO]
------------------------
OF THE 17,567,567 SHARES OF COMMON STOCK BEING OFFERED HEREBY,14,054,054 SHARES
ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 3,513,513 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." OF THE
17,567,567 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 13,513,513 SHARES ARE
BEING SOLD BY THE COMPANY AND 4,054,054 SHARES ARE BEING SOLD BY CERTAIN
STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"). THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE BY THE SELLING STOCKHOLDERS. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." AT THE REQUEST OF THE COMPANY, THE
UNDERWRITERS HAVE RESERVED FOR SALE, AT THE INITIAL PUBLIC OFFERING PRICE, UP TO
878,378 SHARES OF COMMON STOCK, WHICH MAY BE OFFERED TO DIRECTORS, OFFICERS,
EMPLOYEES, RETIREES AND RELATED PERSONS OF THE COMPANY. ANY RESERVED SHARES THAT
ARE NOT SO PURCHASED WILL BE OFFERED BY THE UNDERWRITERS TO THE GENERAL PUBLIC
ON THE SAME BASIS AS THE OTHER SHARES OF COMMON STOCK OFFERED HEREBY. PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE SHARES OF COMMON STOCK OF
THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
PER SHARE WILL BE BETWEEN $17 AND $20. SEE "UNDERWRITERS" FOR A DISCUSSION OF
THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "DLM."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR
RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Per Share................................ $ $ $ $
Total(3)................................. $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses of the offering payable by the Company
estimated at $5,600,000.
(3) The Company and the Selling Stockholders have granted the U.S.
Underwriters an option, exercisable within 30 days of the date hereof,
to purchase up to an aggregate of 2,635,135 additional shares of Common
Stock at the price to public, less underwriting discounts and
commissions, solely for the purpose of covering overallotments, if any.
If the U.S. Underwriters exercise such option in full, the total price
to public, underwriting discounts and commissions, proceeds to Company
and proceeds to Selling Stockholders will be $ , $ ,
$ and $ , respectively. See "Underwriters."
------------------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to the approval of
certain legal matters by Brown & Wood LLP, counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1998 at the office of Morgan Stanley & Co. Incorporated, New York,
N.Y. against payment therefor in immediately available funds.
MORGAN STANLEY DEAN WITTER
BANCAMERICA ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
BT ALEXS BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1998
<PAGE> 4
[PHOTOGRAPHS DEPICTING COLLAGES OF COMPANY PRODUCTS TO BE INSERTED ON
INSIDE FRONT COVER AND INSIDE BACK COVER PAGES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE MARKET PRICE OF THE SHARES OF
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE SHARES OF COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
<PAGE> 5
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY ANY UNDERWRITER THAT WOULD PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER
THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES
ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND
TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK AND THE
DISTRIBUTION OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. ii
Forward-Looking Statements............ ii
Prospectus Summary.................... 1
Risk Factors.......................... 10
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Unaudited Pro Forma Financial Data.... 19
Selected Consolidated Financial
Data................................ 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business.............................. 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Corporate History..................... 57
Management............................ 59
Principal and Selling Stockholders.... 68
Certain Relationships and Related
Transactions........................ 71
Description of Capital Stock.......... 72
Description of Certain Indebtedness... 75
Certain U.S. Tax Consequences to
Non-U.S. Holders.................... 79
Shares Eligible for Future Sale....... 80
Underwriters.......................... 82
Legal Matters......................... 85
Experts............................... 85
Index to Financial Statements......... F-1
</TABLE>
------------------------
Del Monte(R) and Contadina(R) are the principal registered trademarks of
the Company. The Company's other trademarks include Fruit Cup(R), FreshCut(TM),
Snack Cups(R), Fruit Naturals(R), Orchard Select(R), Fruit Smoothie Blenders(TM)
and Del Monte Lite(R).
------------------------
Unless otherwise indicated, references herein to U.S. market share data are
to case volume sold through retail grocery stores (excluding warehouse clubs and
supercenters) with at least $2 million in sales and are based upon data provided
to the Company by A.C. Nielsen Company ("ACNielsen"), an independent market
research firm. Market share data for canned vegetables and solid tomato products
include only those categories in which the Company competes. Such data for
canned fruit include those categories in which the Company competes other than
the "specialty" category, which has been an insignificant portion of the
Company's operations. Market share data for canned solid tomato products is pro
forma for both Del Monte (as defined herein) and Contadina (as defined herein)
sales.
i
<PAGE> 6
AVAILABLE INFORMATION
Del Monte is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Del Monte has filed with
the Commission a Registration Statement on Form S-1 (the "Registration
Statement," which term shall encompass all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the shares of Common Stock being offered hereby (the "Offering"). This
Prospectus does not contain all the information set forth in the Registration
Statement. For further information with respect to Del Monte and the Offering,
reference is made to the Registration Statement. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the document or matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, and the reports, proxy statements and other
information filed by Del Monte with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the
Commission at 7 World Trade Center, 14th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
Del Monte will furnish its stockholders with annual reports that include a
description of operations and annual audited consolidated financial statements
prepared in accordance with U.S. generally accepted accounting principles
("GAAP"). The financial statements included in the annual reports will be
examined and reported upon, with an opinion expressed, by Del Monte's
independent auditors. Del Monte will also furnish quarterly reports for the
first three quarters of each fiscal year containing unaudited consolidated
financial statements prepared in accordance with GAAP.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Prospectus
Summary," "Risk Factors," "Unaudited Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performances or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: general economic and business conditions; weather
conditions; crop yields; industry trends; competition; raw material costs and
availability; the loss of significant customers; changes in business strategy or
development plans; availability, terms and deployment of capital; Year 2000
compliance; changes in, or the failure or inability to comply with, governmental
regulations, including, without limitation, environmental regulations; industry
trends and capacity and other factors referenced in this Prospectus. See "Risk
Factors." These forward-looking statements speak only as of the date of this
Prospectus. The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
ii
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless the context otherwise
requires, "Del Monte" means Del Monte Foods Company, a Delaware corporation, and
the "Company" means Del Monte and its consolidated subsidiaries. References
herein to fiscal years and quarters are to the Company's fiscal year (which ends
on June 30) and related fiscal quarters (which end on the last Sunday of
September, December and March). References to the "Contadina Acquisition" are to
the Company's acquisition of certain assets comprising Nestle USA, Inc.'s
("Nestle") U.S. business of manufacturing and marketing certain canned tomato
products ("Contadina"). Unless otherwise indicated, all information in this
Prospectus reflects an increase in the number of authorized shares to 500
million shares of Common Stock and to 2 million shares of preferred stock and
assumes (i) a 191.542-for-one stock split of the existing shares of Common Stock
and (ii) no exercise of the U.S. Underwriters' overallotment option. See
"Description of Capital Stock."
THE COMPANY
GENERAL
The Company, a branded marketer of premium quality, nutritious food
products, is the largest producer and distributor of canned vegetables and
canned fruit in the United States, with pro forma net sales of $1.1 billion and
$1.4 billion for the nine months ended March 31, 1998 and the fiscal year ended
June 30, 1997, respectively. Management believes that the Company's principal
brand, Del Monte, which has been in existence since 1892, has the highest
unaided brand awareness of any canned food brand in the United States. Del Monte
brand products are found in substantially all national grocery chains and
independent grocery stores throughout the United States. As the brand leader in
three major processed food categories (canned vegetables, fruit and solid tomato
products), the Company has a full-line, multi-category presence that management
believes provides it with a substantial competitive advantage in selling to the
retail grocery industry. The Contadina Acquisition contributes another
established brand and positions the Company as the branded market leader in the
high margin canned solid tomato products category and establishes a strong
presence for the Company in the branded paste-based tomato products category.
See "Business -- Company Products."
The Company sells its products to national grocery chains and wholesalers
through a nationwide sales network consisting primarily of independent food
brokers. The Company's direct sales force also sells to warehouse club stores,
selected mass merchandisers, such as Wal-Mart and Kmart, and larger mass
merchandising outlets that include full grocery sections, such as Wal-Mart
Supercenters and Kmart's SuperKs. In addition, the Company sells its products to
the foodservice industry, food processors and the military through different
independent food brokers. The Company also exports a small percentage of its
products to certain foreign countries directly and through independent exporters
based in the United States. See "Business -- Sales, Marketing and Distribution."
The Company operates 15 production facilities in California, the Midwest,
Washington and Texas, as well as six strategically located distribution centers.
The Company has over 2,500 contracts to purchase vegetables and fruit from
individual growers and cooperatives located in various geographic regions of the
United States, principally California, the Midwest, the Northwest and Texas.
This diversity of sourcing helps insulate the Company from localized disruptions
during the growing season, such as weather conditions, that can affect the price
and supply of vegetables, fruit and tomatoes. See "Business -- Supply and
Production."
In April 1997, the Company completed a recapitalization (the
"Recapitalization") as a result of which Texas Pacific Group, a private
investment group, obtained a controlling interest in the Company. Under a new
senior management team introduced in connection with the Recapitalization, the
Company began implementing a new business strategy designed to increase sales
and improve operating margins by: (i) increasing market share and distribution
of high margin value-added products; (ii) introducing product and packaging
innovations; (iii) increasing penetration of high growth distribution channels,
such as supercenters and
1
<PAGE> 8
warehouse clubs; (iv) achieving cost savings through investments in new and
upgraded production equipment and plant consolidations; and (v) completing
strategic acquisitions.
COMPETITIVE STRENGTHS
Management believes that the following elements contribute to the Company's
position as a leading branded producer, marketer and distributor of canned
vegetables, fruit and tomato products in the United States and provide a solid
foundation for the Company's business strategy.
- - STRONG BRAND NAME RECOGNITION AND LEADING MARKET SHARES -- The Del Monte brand
name, which has been in existence since 1892, is one of the leading brand
names in the food industry. Based on the ability of consumers to name the Del
Monte brand when asked to identify companies that manufacture canned foods,
management believes that the Del Monte brand has the highest unaided brand
awareness of any canned food brand in the United States. The Company recently
acquired the Contadina brand, an established national brand with a strong
reputation for quality. For the 52 weeks ended March 28, 1998, the Company's
19.5% market share of canned vegetables was larger than the combined market
shares of the Company's two largest branded competitors, and its 41.9% market
share of canned fruit was larger than the combined market shares of all other
branded competitors. The Company, including its Contadina business, had a pro
forma 16.3% market share in the high margin solid segment of the canned tomato
market for the 52 weeks ended March 28, 1998. See "Business -- Company
Products."
<TABLE>
<CAPTION>
MARKET SHARE FOR THE 52 WEEKS ENDED MARCH 28, 1998
--------------------------------------------------------
MARKET NEXT LEADING BRANDED
CATEGORY POSITION(a) PERCENTAGE COMPETITOR'S PERCENTAGE(a)
-------- ------------- ---------- ---------------------------
<S> <C> <C> <C>
Canned vegetables......................... #1 19.5% 13.2% (Green Giant)
Canned fruit.............................. #1 41.9% 11.4% (Libby's)
Canned solid tomato products(b)........... #1 16.3% 11.2% (Hunt's)
</TABLE>
- ---------------
(a) Excludes private label.
(b) Pro forma to include Contadina sales.
- - TECHNICAL EXPERTISE AND LOW COST PRODUCTION ADVANTAGES -- The Company has
significant experience in developing new products and packaging alternatives
and in engineering efficient food processing operations. These capabilities
are leveragable across many food categories. The Company has developed
proprietary vegetable seed varieties, which increase harvest and cannery
recoveries and improve flavor and quality. The Company benefits from many
long-term relationships with experienced, geographically diverse growers who
work with the Company to maximize yields of raw product. These relationships
also help to ensure a consistent supply of raw product. As a result of its
technical expertise, proprietary seed varieties and raw product sourcing
diversity, as well as its modern processing equipment and labeling, packaging,
warehousing and distribution efficiencies, management believes that the
Company is one of the lowest cost producers of canned vegetables, fruit and
tomatoes in the United States. See "Business -- Company Products" and
"Business -- Supply and Production."
- - PREFERRED SUPPLIER STATUS -- Competitive pressures in the retail food industry
are causing many retailers to prefer large suppliers such as the Company that
are able to provide consumer-favored brands, full product lines and
sophisticated inventory and category management programs. Del Monte
anticipated this trend and has developed proprietary software tools to assist
its customers and promote sales of its products. Del Monte's proprietary
category management system is designed to address retailers' efforts to
maximize profitability of shelf space dedicated to canned food categories. A
substantial majority of the Company's customers that have employed Del Monte's
category management system have increased the relative amount of shelf space
dedicated to the Company's products as compared to competing products. The
Company's proprietary vendor-managed inventory software allows Del Monte to
manage directly its customers' inventories of the Company's products. This
inventory management software is designed to reduce customers' overhead costs
and to enable them to achieve lower average inventory levels while enhancing
the Company's opportunities to sell its products. Retailers also rely on Del
Monte's in-depth knowledge as the leading branded marketer in the canned
fruit, vegetable and tomato categories, and they
2
<PAGE> 9
seek the Company's advice on marketing and promoting these categories.
Finally, Del Monte has strong, well-developed relationships with all major
participants in the retail grocery trade. The Company believes that these
relationships will become increasingly important as consolidation among
grocery retailers continues. The Company is seeking to use its category
knowledge, customer relationships and software tools, along with its
multi-category product line that can readily be ordered and shipped on a full
truck-load basis, in order to become the preferred supplier in its product
categories. See "Business -- Sales, Marketing and Distribution."
- - EXTENSIVE NATIONAL SALES AND DISTRIBUTION SYSTEM -- The Company's extensive
sales and distribution network is responsible for the distribution of finished
goods to over 2,400 customer destinations nationwide. This network enables the
Company to compete with other national brands and regional competitors, and to
introduce new products on a regional or national basis. The Company operates
six strategically located distribution centers offering customers a variety of
services, including electronic data interchange and direct store shipments.
Management believes that the Company's distribution system makes an important
contribution to the Company's success and provides the Company with a
competitive advantage over regional and private label competitors. See
"Business -- Sales, Marketing and Distribution."
- - EXPERIENCED MANAGEMENT TEAM -- Richard G. Wolford and Wesley J. Smith, the
Company's Chief Executive Officer and Chief Operating Officer, respectively,
are veteran senior managers with extensive food industry experience. Mr.
Wolford has 30 years of experience in the food industry, 20 of which were with
Dole. He was president of Dole Packaged Foods from 1982 to 1987, and during
Mr. Wolford's tenure at Dole, Dole experienced increased profitability, sales
volume and market share. Mr. Wolford played a key role in redefining the Dole
brand and expanding the range of products sold under the brand. From 1988 to
1996, he was Chief Executive Officer of HK Acquisition Corp. where he
developed food industry investments with venture capital investors and managed
the investor-owned companies. Mr. Smith has 25 years of experience in the food
industry, 23 of which were at Dole, where he oversaw the building of Dole's
domestic fresh pineapple business and the restructuring of Dole's sizable
Hawaiian operations. In addition, Mr. Smith was responsible for establishing
Dole's juice business with minimal capital investment. See "Management."
BUSINESS STRATEGY
Following the consummation of the Recapitalization in 1997, the Company
implemented a new business strategy designed to increase sales and improve
operating margins. The key elements of this new business strategy are discussed
below.
- - LEVERAGE BRAND EQUITY TO INCREASE SALES AND MARKET SHARE OF HIGH MARGIN
PRODUCTS -- The Company plans to leverage the Del Monte and Contadina brand
names and its strong relationships with customers to increase sales of its
existing product lines, focusing specifically on high margin products, such as
its specialty fruits and vegetables, diced tomatoes and its Fruit Cup line,
where the Company has historically had either low market share or low
household penetration relative to its overall category position.
- - FOCUS ON CONSUMPTION-DRIVEN MARKETING STRATEGY -- To enhance its ability to
leverage its brand equity, the Company has refocused its marketing efforts and
promotional strategy. To leverage its brand strength, the Company has
increased consumer-targeted marketing programs, primarily through the
distribution of free-standing coupon inserts, and has established clearly
differentiated product positioning that emphasizes the Company's premium
quality. The Company increased spending on consumer promotions from $12
million in fiscal 1996 to $46 million in fiscal 1997 and anticipates that its
consumer spending in fiscal 1998 and 1999 will be generally consistent with
levels of consumer spending in fiscal 1997. The Company has also improved the
effectiveness of its trade promotion strategy. The Company has implemented
performance-based programs under which trade spending, which consists of the
costs of promotional activities with grocery chains and other customers, such
as special displays, discounts and advertisements, is managed based on
retailers' sales of the Company's products to consumers rather than on
purchases from the Company. The Company believes that this performance-based
strategy, coupled with the Company's category management capabilities, will
continue to increase sales and reduce costs.
3
<PAGE> 10
- - IMPROVE PROFITABILITY THROUGH NEW PRODUCTS AND PACKAGING -- The Company is
emphasizing new higher margin products and line extensions designed to
leverage the Company's presence in its current product categories and to
capitalize on its food technology expertise. The Company has successfully
introduced flavored diced tomatoes, two lines of flavored canned fruit,
Orchard Select, a premium fruit product packaged in glass, and Fruit Smoothie
Blenders, a flavored fruit drink. These products extend the Company's
traditional product lines and appeal to consumers' demands for high quality,
convenient and nutritious food products. The Company is evaluating
introductions of other new products packaged in glass and plastic to further
expand its presence in the market beyond the processed food aisle.
- - INCREASE PENETRATION OF HIGH-GROWTH DISTRIBUTION CHANNELS -- Changes in the
retail grocery environment have resulted in substantial growth of alternative
retailers such as warehouse clubs, mass merchandisers and supercenters. The
Company believes it is well-positioned to benefit from these changes because
these vendors generally seek leading brand name products that generate high
inventory turnover. In addition, vendors in this category generally are
attracted to large, technologically sophisticated suppliers such as the
Company that have the ability to meet their stringent inventory and shelf
management requirements. Based on internal estimates and the broad range of
products supplied by the Company to such retailers, the Company believes it is
currently the leading supplier of canned vegetables and fruit to Wal-Mart's
Sam's Club, and is a major supplier to PriceCostco. Based on such estimates,
the Company also believes it is currently the leading supplier of canned
vegetables, fruit and solid tomato products as a group to Wal-Mart
Supercenters.
- - IMPLEMENT FURTHER COST SAVINGS -- The Company is aggressively pursuing cost
reduction opportunities, which have already contributed to an increase in
Adjusted EBITDA margins (excluding the results of Divested Operations (as
defined below)) from 6.9% in 1995 to 10.4% in 1997 and 10.2% for the nine
months ended March 31, 1998. Management's strategy is to improve profitability
through the implementation of capital projects that offer rapid returns on
investment, and through plant consolidations and increased operating
efficiencies. The Company has announced plans to consolidate, over the next
three fiscal years, six existing fruit and tomato operations in California
into four facilities, including one large state-of-the-art facility acquired
as part of the Contadina Acquisition. The Company continually evaluates its
production facilities and believes that further consolidations may be
warranted in the future. In addition, the Company plans to continue to invest
in new, state-of-the-art production equipment to increase production
efficiencies and strengthen its position as a low cost producer.
- - COMPLETE STRATEGIC ACQUISITIONS -- The Company will pursue strategic
acquisitions when there are opportunities to leverage the Company's key
strengths in product development, food processing, marketing, sales and
distribution. In evaluating potential acquisition candidates, the Company
seeks, among other things: (i) strong brands, including those in new product
lines, that can be expanded by leveraging the Company's technical and
manufacturing expertise and/or its sales and distribution systems; (ii) new
products that can achieve growth through re-branding; and (iii) economies of
scale in manufacturing, distribution and capacity utilization. The Contadina
Acquisition, for example, adds a leading national brand which strengthens the
Company's market share in key tomato segments and allows the Company to
realize cost savings through plant consolidations. The Contadina Acquisition
also allows the Company to introduce new branded retail products and to
increase sales to the branded foodservice market. The Company continuously
reviews acquisition opportunities and at any time may be engaged in
discussions with respect to an acquisition that may be material to its
operations. No agreement has been reached, however, with respect to any such
acquisition. The Company believes that any acquisition would likely require
the incurrence of additional debt, which could exceed amounts available under
the Bank Financing (as defined herein). As a result, completion of an
acquisition could require the consent of the lenders under the Bank Financing
and the amendment of the terms thereof, including for purposes of permitting
the Company's compliance with its covenants thereunder.
------------------------
Following the Offering, TPG Partners, L.P. ("TPG Partners") and certain of
its affiliates (with TPG Partners, "TPG") will own approximately 48.4% of the
Common Stock (approximately 44.9% if the U.S. Underwriters' overallotment option
is exercised in full) and will have the power to influence substantially and
4
<PAGE> 11
possibly to control the management and policies of the Company, as well as the
determination of matters requiring stockholder approval. TPG is part of Texas
Pacific Group, which was founded by David Bonderman, James G. Coulter and
William S. Price, III in 1992 to pursue public and private investment
opportunities. Texas Pacific Group's other investments include such branded
consumer products companies as Beringer Wine Estates Holdings, Inc., Ducati
Motors S.p.A., Favorite Brands International, Inc. and J. Crew Group, Inc.
Del Monte, a Delaware corporation, maintains its principal executive office
at One Market, San Francisco, California 94105, and its telephone number is
(415) 247-3000.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company.............................................. 13,513,513 shares
The Selling Stockholders................................. 4,054,054 shares
Total................................................. 17,567,567 shares(1)
Common Stock offered in:
United States offering................................... 14,054,054 shares
International offering................................... 3,513,513 shares
Total................................................. 17,567,567 shares(1)
Common Stock to be outstanding after the Offering.......... 49,003,974 shares(1)(2)
Use of proceeds............................................ Del Monte intends to use the net
proceeds from the Offering to repay or
redeem certain outstanding
indebtedness and preferred stock.
The Company will not receive any of
the proceeds from the sale of shares
of Common Stock by the Selling
Stockholders. See "Use of Proceeds."
Proposed New York Stock Exchange symbol.................... DLM
Risk factors............................................... For a discussion of certain risks that
should be considered by prospective
investors, see "Risk Factors." These
risks include, among others, the
Company's substantial leverage and
risks relating to competition in the
processed food industry, the
implementation of the Company's
business strategy and the effects of
severe weather conditions, as well
as risks and considerations relating
to the Common Stock, such as the
lack of a prior trading market and
the dilution that purchasers will
experience upon completion of the
Offering.
</TABLE>
- ---------------
(1) Assumes the U.S. Underwriters' overallotment option is not exercised.
(2) Assumes the exercise of warrants to purchase 547,262 shares of Common Stock
which will expire, if not previously exercised, upon completion of the
Offering.
5
<PAGE> 12
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary historical and pro forma financial
data of the Company. The summary historical consolidated financial data
presented below as of June 30, 1995, 1996 and 1997 and for the years then ended
and as of March 31, 1998 and for the nine months then ended were derived from
the audited consolidated financial statements of the Company. The summary
historical consolidated financial data presented below as of March 31, 1997 and
for the nine months then ended was derived from the unaudited interim financial
statements of the Company. Such historical financial information should be read
in conjunction with the consolidated financial statements of the Company and the
related notes thereto included elsewhere in this Prospectus. The unaudited pro
forma statements of operations information was prepared by the Company as if the
Contadina Acquisition, the Recapitalization and related financings had occurred
as of July 1, 1996 and should be read in conjunction with the pro forma
financial information set forth under "Unaudited Pro Forma Financial Data." The
unaudited pro forma statements of operations information does not purport to
represent what the Company's results of operations actually would have been if
the Contadina Acquisition and the Recapitalization had occurred as of the date
indicated or what such results will be for any future periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
-------------------------------------- --------------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------------------------ ----------- ------------------ -----------
1995 1996 1997 1997 1997 1998 1998
------ ------ ------ ----------- ----- ---------- -----------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales(a)...................................... $1,527 $1,305 $1,217 $ 1,373 $936 $ 968 $ 1,060
Cost of products sold(a).......................... 1,183 984 817 951(b) 632 653(b) 724(b)
------ ------ ------ ---------- ---- ---------- ----------
Gross profit...................................... 344 321 400 422 304 315 336
Selling, advertising, administrative and general
expense(a)...................................... 264 239 327(c) 361 235 249 274
------ ------ ------ ---------- ---- ---------- ----------
Operating income.................................. 80 82 73 61 69 66 62
Interest expense.................................. 76 67 52 93 37 58 72
Loss (gain) on sale of divested assets(d)......... -- (107) 5 5 5 -- --
Other (income) expense(e)......................... (11) 3 30 30 -- 6 6
------ ------ ------ ---------- ---- ---------- ----------
Income (loss) before income taxes, minority
interest, extraordinary item and cumulative
effect of accounting change..................... 15 119 (14) (67) 27 2 (16)
Provision for income taxes........................ 2 11 -- -- 2 -- --
Minority interest in earnings of subsidiary....... 1 3 -- -- -- -- --
------ ------ ------ ---------- ---- ---------- ----------
Net income (loss) before extraordinary item and
cumulative effect of accounting change.......... 12 105 (14) (67) 25 2 (16)
Extraordinary loss(f)............................. 7 10 42 4 4 -- --
Cumulative effect of accounting change(g)......... -- 7 -- -- -- -- --
------ ------ ------ ---------- ---- ---------- ----------
Net income (loss)................................. $ 5 $ 88 $ (56) $ (71) $ 21 $ 2 $ (16)
====== ====== ====== ========== ==== ========== ==========
Net income (loss) attributable to common
shares(h)....................................... $ (66) $ 6 $ (126) $ (76) $(49) $ (2) $ (20)
====== ====== ====== ========== ==== ========== ==========
Net income (loss) per common share................ $ (2.21) $ (0.05) $ (0.59)
========== ========== ==========
Weighted average number of shares outstanding..... 34,477,560 30,389,671 34,646,160
========== ========== ==========
CERTAIN DATA AS ADJUSTED FOR THE OFFERING:(I)
Interest expense(j)............................... $ 71 $ 54
Net income (loss)................................. (45) 2
Net income (loss) per common share................ $ (0.92) $ 0.04
========== ==========
Weighted average number of shares
outstanding(k).................................. 49,003,974 49,003,974
========== ==========
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31,
--------------------------------------- -------------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
--------------------------- --------- ------------------- ---------
1995 1996 1997 1997 1997 1998 1998
------- ------ -------- --------- ------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Adjusted EBITDA (l)........................... $ 76 $ 92 $ 121 $ 87 $ 99
Adjusted EBITDA margin (l).................... 6.9% 8.6% 10.4% 9.7% 10.2%
Cash flows provided by operating activities... $ 63 $ 60 $ 25 $ 26 $ 9
Cash flows provided by (used in) investing
activities.................................. (21) 170 37 39 (205)
Cash flows provided by (used in) financing
activities.................................. (44) (224) (63) (65) 195
Depreciation and amortization(m).............. 35 26 24 $ 30 18 20 $ 23
Capital expenditures.......................... 24 16 20 30 12 15 20
SELECTED RATIOS:
Ratio of earnings to fixed charges(n)......... 1.2x 2.6x -- -- 1.6x 1.0x --
Deficiency of earnings to cover fixed
charges(n).................................. -- -- $ 14 $ 67 -- -- $ 16
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------ -------------------------------
AS
ACTUAL ACTUAL ADJUSTED(I)
------------------------ -------------- --------------
1995 1996 1997 1997 1998 1998
------ ------ ------ ----- ------ --------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 99 $ 207 $ 116 $ 184 $ 218 $ 166
Total assets................................................ 960 736 667 739 928 914
Total debt, including current maturities.................... 576 373 610 310 770 608
Redeemable preferred stock.................................. 215 213 32 213 32 --
Stockholders' deficit....................................... (393) (304) (412) (257) (366) (175)
</TABLE>
- ---------------
(a) In fiscal 1997, certain merchandising allowances, which previously were
recorded as cost of products sold, have been reclassified to selling
expense. Such merchandising allowances totaled $106 million, $100 million,
$143 million and $101 million in the fiscal years ended June 30, 1995,
1996 and 1997 and the nine months ended March 31, 1997, respectively. In
addition, certain military distributor allowances, which previously were
treated as a reduction in net sales, have been reclassified to selling
expense. Such military distributor allowances amounted to $1 million, $1
million, $2 million and $2 million in fiscal years ended June 30, 1995,
1996 and 1997 and the nine months ended March 31, 1997, respectively. All
financial information has been restated to conform to this presentation.
(b) For the pro forma fiscal year ended June 30, 1997 and the historical nine
months ended March 31, 1998, includes $4 million and $2 million,
respectively, of inventory step-up as part of the purchase price allocation
relating to the Contadina Acquisition. For the pro forma nine months ended
March 31, 1998, excludes $2 million of inventory step-up as part of the
purchase price allocation relating to the Contadina Acquisition.
(c) In connection with the Recapitalization, which was consummated on April
18, 1997, expenses of approximately $25 million were incurred primarily
for management incentive payments and, in part, for severance payments.
(d) In November 1995, the Company sold its pudding business for $89 million,
net of $4 million of related transaction fees. The sale resulted in a gain
of $71 million. In March 1996, the Company sold its 50.1% ownership
interest in Del Monte Pacific Resources Limited ("Del Monte Philippines")
for $100 million, net of $2 million of related transaction fees. The sale
resulted in a gain of $52 million of which $16 million was deferred and $36
million was recognized in fiscal 1996. The purchase price included a
premium paid to the Company as consideration for an eight-year supply
agreement. The gain associated with the value of the premium amortized over
the term of the agreement. In the fiscal quarter ended December 1996, the
Company sold its Mexican, Central American and Carribean subsidiaries
(collectively "Del Monte Latin America"). The combined sales price of $50
million, reduced by $2 million of related transaction expenses, resulted in
a loss of $5 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General."
(e) In fiscal 1995, other income includes the Company's receipt of proceeds of
a $30 million letter of credit, reduced by $4 million of related
transaction expenses, as a result of the termination of a merger agreement
with Grupo Empacador de Mexico, S.A. de C.V. In fiscal 1997, $22 million
of expenses were incurred in conjunction with the Recapitalization,
primarily for legal, investment advisory and management fees.
(f) In June 1995, the Company refinanced its then-outstanding revolving credit
facility, term loan and senior secured floating rate notes. In conjunction
with this debt retirement, capitalized debt issue costs of $7 million were
written off and accounted for as an extraordinary loss. In December 1995
and April 1996, the Company prepaid part of its term loan and senior
secured notes. In conjunction with the early debt retirement, the Company
recorded an extraordinary loss of $10 million for the early retirement of
debt. The extraordinary loss consisted of a $5 million prepayment premium
and a $5 million write-off of capitalized debt issue costs related to the
early retirement of debt. In fiscal 1997, $42 million of expenses related
to the early retirement of debt and to the Recapitalization was charged to
net income. In September 1996, the Company repurchased outstanding debt,
in conjunction with which capitalized debt issue costs of $4 million, net
of a discount on such debt, were written off and accounted for as an
extraordinary loss. In conjunction with the refinancing of debt that
occurred at the time of the Recapitalization, the Company recorded a $38
million extraordinary loss related to the early retirement of debt. The
$38 million extraordinary loss consisted of
7
<PAGE> 14
previously capitalized debt issue costs of approximately $19 million and a
premium payment and a term loan make-whole payment aggregating to $19
million.
(g) Effective July 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
cumulative effect of adopting SFAS No. 121 resulted in a charge to fiscal
1996 net earnings of $7 million.
(h) Net income (loss) attributable to the shares of Common Stock is computed as
net income (loss) reduced by the cash and in-kind dividends for the period
on redeemable preferred stock.
(i) Adjusted to give effect to the issuance by the Company of 13,513,513
shares offered hereby assuming an initial public offering price of $18.50
per share, the exercise of warrants to purchase 547,262 shares of Common
Stock, the use of net proceeds therefrom and the Refinancing (as defined
herein) to fund the repayment of $257 million of long-term debt and the
redemption of preferred stock and a corresponding reduction in fixed
charges at the beginning of the respective periods.
(j) The table below presents as adjusted interest expense, including the
respective interest rates and related fees, and as adjusted amortization
of deferred financing costs after giving effect to the Offering and the
Refinancing.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
------------------------------------ ------------------------------------
INTEREST PRINCIPAL INTEREST INTEREST PRINCIPAL INTEREST
RATE(1) BALANCE(2) EXPENSE(3) RATE(1) BALANCE(2) EXPENSE(3)
-------- ---------- ---------- -------- ---------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Revolving Credit Facility..................... 7.82% $267 $20 7.68% $262 $15
Tranche A of Term Loan Facility............... 7.82 150 12 8.13 135 9
Tranche B of Term Loan Facility............... 8.57 150 13 8.61 149 10
DMC Notes..................................... 12.25 98 12 12.25 98 9
Del Monte Notes............................... 12.50 86 11 12.50 94 9
--- ---
Pro forma interest expense.................. 68 52
Pro forma amortization of deferred financing
costs....................................... 3 2
--- ---
Total pro forma interest expense............ $71 $54
=== ===
</TABLE>
- ---------------
(1) Average of month-end interest rates.
(2) Average of month-end principal balances.
(3) Represents product of average month-end interest rate and average month-end
principal balance for the applicable period.
(k) The weighted average number of shares outstanding for each of the periods
indicated assumes the exercise of warrants to purchase 547,262 shares of
Common Stock.
(l) Adjusted EBITDA represents EBITDA (income (loss) before provision for
income taxes, minority interest, extraordinary item, cumulative effect of
accounting change and depreciation and amortization expense, plus interest
expense) before special charges and other one-time and non-cash charges,
less gains (losses) on sales of assets and the results of the Divested
Operations. Adjusted EBITDA should not be considered in isolation from,
and is not presented as an alternative measure of, operating income or
cash flow from operations (as determined in accordance with GAAP).
Adjusted EBITDA as presented may not be comparable to similarly titled
measures reported by other companies. Since the Company has undergone
significant structural changes during the periods presented, management
believes that this measure provides a meaningful measure of operating cash
flow (without the effects of working capital changes) for the core and
continuing business of the Company by normalizing the effects of
operations that have been divested and of one-time charges or credits. For
fiscal 1995, Adjusted EBITDA excludes $26 million received in connection
with a terminated transaction, $4 million paid by the Company to terminate
its alliance with PCP (as defined herein) and $7 million related to the
termination of a management equity plan. For fiscal 1996, other one-time
charges include $3 million for relocation costs and $6 million of costs
associated with a significant headcount reduction. For fiscal 1997,
Adjusted EBITDA excludes $47 million of expenses incurred in connection
with the Recapitalization and $7 million related to the write-off of a
long-term asset. For the nine months ended March 31, 1998, historical
one-time and non-cash charges consist of $35 million of restructuring
charges and $3 million of stock compensation expense. Historical one-time
charges for the nine months ended March 31, 1998 also include $7 million
of certain indirect expenses incurred in connection with the Contadina
Acquisition and $2 million of inventory step-up due to the purchase price
allocation related to the Contadina Acquisition. Adjusted EBITDA margin is
calculated as Adjusted EBITDA as a percentage of net sales (excluding net
sales of Divested Operations of $417 million, $233 million and $48 million
for the years ended June 30, 1995, 1996 and 1997, respectively, and $43
million for the nine months ended March 31, 1997). See tabular
presentation under "Selected Consolidated Financial Data."
(m) Depreciation and amortization exclude amortization of $5 million of
deferred debt issuance costs in each of fiscal 1995, 1996 and 1997.
Depreciation and amortization exclude amortization of $4 million and $3
million of deferred debt issuance costs in the nine-month periods ended
March 31, 1997 and 1998, respectively. Pro forma depreciation and
amortization exclude amortization of $5 million and $3 million of pro forma
deferred debt issuance costs for fiscal 1997 and for the nine-month period
ended March 31, 1998, respectively.
(n) For purposes of determining the ratio of earnings to fixed charges and the
deficiency of earnings to cover fixed charges, earnings are defined as
income (loss) before extraordinary item, cumulative effect of accounting
change and provision for income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the interest component of rent expense.
8
<PAGE> 15
SUMMARY HISTORICAL FINANCIAL DATA OF CONTADINA
The following table presents summary historical financial data of Contadina
for purchased product lines for the year ended December 31, 1996 and the period
from January 1, 1997 through December 18, 1997 derived from the audited
financial statements for those periods, and summary financial data for the nine
months ended September 30, 1996 and 1997.
Contadina was not operated as a separate business unit and, as such, it did
not have regularly prepared financial statements. The Company has obtained and
prepared financial information of Contadina for the year ended December 31,
1996, the period ended December 18, 1997, and the nine-month periods ended
September 30, 1996 and 1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JANUARY 1, 1997 SEPTEMBER 30,
YEAR ENDED THROUGH --------------
DECEMBER 31, 1996 DECEMBER 18, 1997 1996 1997
----------------- ----------------- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales.................................. $160 $162 $112 $108
Cost of products sold(a)................... 151 163 108 112
---- ---- ---- ----
Gross margin.......................... 9 (1) 4 (4)
Selling, advertising, administrative
and general expense(b)................... 20 26 19 19
---- ---- ---- ----
Operating loss............................. (11) (27) (15) (23)
Interest expense(c)........................ 6 6 4 4
---- ---- ---- ----
Net loss before taxes................. $(17) $(33) $(19) $(27)
==== ==== ==== ====
OTHER DATA:
Depreciation and amortization.............. $ 12 $ 13 $ 8 $ 8
Capital expenditures....................... 10 8 7 7
</TABLE>
- ---------------
(a) Cost of products sold includes royalty expense of $5 million for both the
year ended December 31, 1996 and the period ended December 18, 1997 and $3
million for each of the nine-month periods ended September 30, 1996 and
1997. Under a royalty agreement with Nestle S.A., royalties were charged
for the license of the Contadina trademarks. This expense will not be
incurred as part of the on-going operations of Contadina subsequent to the
date of the Contadina Acquisition. Cost of products sold also includes an
allocation by Nestle for certain fixed distribution costs which included,
without limitation, costs of utilizing outside storage facilities and costs
for utilizing centralized distribution and storage facilities of $5
million, $7 million, $5 million and $5 million for the year ended December
31, 1996, the period ended December 18, 1997, and the nine-month periods
ended September 30, 1996 and 1997, respectively. The Company believes that,
as part of on-going operations of Contadina subsequent to the Contadina
Acquisition, it will experience distribution costs of a similar nature to
those allocated by Nestle in its cost allocation but at a significantly
reduced level; however, no assurances can be given in this regard.
(b) Selling, advertising, administrative and general expense included an
allocation by Nestle for marketing and other general expenses which
include, without limitation, all selling costs, including direct sales
force and brokerage expenses; costs for utilizing centralized distribution
and storage facilities; costs associated with marketing services; and
general and administrative costs associated with support services such as
finance, legal, human resources and information systems. For the year ended
December 31, 1996, the period ended December 18, 1997, and the nine-month
periods ended September 30, 1996 and 1997, allocated marketing expense was
$8 million, $10 million, $7 million and $8 million, respectively. The
Company believes that it will experience operating costs of a similar
nature to those charged by Nestle in its cost allocations, but at a
significantly reduced level; however, no assurances can be given in this
regard. Other general expenses allocated by Nestle were $4 million, $10
million, $7 million and $8 million for the year ended December 31, 1996,
the period ended December 18, 1997, and the nine-month periods ended
September 30, 1996 and 1997, respectively.
(c) Represents an allocation charged to Contadina by Nestle based on the
end-of-month working capital balance at an intercompany rate equal to 7%
for all periods.
9
<PAGE> 16
RISK FACTORS
Before purchasing the shares of Common Stock offered hereby, a prospective
investor should carefully consider all of the information in this Prospectus,
including the risk factors set forth below.
CONSEQUENCES TO HOLDERS OF COMMON STOCK OF COMPANY'S SUBSTANTIAL LEVERAGE
The Company is highly leveraged. On a pro forma basis, as of March 31,
1998, after giving effect to the application of the net proceeds of the Offering
and the Refinancing, the Company had approximately $1.1 billion of indebtedness
(including trade payables), and its stockholders' deficit was $175 million. This
amount includes, after giving effect to the application of the net proceeds of
the Offering, $82 million of notes issued in December 1997 in connection with
the Contadina Acquisition as to which the Company is concurrently making a
public exchange offer in which holders may exchange such notes for registered
debt securities with substantially identical terms. In addition, subject to the
restrictions contained in the Company's indebtedness, the Company and its
subsidiaries may incur additional senior or other indebtedness from time to time
to finance acquisitions or capital expenditures or for other general corporate
purposes. As a result of seasonal working capital requirements, the Company's
borrowings fluctuate significantly during the year, generally peaking in
September and October. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences to the holders of the Common Stock, including, but not limited to,
the following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be impaired; (ii) a significant portion of the
Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for its operations; (iii) significant amounts of the Company's
borrowings will be at variable rates of interest, which could result in higher
interest expense; (iv) the terms of the Company's indebtedness contain financial
and/or restrictive covenants, the failure to comply with which may result in an
event of default which, if not cured or waived, could have a material adverse
effect on the Company; (v) the Company may be substantially more leveraged than
certain of its competitors, which may place the Company at a competitive
disadvantage; and (vi) the Company's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Certain Indebtedness."
The Company's ability to make scheduled payments or to refinance its debt
obligations will depend upon its future financial and operating performance,
which will be affected by prevailing economic conditions and financial, business
and other factors, certain of which are beyond its control. There can be no
assurance that the Company's operating results, cash flow and capital resources
will be sufficient for payment of its indebtedness in the future. In the absence
of such operating results and resources, the Company could face substantial
liquidity problems and might be required to dispose of material assets or
operations to meet its debt service and other obligations, and there can be no
assurance as to the timing of such sales or the proceeds that the Company could
realize therefrom. In addition, because the Company pays interest on certain of
its indebtedness at floating rates, an increase in interest rates could
adversely affect, among other things, the Company's ability to meet its debt
service obligations. If the Company is unable to service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such as
reducing or delaying planned expansion and capital expenditures, selling assets,
restructuring or refinancing its indebtedness or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all.
COMPETITION
While many companies compete in the domestic canned vegetable, fruit and
tomato product categories, only a small number of well-established companies
operate on both a national and a regional basis with single
10
<PAGE> 17
or multiple branded product lines. The Company faces substantial competition
throughout its product lines from these and other companies. Certain of these
competitors have greater financial resources and flexibility than the Company.
Several of the Company's product lines are sensitive to competition from
regional brands, and many of the Company's product lines compete with imports,
private label products and fresh alternatives. While no single private label
competitor has greater market share than the Company in its principal product
categories, for the 52 weeks ended March 28, 1998, private label competition as
a group represented 43.8%, 39.7% and 30.7% of canned vegetable, fruit and solid
tomato product sales, respectively. Furthermore, the Company cannot predict the
pricing or promotional actions by its competitors or their effects on the
Company's ability to market and sell its products. There can be no assurance
that the Company's sales volume or market shares would not be adversely affected
by negative consumer reaction to its higher prices. The categories of the canned
food industry in which the Company competes have in the past been affected by
processing over-capacity. Although the Company believes that recent
consolidation among certain participants in those categories may result in
capacity rationalization, there can be no assurance that the Company's results
will not be adversely affected by industry over-capacity in the future or that
crop supply levels will not change so as to create an imbalance of supply and
demand in future periods.
RISKS RELATING TO IMPLEMENTATION OF BUSINESS STRATEGY
The Company's ability to implement its business strategy and improve its
operating results will depend in part on its ability to realize substantial cost
savings through operating efficiencies and to achieve additional penetration and
market share for its high margin products. No assurance can be given that the
Company will be able to achieve such goals or that, in implementing cost saving
measures, it will not impair its ability to respond rapidly or efficiently to
changes in the competitive environment. In such circumstances, the Company's
results of operations and financial condition could be materially adversely
affected.
The Company's strategy also depends on its ability to increase distribution
of its products through warehouse clubs, such as Wal-Mart's Sam's Clubs and
PriceCostco, and mass merchandisers, such as Wal-Mart Supercenters. The Company
does not enter into long-term agreements with these entities, which make
purchases depending on their inventory levels. If the Company's relationship
with any of these entities should deteriorate, such entity could immediately
cease purchases of the Company's products. The loss of such sales and resulting
possible adverse market perception could materially adversely affect the
Company's results of operations and financial condition.
Although the Company intends to pursue strategic acquisitions, completion
of any acquisition could require the consent of the lenders under the Bank
Financing and the amendment of the terms thereof, including for purposes of
permitting the Company's compliance with its covenants thereunder. There can be
no assurance as to whether, or the terms on which, the lenders under the Bank
Financing would grant such consent. In addition, to the extent that the Company
completes strategic acquisitions, it will be subject to risks associated with
the integration of the acquired businesses into the Company's operations,
including the integration of personnel, production and financial and information
systems. The timing and number of acquisitions could increase the difficulty in
addressing these risks. Failure of the Company to integrate any acquired
business adequately could adversely affect the Company's results of operations
and financial condition.
RISKS RELATING TO CONTADINA
Contadina was not operated as a separate business unit and, as such, it did
not have regularly prepared financial statements. Contadina's books and records
have been audited only for the fiscal year ended December 31, 1996 and the
period ended December 18, 1997. Financial information presented herein
concerning Contadina has of necessity required estimation by the Company, and no
assurance can be given that results of the acquired business for these periods,
if the business had been operated as an independent entity, would not vary
materially.
The Contadina Acquisition has been accounted for using the purchase method.
This accounting treatment requires all purchased assets to be recorded on the
Company's books based upon their fair value.
11
<PAGE> 18
Accordingly, the inventory of Contadina acquired in the Contadina Acquisition
was recorded on the Company's books at fair value (generally higher than the
recorded cost). The Company expects to report a lower gross margin upon future
sales of the revalued inventory.
The full benefits of the acquisition of Contadina's assets will require
coordination of operations, the implementation of appropriate operational,
financial and management systems and controls in order to operate effectively
and efficiently, and the integration of the Contadina business into the
Company's administrative, finance and marketing organizations. This will require
substantial attention from the Company's management team. The diversion of
management attention, as well as any other difficulties which may be encountered
in the transition and integration process, could have an adverse impact on the
revenue and operating results of the Company. In addition, there can be no
assurance that the Company will be successful in integrating the operations of
Contadina, or that any planned benefits will be realized.
SEVERE WEATHER CONDITIONS AND NATURAL DISASTERS
Severe weather conditions and natural disasters, such as floods, droughts,
frosts, earthquakes or pestilence, may affect the supply of one or more of the
Company's products. For example, the Company's peach and pear growing regions
experienced a compressed summer 1997 harvesting season due to adverse weather.
This shortened time frame for harvesting caused an increase in the use of cold
storage for peaches and pears until processing capacity became available. In
addition, smaller fruit size lowered raw product recoveries and cooler weather
than normal resulted in late plantings for some vegetables, lower field yields
and lower recoveries. Furthermore, competing manufacturers of canned vegetable,
fruit or tomato products may be affected differently depending on the location
of their principal sources of supply. If the supply of any of the Company's
products is adversely affected by weather conditions, there can be no assurance
that the Company will be able to obtain sufficient supplies from other sources.
In particular, the Company's tomato and fruit production is concentrated in the
San Joaquin Valley of California. In the winter and spring of 1997-98, certain
areas in California, including some of the Company's growing regions, have
experienced substantial rainfall as a result of the "El Nino" phenomenon. The
Company believes that the 1998 California fruit and tomato harvests may be
somewhat reduced as a result of these weather conditions. However, the Company
does not believe that such weather conditions will have a material adverse
effect on the Company's results of operations or financial condition.
Historically, significant weather-related shortages in fruit, vegetable and
tomato harvests have resulted in price increases that have offset increases in
raw product costs and reductions in sales volumes. Nevertheless, no assurance
can be given that, if such adverse weather conditions persist, the harvesting
season will not be delayed or otherwise adversely affected with consequent
adverse effects on the Company's cost of goods sold, inventory and sales.
SEASONALITY OF PRODUCTION AND SALES
The Company is not a continuous manufacturer, but has a production period
that is limited to approximately three to four months during the summer each
year. As a result, the Company's working capital requirements are also seasonal
and are most significant in the first and second fiscal quarters. If the Company
were to experience an unexpected plant shutdown or any other interference with
its production schedule, the Company's results of operations and financial
condition could be materially adversely affected.
The Company's historical net sales have exhibited seasonality, with the
second and third fiscal quarters having the highest net sales, principally due
to increased sales during the holiday period in the United States extending from
November through December, as well as in anticipation of the Easter holiday. Net
sales in the first fiscal quarter have historically been affected principally by
lower levels of promotional activity and the availability of fresh produce.
Although the Company believes that these seasonal fluctuations are relatively
predictable and that the Company's sources of liquidity are adequate to ensure
the availability of working capital, there can be no assurance that seasonal
trends in the Company's business will not adversely affect the Company's results
of operations or financial condition in the future.
12
<PAGE> 19
GOVERNMENTAL REGULATION; ENVIRONMENTAL COMPLIANCE
As a result of its agricultural, food processing and canning activities,
the Company is subject to certain environmental laws and regulations. Many of
these laws and regulations are becoming increasingly stringent and compliance
with them is becoming increasingly expensive. The Company has been named as a
potentially responsible party ("PRP") and may be liable for environmental
investigation and remediation costs at certain designated "Superfund Sites"
under the federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), or under similar state laws. Based
on available information, the Company is defending itself in these actions as
appropriate, and believes that none of the matters will have a material adverse
impact on the Company's financial position or results of operations. There can
be no assurance that such will be the case or that the Company will not be
identified as a PRP at additional sites in the future or that additional
remediation requirements will not be imposed on properties currently or
previously owned or operated by the Company. In addition, there can be no
assurance that other sites to which the Company has sent waste will not be
identified for investigation or proposed for listing under CERCLA or similar
state laws. In addition, under the Federal Food, Drug and Cosmetic Act and the
Food Quality Protection Act of 1996, the U.S. Environmental Protection Agency
(the "EPA") is involved in a series of regulatory actions relating to the
evaluation and use of pesticides in the food industry, and there can be no
assurance that the effect of such actions and any future actions on the
availability and use of pesticides would not have a material adverse impact on
the Company's financial position or results of operations. See
"Business -- Governmental Regulation" and "-- Environmental Compliance."
CONTROL BY TPG
After giving effect to the Offering, TPG will own approximately 48.4%
(approximately 44.9% if the U.S. Underwriters' overallotment option is exercised
in full) of the outstanding Common Stock. Following the Offering, it is expected
that TPG will continue to use its significant interest in the Common Stock to
influence substantially and possibly to control the management and policies of
the Company, as well as the determination of matters requiring stockholder
approval. See "Certain Relationships and Related Transactions" and "Description
of Capital Stock." The concentration of beneficial ownership of Del Monte may
also have the effect of delaying, deterring or preventing a change in control of
Del Monte, may discourage bids for the Common Stock at a premium over the market
price of the Common Stock and may otherwise adversely affect the market price of
the Common Stock. See "-- Anti-Takeover Provisions."
The Company currently has, and will continue to have, contractual
relationships with TPG, including a Transaction Advisory Agreement (as defined
herein) and a Management Advisory Agreement (as defined herein), each relating
to certain services to be provided by TPG to the Company. See "Certain
Relationships and Related Transactions."
RESTRICTIVE DEBT COVENANTS
The Company is subject to a number of significant covenants under its
indebtedness that, among other things, restrict the ability of the Company to
dispose of assets, incur additional indebtedness, incur guarantee obligations,
repay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into capital leases, make investments, loans or advances,
make acquisitions, engage in mergers or consolidations, make capital
expenditures, engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, under the Bank
Financing (as defined herein), the Company is required to comply with specified
financial ratios and tests, including minimum EBITDA (as defined in the Bank
Financing), minimum net worth, minimum fixed charge coverage and maximum
leverage ratios. Substantially all of the assets of the Company have been
pledged to secure the indebtedness of the Company. See "Description of Certain
Indebtedness."
Compliance with such restrictions could impair the Company's ability to
fund its capital expenditures on a timely basis. Moreover, the Company's ability
to comply with such covenants may be affected by events beyond its control,
including prevailing economic, financial and industry conditions. The breach of
any of such covenants could result in a default, which would permit the
acceleration of such indebtedness and the
13
<PAGE> 20
termination of the commitments of the Company's senior lenders to make further
extensions of credit. Such senior lenders could also foreclose against
collateral securing indebtedness owed them. If the Company's obligations under
the Bank Financing were accelerated and the lenders' commitments terminated, the
Company would be required to repay all amounts outstanding under the Bank
Financing and would have no credit facility available to finance its seasonal
working capital or other cash requirements. As a result, particularly if lenders
were to foreclose on the Company's assets, the Company's business prospects,
results of operations and financial condition would be materially and adversely
affected.
BRAND RISK
The Company has licensed the Del Monte brand name to various unaffiliated
companies internationally and, for certain products, within the United States.
The common stock and certain debt securities of one licensee, Fresh Del Monte
Produce N.V., are publicly traded in the United States. Acts or omissions by
these unaffiliated companies may adversely affect the value of the Del Monte
brand name or the trading prices for the Common Stock. In addition, press and
other third party announcements or rumors relating to any of these licensees may
adversely affect the market prices for the Common Stock and demand for the
Company's products, even though the events announced or rumored may not relate
to the Company, which in turn could materially adversely affect the Company's
results of operations and financial condition. See "Business -- Intellectual
Property."
LACK OF DIVIDENDS
Del Monte has not declared or paid any cash or other dividends on its
shares of Common Stock and does not expect to pay dividends for the foreseeable
future. Del Monte is a holding company with no substantial business operations
or assets of its own. The terms of the Company's indebtedness limit the ability
of the Company's subsidiaries to distribute to the Company any cash or other
assets, which could limit the ability of Del Monte to pay dividends to holders
of Common Stock. In addition, future borrowings by the Company's subsidiaries
can be expected to contain further restrictions or prohibitions on the payment
of dividends by such subsidiaries to Del Monte. See "Dividend Policy" and
"Description of Certain Indebtedness."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and although application has been made to list the Common Stock on the
New York Stock Exchange, there can be no assurance that an active trading market
for the Common Stock will develop or be sustained if it develops or that the
market price for the Common Stock will not decline below the public offering
price set forth on the cover page of this Prospectus. The initial public
offering price of the Common Stock will be determined by negotiation between the
Company, the Selling Stockholders and the Underwriters and may not be indicative
of the market price of the Common Stock following the Offering. See
"Underwriters." The market price of the Common Stock could be subject to
significant fluctuations in response to various factors and events, including
the liquidity of the market for the Common Stock, differences between the
Company's actual financial or operating results and those expected by investors
and analysts, changes in analysts' recommendations or projections, pricing and
competition in the canned fruit and vegetable industry, new statutes or
regulations or changes in interpretations of existing statutes and regulations
affecting the Company's business, changes in general market conditions and broad
market fluctuations.
DILUTION; BENEFIT TO EXISTING STOCKHOLDERS
The assumed initial public offering per share price of the Common Stock is
$18.50 (the midpoint of the range specified on the cover page of this
Prospectus), and the deficit in net tangible book value per share of Common
Stock at March 31, 1998 was $(10.76). Purchasers of Common Stock in the Offering
will experience immediate and substantial dilution of $22.09 per share of Common
Stock from the initial public offering price, and the deficit in net tangible
book value per share of Common Stock after the Offering will be $(3.59) per
share. See "Dilution."
14
<PAGE> 21
As part of its business strategy, the Company continuously reviews
acquisition opportunities. No agreement has been reached, however, with respect
to any such transaction. Although the Company anticipates that any acquisition
would be funded with debt, the Company could elect to pay a portion of the
consideration for an acquisition in shares of the Common Stock. Depending on the
terms of the transaction, the issuance of additional Common Stock could result
in dilution to existing holders of the Common Stock, including purchasers of the
Common Stock in the Offering.
POTENTIAL ADVERSE IMPACT ON STOCK PRICE OF SHARES ELIGIBLE FOR FUTURE SALE
Following the Offering, Del Monte will have outstanding 49,003,974 shares
of Common Stock (assuming the exercise of warrants to purchase 547,262 shares,
which, if unexercised, will expire on consummation of the Offering, and no
exercise of the U.S. Underwriters' overallotment option). Of these, the
17,567,567 shares offered hereby will be freely transferable by persons other
than "affiliates" of the Company without restriction or further registration
under the Securities Act. Substantially all of the remaining 31,436,407
outstanding shares of Common Stock will be owned by TPG and certain other
current stockholders of Del Monte and will be "restricted securities." These
"restricted" shares of Common Stock will be eligible for sale in the public
market without registration under the Securities Act, subject to compliance with
the resale volume limitations and other restrictions of Rule 144 under the
Securities Act, or in the private institutional market, subject to compliance
with the requirements of Rule 144A under the Securities Act. Future sales of
shares of Common Stock by TPG or such other stockholders or the perception that
such sales could occur, could adversely affect prevailing market prices for the
shares of Common Stock. See "Shares Eligible for Future Sale."
ANTI-TAKEOVER PROVISIONS
Certain provisions of Del Monte's Certificate of Incorporation (the
"Certificate of Incorporation") and bylaws, including the provisions providing
for (i) the issuance of blank check preferred stock by the Board of Directors
without stockholder approval; (ii) classification of the Board of Directors;
(iii) a requirement that general meetings of stockholders be called only by a
majority of the Board of Directors or by the Chairman of the Board; (iv) a
prohibition on stockholder action through written consents; and (v) advance
notice requirements for stockholder proposals and nominations, may have the
effect of delaying, deferring or preventing a change of control of Del Monte
without further action by the stockholders, may discourage bids for the Common
Stock at a premium over the market price of the Common Stock and may adversely
affect the market price of, and the voting and other rights of the holders of,
the Common Stock. See "Description of Capital Stock -- Certain Certificate of
Incorporation and Bylaw Provisions."
In addition, the indentures relating to certain indebtedness of the Company
provide that upon the occurrence of a change of control (in each case, as
defined therein), each holder of such notes will, under certain circumstances,
have the right to require that the Company repurchase all of such holder's notes
in cash at a premium to the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of such repurchase. In addition, a change
of control would constitute an event of default under the Bank Financing and the
Company's proposed amendment and restatement thereof (the "Refinancing"), which
could have a material adverse effect on the Company. These provisions could
delay, deter or prevent a takeover attempt. See "Description of Certain
Indebtedness."
15
<PAGE> 22
USE OF PROCEEDS
Assuming an initial public offering price of $18.50 per share, the net
proceeds to Del Monte from its sale of shares of Common Stock in the Offering
(after deducting applicable underwriting discounts and commissions and estimated
offering expenses payable by Del Monte) are estimated to be approximately $230
million (approximately $250 million if the U.S. Underwriters' overallotment
option is exercised in full). The Company will not receive any of the net
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
Del Monte intends to use the net proceeds of the Offering and $60 million from
its Revolving Credit Facility (as defined herein) as follows: (i) approximately
$129 million to repay indebtedness under its senior secured term loan facility
(the "Term Loan Facility"); (ii) $46 million to redeem its senior discount notes
(the "Del Monte Notes"), including $2 million of accrued interest; (iii) $61
million to redeem its senior subordinated notes (the "DMC Notes"), including $9
million of accrued interest; (iv) $41 million to redeem its Series A Redeemable
Preferred Stock (the "Series A Preferred Stock"), including $3 million of
unamortized discount, $5 million of accreted dividends and $1 million of
redemption premium; and (v) $13 million to pay certain repayment and redemption
premiums in connection with the redemption of the Del Monte Notes and the DMC
Notes. The Term Loan Facility, the Del Monte Notes and the DMC Notes mature and
bear interest at the rates specified under the heading "Description of Certain
Indebtedness." The net proceeds from the issuance of the Del Monte Notes were
used by the Company to finance a portion of the Contadina Acquisition.
DIVIDEND POLICY
Holders of the Common Stock are entitled to receive dividends pro rata on a
per share basis when, as and if declared by the Board of Directors of Del Monte
out of funds legally available therefor. Del Monte has not declared or paid any
cash or other dividends on its shares of Common Stock and does not expect to pay
dividends for the foreseeable future. Future dividend policy will be determined
periodically by the Board of Directors based upon conditions then existing,
including the Company's earnings and financial condition, capital requirements,
including debt service obligations, and other relevant factors.
As a holding company, the ability of Del Monte to pay dividends in the
future is dependent upon the receipt of dividends or other payments from its
subsidiaries. In addition, the terms of the Company's indebtedness limit the
ability of Del Monte's subsidiaries to pay dividends to Del Monte. See "Risk
Factors -- Lack of Dividends" and "Description of Certain Indebtedness."
16
<PAGE> 23
CAPITALIZATION
The following table sets forth the actual unaudited capitalization of the
Company at March 31, 1998 and as adjusted to give effect to the sale of
13,513,513 shares of Common Stock by the Company, assuming an initial public
offering price of $18.50 per share, and the application of the estimated net
proceeds to be received by the Company. The following table should be read in
conjunction with "Use of Proceeds," "Unaudited Pro Forma Financial Data,"
"Selected Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the notes thereto of the Company included herein.
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED
------ --------------
(IN MILLIONS)
<S> <C> <C>
Total debt:
Revolving Credit Facility(1).............................. $ 68 $131
Term Loan Facility........................................ 429 300
12 1/4% Senior Subordinated Notes of DMC(2)............... 147 95
12 1/2% Senior Discount Notes of Del Monte(3)............. 126 82
---- ----
Total debt............................................. 770 608
---- ----
Redeemable Preferred Stock(4)............................... 32 --
Stockholders' equity:
Common Stock, $.01 par value; 1,000,000 shares authorized
and 182,431 shares issued and outstanding, actual; and
500,000,000 shares authorized and 49,003,974 shares
issued and outstanding, as adjusted(5)(6).............. -- --
Paid-in capital........................................... 173 403
Retained deficit(7)....................................... (539) (578)
---- ----
Total stockholders' deficit............................ (366) (175)
---- ----
Total capitalization.............................. $436 $433
==== ====
</TABLE>
- ---------------
(1) The total capacity under the revolving credit facility as of March 31, 1998
was $350 million. See "Description of Certain Indebtedness." The amount, as
adjusted, reflects $63 million of additional borrowings under the Revolving
Credit Facility, including $3 million to pay fees incurred in connection
with the Refinancing.
(2) Excludes $9 million of accrued interest payable.
(3) Excludes $2 million of accrued interest payable.
(4) Net of unamortized discount of $3 million and excludes accreted dividends
aggregating approximately $5 million as of March 31, 1998.
(5) Assumes the exercise of warrants to purchase 547,262 shares of Common Stock,
but excludes 1,838,995 shares reserved for issuance pursuant to the
Company's management share option plan. See "Management" and "Description of
Capital Stock."
(6) The actual number of shares of Common Stock at March 31, 1998 does not
reflect the 191.542-for-one stock split of the existing shares of Common
Stock or the increase in the number of authorized shares of Common Stock to
500 million shares.
(7) As adjusted reflects a $16 million write-off of a pro rata share of deferred
financing costs associated with the repayment of the Company's indebtedness,
as well as $14 million of repayment and redemption premiums, $5 million in
dividends paid, $3 million write-off of unamortized discount relating to the
preferred shares redeemed and $1 million in other expenses incurred in the
Refinancing.
17
<PAGE> 24
DILUTION
The deficit in net tangible book value of the Company at March 31, 1998 was
approximately $(382) million or $(10.76) per share of Common Stock (assuming the
exercise of all outstanding warrants and no exercise of the U.S. Underwriters'
overallotment option). Without taking into account any changes in the deficit in
net tangible book value attributable to operations after March 31, 1998, after
giving effect to the sale of the shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $18.50 per share and the
application of the estimated net proceeds as described under "Use of Proceeds,"
the pro forma deficit in net tangible book value of the Company as adjusted at
March 31, 1998 would have been $(176) million, or $(3.59) per share of Common
Stock (assuming the exercise of all outstanding warrants and no exercise of the
U.S. Underwriters' overallotment option). This represents an immediate reduction
in the deficit in net tangible book value of $7.17 per share of Common Stock to
the existing stockholders, including TPG, and an immediate dilution of $22.09
per share of Common Stock to new investors in shares of Common Stock in the
Offering. The following table illustrates such per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $18.50
Deficit in net tangible book value per share of Common Stock
before the Offering(1).................................... $(10.76)
Reduction in deficit in net tangible book value per share of
Common Stock attributable to new investors(2)............. $ 7.17
-------
Pro forma deficit in net tangible book value per share of
Common Stock after the Offering........................... $(3.59)
------
Dilution per share to new investors(3)...................... $22.09
======
</TABLE>
- ---------------
(1) Deficit in net tangible book value per share is determined by dividing the
Company's audited net deficit in tangible book value (total tangible assets
less total liabilities) of approximately $(382) million at March 31, 1998 by
the aggregate number of shares of Common Stock outstanding at March 31, 1998
(assuming the exercise of all outstanding warrants and no exercise of the
U.S. Underwriters' overallotment option).
(2) After deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(3) Dilution is determined by subtracting pro forma deficit in net tangible book
value per share of Common Stock after the Offering from the assumed initial
public offering price paid by a new investor for a share of Common Stock.
18
<PAGE> 25
UNAUDITED PRO FORMA FINANCIAL DATA
On April 18, 1997, the Company completed the Recapitalization. In
connection with the Recapitalization, the Company repaid substantially all of
its funded debt obligations existing immediately before the Recapitalization. On
December 19, 1997, the Company acquired Contadina for $177 million, plus an
estimated working capital adjustment of approximately $20 million. The
consideration was paid solely in cash. The purchase price was subject to
adjustment based on the final calculation of net working capital as of the
closing date. Nestle provided its calculation of the net working capital, which
resulted in a payment to the Company of $2 million, and therefore a reduction in
the purchase price to a total of $195 million. The following Unaudited Pro Forma
Statements of Operations were prepared by the Company as if the Contadina
Acquisition, the Recapitalization and related financings had occurred as of July
1, 1996. The Unaudited Pro Forma Statements of Operations do not purport to
represent what the Company's results of operations actually would have been if
the Contadina Acquisition and the Recapitalization had occurred as of the dates
indicated or what such results will be for any future periods.
The unaudited pro forma financial data are based on the historical
financial statements of the Company and the assumptions and adjustments
described in the accompanying notes. The Company believes that such assumptions
are reasonable. The unaudited pro forma financial data should be read in
conjunction with the consolidated financial statements of the Company and the
accompanying notes thereto appearing elsewhere in this Prospectus.
Contadina was not operated as a separate business unit and, as such, it did
not have regularly prepared financial statements. The Company has obtained and
prepared financial information of Contadina for the year ended December 31,
1996, the period ended December 18, 1997 and the nine-month periods ended
September 30, 1996 and 1997. Due to the limited information available to the
Company, the Company has prepared the Unaudited Pro Forma Statement of
Operations for the year ended June 30, 1997 using Contadina historical financial
information for the 12-month period ended September 30, 1997 derived from the
audited financial statements for the year ended December 31, 1996 appearing
elsewhere in this Prospectus and unaudited financial data for the nine-month
periods ended September 30, 1996 and 1997 appearing under "Summary Historical
Financial Data of Contadina." The Unaudited Pro Forma Statement of Operations
for the nine-month period ended March 31, 1998 includes the historical revenues
and expenses of Contadina from July 1, 1997 through December 18, 1997 (the
results of operations of Contadina since the date of acquisition have been
included in the historical Company revenues and expenses for the nine-month
period ended March 31, 1998). Such historical financial information includes
allocations by Nestle for certain operating costs including, without limitation,
costs of utilizing outside storage facilities; all selling costs including,
without limitation, direct sales force and brokerage expenses; costs for
utilizing centralized distribution and storage facilities; costs associated with
marketing services; and general and administrative costs associated with support
services such as finance, legal, human resources and information systems. The
Company believes that it will experience operating costs of a similar nature to
those charged by Nestle in its cost allocations but at a significantly reduced
level; however, no assurances can be given in this regard. See "Risk
Factors -- Risks Relating to Contadina."
19
<PAGE> 26
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
----------------------------- PRO FORMA
DEL MONTE CONTADINA(A)(B) ADJUSTMENTS PRO FORMA
---------- --------------- ----------- -----------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................. $ 1,217 $156 $ -- $ 1,373
Cost of products sold (excluding 817 155 (25)(c) 947
inventory step-up)..................
Inventory step-up (d)................. -- -- 4 4
---------- ---- ---- -----------
Gross profit........................ 400 1 21 422
Selling, advertising, administrative 327(e) 20 14 361
and general expense.................
---------- ---- ---- -----------
OPERATING INCOME (LOSS)............... 73 (19) 7 61
Interest expense...................... 52 6 35(f) 93
Loss on sale of divested assets....... 5 -- -- 5
Other expense......................... 30(g) -- -- 30
---------- ---- ---- -----------
LOSS BEFORE INCOME TAXES AND (14) (25) (28) (67)
EXTRAORDINARY ITEM..................
Provision for income taxes............ -- -- -- --
---------- ---- ---- -----------
LOSS BEFORE EXTRAORDINARY ITEM........ $ (14) $(25) $(28) $ (67)
========== ==== ==== ===========
Loss before extraordinary item $ (84) $ (72)
attributable to common shares(h)....
========== ===========
Loss before extraordinary item per $ (12.06) $ (2.09)
common share........................
========== ===========
Weighted average number of shares 6,991,111 34,477,560
outstanding (i).....................
========== ===========
OTHER DATA:
Depreciation and amortization (j)..... $ 24 $ 30
Capital expenditures.................. 20 30
</TABLE>
See accompanying notes.
20
<PAGE> 27
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA
DEL MONTE CONTADINA(A)(B) ADJUSTMENTS PRO FORMA
---------- --------------- ----------- -----------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Net sales..................................... $ 968 $ 92 $ -- $ 1,060
Cost of products sold (excluding inventory 653 91 (18)(c) 726
step-up)....................................
Inventory step-up(d).......................... -- -- (2) (2)
---------- ---- ---- -----------
Gross profit............................. 315 1 20 336
Selling, advertising, administrative and 249 13 12(e) 274
general expense.............................
---------- ---- ---- -----------
OPERATING INCOME (LOSS)....................... 66 (12) 8 62
Interest expense.............................. 58 3 11(f) 72
Other expense................................. 6(g) -- -- 6
---------- ---- ---- -----------
LOSS BEFORE INCOME TAXES...................... 2 (15) (3) (16)
Provision for income taxes.................... -- -- -- --
---------- ---- ---- -----------
LOSS.......................................... $ 2 $(15) $ (3) $ (16)
========== ==== ==== ===========
Loss attributable to common shares (h)........ $ (2) $ (20)
========== ===========
Loss per common share......................... $ (0.05) $ (0.59)
========== ===========
Weighted average number of shares outstanding 30,389,671 34,646,160
(i).........................................
========== ===========
OTHER DATA:
Depreciation and amortization (j)............. $ 20 $ 23
Capital expenditures.......................... 15 20
</TABLE>
See accompanying notes.
21
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Statements of Operations reflect the adjustments
for the Contadina Acquisition, the Recapitalization and related financings as if
such events had occurred as of July 1, 1996.
On December 19, 1997, the Company acquired the Contadina canned tomato
business, including the Contadina trademark worldwide, capital assets and
inventory, from Nestle and Contadina Services, Inc. for a total purchase price
of $197 million, comprised of a base price of $177 million and an estimated net
working capital adjustment of $20 million. The consideration was paid solely in
cash. The purchase price was subject to adjustment based on the final
calculation of net working capital as of the closing date. Nestle provided its
calculation of the net working capital, which resulted in a payment to the
Company of $2 million, and therefore a reduction in the purchase price to a
total of $195 million. The Contadina Acquisition also included the assumption of
certain liabilities of approximately $2 million, consisting primarily of
liabilities in respect of reusable packaging materials and accrued vacation. In
connection with the Contadina Acquisition, approximately $7 million of indirect
expenses were incurred.
The Contadina Acquisition was accounted for using the purchase method of
accounting. The allocation of purchase price to the assets acquired and
liabilities assumed has been made using estimated fair values that include
values based on independent appraisals and management estimates. These estimates
may be subject to adjustment to reflect actual amounts, primarily in the case of
accrued liabilities. Any subsequent adjustments are expected to occur by the
1998 fiscal year-end and are not expected to be material. Allocation of the $195
million purchase price is as follows: inventory $104 million, prepaid expenses
$5 million, property, plant and equipment $84 million, intangibles $16 million
and accrued liabilities $14 million (assumed liabilities of $2 million and other
liabilities of $12 million).
(a) The historical financial information for Contadina for the 12-month period
ended September 30, 1997 was derived from the audited financial statements
appearing elsewhere in this Prospectus and unaudited financial data
appearing under "Summary Historical and Financial Data of Contadina." The
historical financial data provided to the Company includes certain allocated
expenses for functions and services provided by Nestle. Such allocated
expenses are comprised of, without limitation, costs of utilizing outside
storage facilities; all selling costs including, without limitation, direct
sales force and brokerage expenses; costs for utilizing centralized
distribution and storage facilities; costs associated with marketing
services; and general and administrative costs associated with support
services such as finance, legal, human resources and information systems and
interest expense. The additional operating cost allocations were $25 million
and $17 million, and the interest allocations were $6 million and $3 million
for the 12-month period ended September 30, 1997 and the nine-month period
ended March 31, 1998, respectively.
(b) Represents the historical revenue and expenses of Contadina from October 1,
1996 through September 30, 1997 and July 1, 1997 through December 18, 1997
for the Unaudited Pro Forma Statements of Operations for the year ended June
30, 1997 and the nine months ended March 31, 1998, respectively. As
described in note (a) above, pro forma statement of operations data for the
12-month period ending September 30, 1997 for Contadina has been derived
using Contadina's results of operations for the nine-month periods ended
September 30, 1996 and 1997 and the year ended December 31, 1996.
Contadina's results of operations for the period from July 1, 1997 to
September 30, 1997 are accordingly presented in both the pro forma statement
of operations for the year ended June 30, 1997 and the pro forma statement
of operations for the nine months ended March 31, 1998. Net sales included
in both periods amount to $37 million, and the net loss included in both
periods is $8 million. There were no significant transactions or unusual
events occurring during the three-month period ended September 30, 1997, nor
were there any significant transactions or unusual events omitted by not
including the period from July 1, 1996 to September 30, 1996.
22
<PAGE> 29
(c) Adjustment to cost of products sold reflects the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JUNE 30, MARCH 31,
1997 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Reclassification of Contadina trade promotion
costs............................................. $(14) $(13)
Reduction in depreciation expense arising from fair
value adjustment for property, plant and equipment
acquired.......................................... (6) (2)
Elimination of royalties to Nestle S.A. for
trademark license................................. (5) (3)
---- ----
$(25) $(18)
==== ====
</TABLE>
Trade promotion costs for Contadina were reclassified from cost of products
sold to selling, advertising, general and administrative expense to conform
with Del Monte's classification of such costs.
The expense represented by Contadina's historical charge to cost of
products sold for royalties due to Nestle S.A. has been replaced by
amortization of trademark recorded as selling, advertising, general and
administrative expense which treatment is more representative of the
continuing costs associated with the use of the Contadina trademark.
(d) Represents the cost of products sold related to the sales of the inventory
acquired from Contadina which was written-up by the Company to estimated
fair value as part of the preliminary purchase price allocation relating to
the Contadina Acquisition.
(e) Adjustment to selling, advertising, administrative and general expense
reflects the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JUNE 30, MARCH 31,
1997 1998
---------- ------------
(IN MILLIONS)
<S> <C> <C>
Reclassification of Contadina trade promotion
costs............................................. $ 14 $ 13
Elimination of amortization of Nestle goodwill...... (1) (1)
Amortization of intangible acquired................. 1 --
---- ----
$ 14 $ 12
==== ====
</TABLE>
Selling, advertising, administrative and general expense for the year ended
June 30, 1997 includes $25 million of one-time charges incurred in
connection with the Recapitalization primarily for management incentive
payments and, in part, for severance payments.
23
<PAGE> 30
(f) Represents adjustments necessary to reflect pro forma interest expense and
amortization of deferred financing expense as shown below based upon pro
forma debt levels and applicable interest rates. The table below presents
pro forma interest expense, including the respective interest rates and
related fees and pro forma amortization of deferred financing costs.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
----------------------------------- -----------------------------------
INTEREST PRINCIPAL INTEREST INTEREST PRINCIPAL INTEREST
RATE(1) BALANCE(2) EXPENSE(3) RATE(1) BALANCE(2) EXPENSE(3)
--------- ---------- ---------- --------- ---------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Revolving Credit Facility......... 7.82% $ 129 $18 7.68% $ 228 $13
Tranche A of Term Loan Facility... 7.82 200 16 8.13 197 12
Tranche B of Term Loan Facility... 8.57 230 20 8.61 249 15
DMC Notes......................... 12.25 150 18 12.25 150 15
Del Monte Notes................... 12.50 129 16 12.50 145 14
--- ---
Pro forma interest expense...... 88 69
Pro forma amortization of deferred
financing costs................. 5 3
--- ---
Total pro forma interest
expense....................... $93 $72
=== ===
</TABLE>
-------------------
(1) Average of month-end interest rates.
(2) Average of month-end principal balances.
(3) Represents product of average month-end interest rate and average
month-end principal balance for the applicable period.
(g) For the year ended June 30, 1997, includes $22 million of one-time expenses
incurred in connection with the Recapitalization. For the nine months ended
March 31, 1998, includes $7 million of certain indirect one-time expenses
incurred in connection with the Contadina Acquisition.
(h) Loss before extraordinary items attributable to common shares for the year
ended June 30, 1997, and loss attributable to common shares for the
nine-month period ended March 31, 1998, reflect the deduction for the cash
and in-kind dividends for the period on redeemable preferred stock.
(i) The weighted average number of shares outstanding on a historical basis for
the fiscal year ended June 30, 1997 does not reflect the 191.542-for-one
stock split of the shares of Common Stock for the period from July 1, 1996
through April 17, 1997, which is the period prior to the consummation of the
Recapitalization.
(j) Historical depreciation and amortization exclude amortization of $5 million
and $3 million of deferred debt issue costs for fiscal 1997 and for the
nine-month period ended March 31, 1998, respectively. Pro forma depreciation
and amortization excludes amortization of $5 million and $3 million of pro
forma deferred debt issue costs for fiscal 1997 and for the nine-month
period ended March 31, 1998, respectively.
24
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth historical consolidated financial
information of the Company. The statement of operations data for each of the
fiscal years in the four-year period ended June 30, 1996 and the balance sheet
data as of June 30, 1993, 1994, 1995 and 1996 have been derived from
consolidated financial statements of the Company audited by Ernst & Young LLP,
independent auditors. The statement of operations data for the year ended June
30, 1997 and the nine months ended March 31, 1998, and the balance sheet data as
of June 30, 1997 and March 31, 1998, have been derived from consolidated
financial statements of the Company audited by KPMG Peat Marwick LLP,
independent auditors. The selected consolidated financial data presented below
as of March 31, 1997 and the nine months then ended was derived from the
unaudited interim financial statements of the Company. The financial data
presented below as of March 31, 1997 and for the nine months then ended, in the
opinion of management, reflect all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of such data and which
have been prepared in accordance with the same accounting principles followed in
the presentation of the Company's audited financial statements for the fiscal
year ended June 30, 1997. Operating results for the nine months ended March 31,
1998 are not necessarily indicative of results to be expected for the full
fiscal year. The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
consolidated financial statements of the Company and related notes and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- ----------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(a).................... $ 1,556 $ 1,500 $ 1,527 $ 1,305 $ 1,217 $ 936 $ 968
Cost of products sold(a)........ 1,213 1,208 1,183 984 817 632 653
--------- --------- --------- --------- --------- -------- ----------
Gross profit.................... 343 292 344 321 400 304 315
Selling, advertising,
administrative and general
expense(a).................... 286 225 264 239 327(b) 235 249
Special charges(c).............. 140 -- -- -- -- -- --
--------- --------- --------- --------- --------- -------- ----------
Operating income (loss)......... (83) 67 80 82 73 69 66
Interest expense................ 68 61 76 67 52 37 58
Loss (gain) on sale of divested
assets(d)..................... (13) (13) -- (107) 5 5 --
Other (income) expense(e)....... 4 8 (11) 3 30 -- 6
--------- --------- --------- --------- --------- -------- ----------
Income (loss) before income
taxes, minority interest,
extraordinary item and
cumulative effect of
accounting change............. (142) 11 15 119 (14) 27 2
Provision for income taxes...... 10 3 2 11 -- 2 --
Minority interest in earnings of
subsidiary.................... 8 5 1 3 -- -- --
--------- --------- --------- --------- --------- -------- ----------
Net income (loss) before
extraordinary item and
cumulative effect of
accounting change............. (160) 3 12 105 (14) 25 2
Extraordinary loss(f)........... -- -- 7 10 42 4 --
Cumulative effect of accounting
change(g)..................... 28 -- -- 7 -- -- --
--------- --------- --------- --------- --------- -------- ----------
Net income (loss)............... $ (188) $ 3 $ 5 $ 88 $ (56) $ 21 $ 2
========= ========= ========= ========= ========= ======== ==========
Net income (loss) attributable
to common shares(h)........... $ (240) $ (58) $ (66) $ 6 $ (126) $ (49) $ (2)
========= ========= ========= ========= ========= ======== ==========
Net income (loss) per common
share......................... $ (571.70) $ (143.08) $ (163.69) $ 14.87 $ (18.01) $(127.13) $ (0.05)
========= ========= ========= ========= ========= ======== ==========
Weighted average number of
shares outstanding (i)........ 406,779 419,597 400,285 391,806 6,991,111 382,854 30,389,671
========= ========= ========= ========= ========= ======== ==========
</TABLE>
25
<PAGE> 32
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Gross margin(a)................. 22.0% 19.5% 22.5% 24.6% 32.9% 32.5% 32.5%
Adjusted EBITDA:(j)
EBIT.......................... $ (74) $ 72 $ 91 $ 186 $ 38 $ 64 $ 60
Depreciation and
amortization(k)............. 59 35 35 26 24 18 20
EBITDA of Divested
Operations.................. (50) (39) (35) (22) -- -- --
Special charges(c)............ 140 -- -- -- -- -- --
Asset write-off(l)............ -- 1 -- -- 7 -- --
Loss (gain) on sale of
Divested Operations(d)...... (13) (13) -- (107) 5 5 --
Terminated transactions(m).... -- 1 (22) -- -- -- --
Benefit costs(n).............. -- 6 7 -- -- -- 10
Headcount reduction and
relocation(o)............... -- -- -- 9 -- -- --
Recapitalization
expenses(b)(e).............. -- -- -- -- 47 -- --
Indirect expenses of Contadina
Acquisition(p).............. -- -- -- -- -- -- 7
Contadina inventory
write-up(p)................. -- -- -- -- -- -- 2
--------- --------- --------- --------- --------- -------- ----------
Adjusted EBITDA............. $ 62 $ 63 $ 76 $ 92 $ 121 $ 87 $ 99
========= ========= ========= ========= ========= ======== ==========
Adjusted EBITDA margin(j)....... 5.4% 5.7% 6.9% 8.6% 10.4% 9.7% 10.2%
Cash flows provided by operating
activities.................... $ 61 $ 28 $ 63 $ 60 $ 25 $ 26 $ 9
Cash flows provided by (used in)
investing activities.......... (2) 55 (21) 170 37 39 (205)
Cash flows provided by (used in)
financing activities.......... (55) (83) (44) (224) (63) (65) 195
Capital expenditures............ 34 36 24 16 20 12 15
SELECTED RATIOS:
Ratio of earnings to fixed
charges(q).................... -- 1.2x 1.2x 2.6x -- 1.6x 1.0x
Deficiency of earnings to cover
fixed charges(q).............. $ 142 -- -- -- $ 14 -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------------------ --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ----- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 92 $ 88 $ 99 $ 207 $ 116 $ 184 $ 218
Total assets................................ 1,066 936 960 736 667 739 928
Total debt, including current maturities.... 624 569 576 373 610 310 770
Redeemable preferred stock.................. 216 215 215 213 32 213 32
Stockholders' deficit....................... (385) (384) (393) (304) (412) (257) (366)
</TABLE>
- ---------------
(a) In fiscal 1997, certain merchandising allowances, which previously were
recorded as a cost of products sold, have been reclassified to selling
expense. Such merchandising allowances totaled $113 million, $67 million,
$106 million, $100 million, $143 million and $101 million in the fiscal
years ended June 30, 1993, 1994, 1995, 1996 and 1997, and the nine months
ended March 31, 1997, respectively. In addition, certain military
distributor allowances, which previously were treated as a reduction in net
sales, have been reclassified to selling expense. Such military distributor
allowances amounted to $1 million, $1 million, $1 million, $1 million, $2
million and $2 million in fiscal years ended June 30, 1993, 1994,
26
<PAGE> 33
1995, 1996 and 1997, and the nine months ended March 31, 1997,
respectively. All financial information has been restated to conform to
this presentation.
(b) In connection with the Recapitalization, which was consummated on April 18,
1997, expenses of approximately $25 million were incurred primarily for
management incentive payments and, in part, for severance payments.
(c) In June 1993, the Company recorded special charges of $140 million, which
included $115 million for permanent impairment of acquisition-related
intangible assets, including goodwill, and $25 million for facility
consolidations.
(d) The Company sold its equity investment in Del Monte International in the
fiscal quarter ended March 31, 1993 and recognized a $13 million gain. The
Company sold its can manufacturing operations in the fiscal quarter ended
December 31, 1993 and recognized a $13 million gain. In November 1995, the
Company sold its pudding business for $89 million, net of $4 million of
related transaction fees. The sale resulted in a gain of $71 million. In
March 1996, the Company sold its 50.1% ownership interest in Del Monte
Philippines for $100 million, net of $2 million of related transaction
fees. The sale resulted in a gain of $52 million of which $16 million was
deferred and $36 million was recognized in fiscal 1996. The purchase price
included a premium paid to the Company as consideration for an eight-year
supply agreement. The gain associated with the value of the premium was
deferred and is being amortized over the term of the agreement. In the
fiscal quarter ended December 1996, the Company sold Del Monte Latin
America. The combined sales price of $50 million, reduced by $2 million of
related transaction expenses, resulted in a loss of $5 million.
(e) In fiscal 1995, other income includes the Company's receipt of proceeds of
a $30 million letter of credit, reduced by $4 million of related
transaction expenses, as a result of the termination of a merger agreement
with Grupo Empacador de Mexico, S.A. de C.V. In fiscal 1997, $22 million of
expenses were incurred in conjunction with the Recapitalization, primarily
for legal, investment advisory and management fees.
(f) In June 1995, the Company refinanced its then-outstanding revolving credit
facility, term loan and senior secured floating rate notes. In conjunction
with this debt retirement, capitalized debt issue costs of $7 million were
written off and accounted for as an extraordinary loss. In December 1995
and April 1996, the Company prepaid part of its term loan and senior
secured notes. In conjunction with the early debt retirement, the Company
recorded an extraordinary loss of $10 million for the early retirement of
debt. The extraordinary loss consisted of a $5 million prepayment premium
and a $5 million write-off of capitalized debt issue costs related to the
early retirement of debt. In fiscal 1997, $42 million of expenses related
to the early retirement of debt and to the Recapitalization was charged to
net income. In September 1996, the Company repurchased outstanding debt, in
conjunction with which capitalized debt issue costs of $4 million, net of a
discount on such debt, were written off and accounted for as an
extraordinary loss. In conjunction with the refinancing of debt that
occurred at the time of the Recapitalization, the Company recorded a $38
million extraordinary loss related to the early retirement of debt. The $38
million extraordinary loss consisted of previously capitalized debt issue
costs of approximately $19 million and a premium payment and a term loan
make-whole payment aggregating $19 million.
(g) Effective July 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Post-Retirement Benefits Other Than Pensions." The Company
elected to recognize this change in accounting on the immediate recognition
basis. The cumulative effect of adopting SFAS No. 106 resulted in a charge
to fiscal 1993 net earnings of $28 million. Effective July 1, 1995, the
Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The cumulative effect
of adopting SFAS No. 121 resulted in a charge to fiscal 1996 net earnings
of $7 million.
(h) Net income (loss) attributable to the shares of Common Stock is computed as
net income (loss) reduced by the cash and in-kind dividends for the period
on redeemable preferred stock.
27
<PAGE> 34
(i) Given the significant change in the Company's capital structure as a result
of the Recapitalization, which was consummated on April 18, 1997, the
weighted average number of shares outstanding for all periods prior to this
event do not reflect the 191.542-for-one stock split of the shares of
Common Stock. For all periods subsequent to the Recapitalization, the
weighted average number of shares outstanding reflect the 191.542-for-one
stock split. For the year ended June 30, 1997, the weighted average number
of shares outstanding was computed based on weighting the shares
outstanding under the capital structure in place prior to the
Recapitalization and the split adjusted shares outstanding subsequent to
the Recapitalization.
(j) Adjusted EBITDA represents EBITDA (income (loss) before provision for
income taxes, minority interest, extraordinary item, cumulative effect of
accounting change and depreciation and amortization expense, plus interest
expense) before special charges and other one-time and non-cash charges,
less gains (losses) on sales of assets and the results of the Divested
Operations. Adjusted EBITDA should not be considered in isolation from, and
is not presented as an alternative measure of, operating income or cash
flow from operations (as determined in accordance with GAAP). Adjusted
EBITDA as presented may not be comparable to similarly titled measures
reported by other companies. Since the Company has undergone significant
structural changes during the periods presented, management believes that
this measure provides a meaningful measure of operating cash flow (without
the effects of working capital changes) for the core and continuing
business of the Company by normalizing the effects of operations that have
been divested and one-time charges or credits. Adjusted EBITDA margin is
calculated as Adjusted EBITDA as a percentage of net sales (excluding net
sales of Divested Operations of $402 million, $399 million, $417 million,
$233 million and $48 million for the years ended June 30, 1993, 1994, 1995,
1996 and 1997, respectively, and $43 million for the nine months ended
March 31, 1997).
(k) Depreciation and amortization exclude amortization of $8 million, $5
million, $5 million, $5 million and $5 million of deferred debt issuance
costs for fiscal 1993, 1994, 1995, 1996 and 1997, respectively.
Depreciation and amortization exclude amortization of $4 million and $3
million of deferred debt issuance costs in the nine-month periods ended
March 31, 1997 and 1998, respectively.
(l) In fiscal 1994 and fiscal 1997, non-cash charges include $1 million related
to write-offs of labels due to new labeling laws and $7 million related to
the write-off of a long-term asset, respectively.
(m) In fiscal 1994, one-time charges of $1 million relate to a terminated
transaction. In fiscal 1995, one-time charges and credits include $26
million received in connection with a terminated transaction and $4 million
paid by the Company to terminate its alliance with PCP.
(n) In fiscal 1994 and 1995, one-time and non-cash charges include $6 million
of benefit plan charges and $7 million related to the termination of a
management equity plan, respectively. In the nine months ended March 31,
1998, one-time and non-cash charges include $3 million of stock
compensation and related benefit expense and $7 million of severance and
benefit costs.
(o) In fiscal 1996, other one-time charges include $3 million for relocation
costs and $6 million of costs associated with a significant headcount
reduction.
(p) For the nine months ended March 31, 1998, one-time charges include of $7
million of certain indirect expenses incurred in connection with the
Contadina Acquisition and $2 million of inventory step-up due to the
purchase price allocation related to the Contadina Acquisition.
(q) For purposes of determining the ratio of earnings to fixed charges and the
deficiency of earnings to cover fixed charges, earnings are defined as
income (loss) before extraordinary item, cumulative effect of accounting
change and provision for income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the interest component of rent expense.
28
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity of the Company
during the nine-month periods ended March 31, 1997 and 1998, and the three-year
period ended June 30, 1997. This discussion should be read in conjunction with
the unaudited consolidated financial statements for the nine-month period ended
March 31, 1997 and the audited consolidated financial statements of the Company
for the nine-month period ended March 31, 1998 and for the three-year period
ended June 30, 1997, including the notes thereto, appearing elsewhere in this
Prospectus.
GENERAL
The Company reports its financial results on a July 1 to June 30 fiscal
year basis to coincide with its inventory production cycle, which is highly
seasonal. Raw product is harvested and packed primarily in the months of June
through October, during which time inventories rise to their highest levels. At
the same time, consumption of canned products drops, reflecting, in part, the
availability of fresh alternatives. This situation affects operating results as
sales volumes, revenues and profitability decline during this period. Results
over the remainder of the fiscal year are affected by many factors including
industry supply and the Company's share of that supply. See "-- Seasonality."
Consistent with the Company's strategy to generate growth through
acquisitions, the Company consummated the Contadina Acquisition in December
1997. The Contadina Acquisition contributes another established brand and
positions the Company as the branded market leader in the high margin canned
solid tomato category. The Contadina Acquisition also establishes a strong
presence for the Company in the branded paste-based tomato products category,
which includes tomato paste, tomato sauce and pizza sauce. The Company believes
that Contadina's strong brand recognition, particularly in paste-based tomato
products, complements the Company's brand leadership in canned solid tomato
products and will enhance the Company's market share and household penetration.
See "Prospectus Summary -- Summary Historical Financial Data of Contadina" and
"Unaudited Pro Forma Financial Data."
In addition to diversifying further the Company's revenue base, the
Contadina Acquisition will expand the Company's processing scale, which the
Company believes will result in production cost efficiencies. Moreover, among
the facilities acquired by the Company is a state-of-the-art manufacturing
facility at Hanford, California. As part of its efforts to consolidate
production, tomato production at the Company's Modesto, California facility is
expected to be transferred to Hanford following the summer 1998 pack. The
Modesto facility would then be converted to a fruit processing facility and
would assume the production currently conducted at the Company's San Jose and
Stockton facilities in California, which are expected to be closed after the
summer 1999 and 2000 packs, respectively. It is anticipated that these
properties will be sold in the year following closure. In connection with these
actions, the Company recorded charges of $7 million in the third quarter of
fiscal 1998, principally relating to severance. The Company anticipates that it
will incur material additional charges as a result of these plant closures,
principally consisting of asset write-offs. The Company is continuing to
evaluate its production facilities and believes that further consolidations may
be appropriate. In conjunction with the purchase price allocation relating to
the Contadina Acquisition, the Company has stepped up the value of the purchased
inventory. Such step-up is estimated to be $4 million.
Commencing in 1996, the Company has sought to leverage its brand and price
leadership to improve sales and operating margins and, to that end, increased
prices for many of its fruit and vegetable products in that year. As a result,
the Company experienced an anticipated volume loss and market share decline. In
the case of its fruit operations, the Company lost 3.3 percentage points of
market share during fiscal 1996. However, the Company's significantly improved
margins generally offset the effects of the lower volume, and the Company's
market share recovered by year-end 1997 to achieve an increase of 5.1 percentage
points of market share during 1997, a level higher than that experienced prior
to the price increases. In the case of its vegetable operations, the Company
lost 3.7 percentage points of market share during fiscal 1996 and 0.1 of a
percentage point of market share during fiscal 1997. The Company coupled these
price increases with a new marketing strategy that emphasizes consumption-driven
trade promotion programs, as well as consumer-targeted
29
<PAGE> 36
promotions such as advertising and coupons, to encourage retailers to use store
advertisements, displays and consumer-targeted promotions, rather than periodic
price-only promotions. The Company plans to continue to emphasize its status as
a price leader and, in 1997, in connection with the Recapitalization, began
implementing a new business strategy designed to improve sales and operating
margins by: (i) increasing market share and household penetration of high margin
value-added products; (ii) introducing product and packaging innovations; (iii)
increasing penetration of high growth distribution channels, such as
supercenters and warehouse clubs; (iv) achieving cost savings through operating
efficiencies, plant consolidations and investments in new and upgraded
production equipment; and (v) completing strategic acquisitions.
In fiscal 1995, Del Monte terminated an exclusive supply agreement with
Pacific Coast Producers, an unaffiliated grower co-operative ("PCP"), to
purchase substantially all of PCP's tomato and fruit production. Since
terminating its agreement with PCP, the Company on occasion buys from and sells
to PCP a limited amount of product on a spot basis. During fiscal 1996 and the
first half of fiscal 1997, the Company sold its pudding business, its 50.1%
interest in Del Monte Philippines and all of its interest in Del Monte Latin
America. At the end of fiscal 1997, a distribution agreement expired under which
Del Monte sold certain products for Yorkshire Dried Fruits and Nuts, Inc.
("Yorkshire") at cost. These events are collectively referred to as the
"Divested Operations."
The following table sets forth the net proceeds received by the Company in
connection with the sale of the Divested Operations and, for the periods
indicated, the net sales generated by the Divested Operations prior to
disposition by the Company:
<TABLE>
<CAPTION>
NET PROCEEDS NET SALES FROM DIVESTED
FISCAL YEAR FROM DISPOSITION/ OPERATIONS PRIOR TO
DIVESTED OPERATION ENDED JUNE 30, TERMINATION DISPOSITION/TERMINATION
------------------ -------------- ----------------- -----------------------
(IN MILLIONS)
<S> <C> <C> <C>
Del Monte pudding business............. 1996 $ 89 $ 15(a)
1995 -- 47
Del Monte Philippines ................. 1996 100(b) 102(b)
1995 -- 142
Del Monte Latin America................ 1997 48(c) 17(c)
1996 -- 55
1995 -- 65
PCP.................................... 1996 -- 26(d)
1995 --(d) 124(d)
Yorkshire.............................. 1997 --(e) 31(e)
1996 -- 35
1995 -- 39
</TABLE>
- ---------------
(a) The Company divested its pudding business in November 1995.
(b) In connection with the sale, which was consummated in March 1996, the
Company entered into an eight-year supply agreement with the acquiror.
(c) The Company divested its Latin American operations in the second quarter of
fiscal 1997.
(d) The Company entered into a consent decree with the U.S. Federal Trade
Commission (the "FTC") pursuant to which the Company agreed to terminate its
supply agreement with PCP. The Company terminated that supply agreement in
June 1995. The Company sold the remaining inventory during fiscal 1996.
(e) The Company's distribution agreement with Yorkshire expired in June 1997.
30
<PAGE> 37
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of operations, expressed as
percentages of the Company's net sales for such periods:
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED
ENDED JUNE 30, MARCH 31,
-------------------------- ------------
1995 1996 1997 1997 1998
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Net sales.............................. 100% 100% 100% 100% 100%
Cost of products sold.................. 78 76 67 68 68
--- --- --- --- ---
Gross profit........................... 22 24 33 32 32
Selling, advertising, administrative
and general expense.................. 17 18 27 25 26
--- --- --- --- ---
Operating income....................... 5% 6% 6% 7% 6%
=== === === === ===
Interest expense....................... 5% 5% 4% 4% 6%
=== === === === ===
</TABLE>
The following tables set forth, for the periods indicated, the Company's
net sales by product category, expressed in dollar amounts and as percentages of
the Company's total net sales for such periods:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
-------------------------- ------------
1995 1996 1997 1997 1998
------ ------ ------ ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES:
Canned vegetables(a)................... $ 441 $ 402 $ 437 $336 $358
Canned fruit(a)........................ 394 367 431 335 343
Tomato products(a)..................... 211 217 229 168 211
Canned pineapple(a).................... 66 72 65 50 50
Other(b)............................... 219 89 41 33 6
------ ------ ------ ---- ----
Subtotal domestic............ 1,331 1,147 1,203 922 968
Latin America.......................... 65 55 17 17 --
Philippines............................ 180 142 -- -- --
Intercompany sales..................... (49) (39) (3) (3) --
------ ------ ------ ---- ----
Total net sales.............. $1,527 $1,305 $1,217 $936 $968
====== ====== ====== ==== ====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED
ENDED JUNE 30, MARCH 31,
-------------------------- ------------
1995 1996 1997 1997 1998
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF NET SALES:
Canned vegetables(a)................... 29% 31% 36% 36% 37%
Canned fruit(a)........................ 26 28 35 36 35
Tomato products(a)..................... 14 16 19 18 22
Canned pineapple(a).................... 4 6 5 5 5
Other(b)............................... 14 7 4 3 1
--- --- --- --- ---
Subtotal domestic............ 87 88 99 98 100
Latin America.......................... 4 4 1 2 --
Philippines............................ 12 11 -- -- --
Intercompany sales..................... (3) (3) -- -- --
--- --- --- --- ---
Total........................ 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
- ---------------
(a) Includes sales of the entire product line across each channel of
distribution, including sales to grocery chains, warehouse clubs,
supercenters, mass merchandisers and other grocery retailers, as well as the
Company's foodservice, food ingredients, export and vegetable private label
businesses and military sales.
31
<PAGE> 38
(b) Includes dried fruit, gel and pudding cups and certain other retail
products, as well as the Company's private label fruit and tomato
businesses, which were discontinued in fiscal 1995 with the termination of
the alliance with PCP.
SEASONALITY
The Company's quarterly operating results have varied in the past and are
likely to vary in the future based upon a number of factors. The Company's
historical net sales have exhibited seasonality, with the second and third
fiscal quarters having the highest net sales. These two quarters reflect
increased sales of the Company's products during the holiday period in the
United States extending from late November through December, as well as sales
associated with the Easter holiday. Net sales in the first fiscal quarter have
historically been affected by lower levels of promotional activity, the
availability of fresh produce and other factors. Quarterly gross profit
primarily reflects fluctuations in sales volumes and is also affected by the
overall product mix. The Company's fruit operations have a greater percentage of
annual sales and cost of sales in the first fiscal quarter, as compared to its
vegetable and tomato operations, due principally to increased sales of fruit
cups during the "back to school" period. The Company's vegetable and fruit
operations have a greater percentage of annual sales and cost of sales in the
second and third fiscal quarters, principally due to the year-end holiday season
in the United States, and sales of ketchup and related cost of sales typically
increase in the fourth fiscal quarter. Selling, advertising, general and
administrative expenses tend to be greater in the first half of the fiscal year,
reflecting promotional expenses relating to the "back to school" period and the
year-end holiday season, while Easter is the only major holiday in the second
half of the fiscal year.
During the early 1990s, the markets for the Company's principal canned
vegetable and fruit products were in a position of stable demand and excess
supply. This excess supply primarily resulted from overplanting and abundant
harvests of raw product, combined with processing over-capacity. During such
periods of industry oversupply, pressure was placed on absolute volumes and
gross margins. The Company, as well as certain of its competitors, implemented
vegetable plant closures in an attempt to reduce processing over-capacity. The
summer 1995 pack was below average for both vegetables and fruit due to flooding
in the Midwest and heavy rains in California during the winter and spring of
1995. As a result, inventory levels during fiscal 1996 were lower than in
previous years, leaving industry supply for vegetables and fruit in a
balanced-to-tight position. The summer 1996 pack was slightly below average for
fruit, while tomato production was slightly higher than expected. Vegetable
production during the summer of 1996 was above average. This, coupled with an
industry decrease in sales, resulted in higher than expected carry-in
inventories (inventories on hand at the start of a packing season) of
vegetables. In response, planned vegetable plantings were decreased for summer
1997 which resulted in higher vegetable costs. In addition, cooler weather than
normal resulted in late plantings for some vegetables causing lower recoveries,
while smaller fruit size lowered raw product fruit recoveries. These conditions
have had very little impact on the Company's supply of product available for
sale, however, since carry-in inventories were adequate to cover shortfalls from
the summer 1997 harvest.
The weather conditions which existed during the summer of 1995 resulted in
reduced acreage yields and production recoveries of fruits and vegetables which
negatively impacted the Company's production costs in fiscal 1996. During fiscal
1996, the Company's management developed a strategy to increase prices. These
price increases resulted in volume and market share decreases for the Company
during fiscal 1996 as competitors sold greater volume because their prices
remained below the Company's. Despite the reduced market share, the Company's
profitability was significantly higher in the fourth quarter of fiscal 1996 as a
result of higher net selling prices. These price increases were applied to all
product lines in fiscal 1997. Although the Company's aggregate volumes decreased
in fiscal 1997 as compared to fiscal 1996, the Company regained and exceeded
prior year fruit market share while vegetable market share was maintained and
profitability growth continued due to these higher net selling prices.
Profitability growth and market share may be unfavorably affected in the future
due to the market dynamics of available supply and competitors' pricing.
In the winter and spring of 1997-98, certain areas in California, one of
the Company's principal growing regions for tomatoes and fruit, experienced
substantial rainfall as a result of the "El Nino" phenomenon. The Company
believes that the 1998 California fruit and tomato harvests may be somewhat
reduced as a result of
32
<PAGE> 39
these weather conditions. However, the Company does not believe that such
weather conditions will have a material adverse effect on its results of
operations. Historically, significant weather-related shortages in fruit,
vegetable and tomato harvests have resulted in price increases that have offset
increases in raw product costs and reductions in sales volumes. Nevertheless, no
assurance can be given that, if such adverse weather conditions persist, the
harvesting season will not be delayed or otherwise adversely affected with
consequent adverse effects on the Company's cost of goods sold, inventory and
sales.
NINE MONTHS ENDED MARCH 31, 1998 VS. NINE MONTHS ENDED MARCH 31, 1997
Contadina Acquisition
On December 19, 1997, the Company completed the Contadina Acquisition for a
total of $197 million, comprised of a base price of $177 million and an
estimated working capital adjustment of approximately $20 million. The
consideration was paid solely in cash. The purchase price was subject to
adjustment based on the final calculation of net working capital as of the
closing date. Nestle provided its calculation of the net working capital, which
resulted in a payment to the Company of $2 million, and therefore a reduction in
the purchase price to a total of $195 million. The Contadina Acquisition also
included the assumption of certain liabilities of approximately $2 million,
consisting principally of liabilities in respect of reusable packaging materials
and accrued vacation. The Contadina Acquisition was accounted for using the
purchase method of accounting.
Net Sales
Consolidated net sales for the nine months ended March 31, 1998 increased
by $32 million, or 3.4%, from the nine months ended March 31, 1997 due to higher
sales across all businesses and the Contadina Acquisition. Net sales, after
adjusting for the effect of the Divested Operations, were $968 million for the
nine months ended March 31, 1998 as compared to $893 million for the nine months
ended March 31, 1997, an increase of $75 million or 8.4%. Fruit volume and net
sales increased slightly for the nine months ended March 31, 1998 as compared to
the nine months ended March 31, 1997, primarily due to an increase in retail
fruit cup sales and sales of flavored fruits, which were introduced in 1997. Due
to competitive pricing pressures in the fruit foodservice market, the gains in
retail fruit sales in the nine months ended March 31, 1998 were partially offset
by volume and sales declines in the foodservice business. The vegetable business
experienced an increase of 6.3% and 6.5% in sales volumes and net sales,
respectively, for the nine months ended March 31, 1998 as compared to the nine
months ended March 31, 1997. The increase in sales volumes and net sales for the
vegetable business has been affected by the Company's use of an effective mix of
targeted trade and consumer promotions in addressing competitive discounting by
other manufacturers. The tomato business also experienced an increase in sales
volumes and net sales for the nine months ended March 31, 1998 as compared to
the nine months ended March 31, 1997, primarily due to the Contadina
Acquisition.
Cost of Products Sold and Gross Profit
Gross margin was 32.5% for both of the nine-month periods ended March 31,
1997 and 1998. Gross margin (excluding the Divested Operations) was 32.5% and
33.7% for the nine months ended March 31, 1998 and 1997, respectively. Costs
increased for the nine months ended March 31, 1998 as compared to the comparable
prior period. However, these increased costs were offset in part by a favorable
sales mix of higher margin products. Increased costs for the nine months ended
March 31, 1998 reflect primarily an increase in processing costs caused by a
compressed harvesting season for fruit which resulted in the increased use of
cold storage until processing capacity became available. Also affecting costs
were reduced plantings for some vegetables and lower fruit raw product
recoveries due to adverse weather conditions. Adverse harvesting conditions did
not materially affect the Company's supply of product available for sale,
however, since inventory balances at the end of fiscal 1997 were adequate to
cover shortfalls in production in fiscal 1998. In addition, $2 million of
inventory step-up resulting from the purchase price allocation related to the
Contadina Acquisition has been included in cost of products sold.
33
<PAGE> 40
Selling, Advertising, Administrative and General Expense
Selling, advertising, administrative and general expense as a percentage of
net sales (excluding the Divested Operations) was 25.7% and 26.0% for the nine
months ended March 31, 1998 and 1997, respectively. Selling, advertising,
administrative and general expense for the nine months ended March 31, 1998
increased to $249 million from $235 million for the nine months ended March 31,
1997. The Company addressed competitive discounting in the marketplace in its
vegetable and tomato businesses by increasing spending on an effective mix of
targeted trade and consumer promotions. In addition, in the third quarter of
fiscal 1998, the Company recorded accruals of $7 million for severance and
related benefit costs of employees to be terminated in connection with a plant
consolidation plan. As previously disclosed, management has implemented a plan
to consolidate the Company's manufacturing operations.
Interest Expense
The 56.8% increase in interest expense for the nine months ended March 31,
1998 as compared to the nine months ended March 31, 1997 was due primarily to
higher outstanding debt balances resulting from the Recapitalization, which
occurred in the fourth quarter of fiscal 1997.
Other Expense
Other expense for the nine months ended March 31, 1998 primarily represents
certain indirect costs associated with the Contadina Acquisition.
Provision for Income Taxes
There was no provision for income taxes for the nine months ended March 31,
1998 as compared to a provision of $2 million for the nine months ended March
31, 1997 because of the utilization of net operating loss carryforwards for
which no benefit has been recognized and because of a change in the valuation
allowance.
Net Income
Net income for the nine months ended March 31, 1998 decreased by $19
million as compared to the nine months ended March 31, 1997. The decrease in net
income was primarily due to the plant consolidation severance accrual of $7
million and the increase in interest expense over the comparable prior period.
THREE YEARS ENDED JUNE 30, 1997
Net Sales
Consolidated net sales for fiscal 1996 decreased $222 million or 15% from
the prior year due to lower volumes in domestic operations. Net sales for the
domestic operations, (excluding the Divested Operations) were $1,072 million for
fiscal 1996 as compared to $1,110 million for fiscal 1995, a decrease of $38
million or 3%. The Company increased retail fruit and vegetable prices; however,
these price increases were not immediately followed by the competition and
resulted in lower sales volumes as compared to the prior year. In fiscal 1996,
the Company's market share for Del Monte brand vegetables was 20.4% versus 24.1%
for the previous year, and the Company's market share for Del Monte brand fruit
was 35.5% versus 38.8% for the previous year. Consolidated net sales for fiscal
1997 decreased by $88 million or 7% from fiscal 1996. This decrease was
attributable to the absence of the Divested Operations. Net sales for the
domestic operations, after adjusting for the effect of Divested Operations,
increased by $97 million from $1,072 million in fiscal 1996 to $1,169 million in
fiscal 1997 due to higher prices across all product lines. The retail vegetable
and fruit businesses increased prices in the second half of fiscal 1996. The
export and foodservice businesses each increased fruit prices at the beginning
of fiscal 1997. Generally balanced industry supplies of fruit and the Company's
emphasis on consumer promotions were contributing factors towards realizing the
higher prices. Volume increases in the fruit business were more than offset by
volume decreases in the vegetable and tomato businesses. The volume decrease in
the Company's vegetable business reflects, in part, an overall decline in
34
<PAGE> 41
canned vegetable consumption. In fiscal 1997, the Company's market share for Del
Monte brand vegetable products was 20.3% versus 20.4% in the previous year,
while the Company's market share for Del Monte brand fruit products was 40.5%
compared to 35.5% for the previous year.
Del Monte Philippines' net sales for the first nine months of fiscal 1996,
until the Company's sale of its interest in this joint venture, accounted for 8%
of consolidated net sales for the year ended June 30, 1996. Del Monte Latin
America's net sales for fiscal 1996 (4% of consolidated sales in fiscal 1996)
decreased $10 million or 15% even though volumes were at approximately the same
level as the prior year period. This decrease was primarily due to the
significant Mexican peso devaluation.
Cost of Products Sold and Gross Profit
Gross margin was 22.5%, 24.6% and 32.9% in fiscal 1995, 1996 and 1997,
respectively. Domestic gross margin (excluding the Divested Operations) was
26.4%, 26.4% and 34.0% in fiscal 1995, 1996 and 1997, respectively. Higher
selling prices, changes in marketing strategy and relatively stable costs
resulted in significantly higher gross profit margin than in prior years. In
fiscal 1996, higher manufacturing costs were offset by price increases across
all major product lines.
Del Monte Philippines' gross margins were 11.8% and 17.4% in fiscal 1995
and 1996, respectively. Gross margins for Del Monte Latin America were 23.8% and
24.3% in fiscal 1995 and 1996, respectively. The increases in fiscal 1996
resulted primarily from opportunistic price increases due to inflationary
conditions in Mexico with a lag in increases of cost of goods sold due to
seasonal packing.
Selling, Advertising, Administrative and General Expense
Selling, advertising, administrative and general expense as a percentage of
net sales (excluding the Divested Operations) was 21.2%, 19.8% and 27.5% in
fiscal 1995, 1996 and 1997, respectively. Selling, advertising, administrative
and general expense for fiscal 1997 increased significantly due to the
Recapitalization and the change in marketing strategy. Expenses incurred
primarily for management incentive payments and, in part, for severance payments
incurred related to the Recapitalization were approximately $25 million.
Marketing spending increased as the Company placed more emphasis on consumer
promotion programs versus discounts from retailers' list prices than in the
prior year.
Included in general and administrative expenses are research and
development costs of $6 million, $6 million and $5 million for fiscal 1995, 1996
and 1997, respectively. Research and development spending in fiscal 1995, 1996
and 1997 remained focused on strategic spending to maintain the existing
business and to develop product line extensions.
Interest Expense
The 12% decrease in interest expense for fiscal 1996 compared to fiscal
1995 resulted from lower net borrowings under the Company's revolving credit
facility and lower outstanding debt balances resulting in part from the sale of
the Divested Operations. Interest expense decreased 22% in fiscal 1997 compared
to fiscal 1996. This decrease was due to the lower outstanding debt balances
during the first nine months of fiscal 1997 (before the Recapitalization).
Other (Income) Expense
Other income for fiscal 1995 reflects the Company's receipt of the proceeds
of a $30 million letter of credit (reduced by $4 million of related transaction
expenses) as a result of the termination of the merger agreement with Grupo
Empacador de Mexico, S.A. de C.V. in September 1994. Other expense for fiscal
1997 increased due to $22 million of expenses incurred in the Recapitalization
(primarily legal, investment advisory and management fees). Also included in
fiscal 1997 other expense is the revaluation of a long-term asset.
35
<PAGE> 42
Provision for Income Taxes
The tax provision increased to $11 million in fiscal 1996 from $2 million
in fiscal 1995 primarily due to alternative minimum tax and state income tax as
a result of the sales of divested assets in fiscal 1996. There was no tax
provision in fiscal 1997 compared to a provision of $11 million in fiscal 1996.
This decrease was primarily due to the expenses of the Recapitalization. As of
June 30, 1997, the Company had $84 million in net operating loss carryforwards
for tax purposes, which will expire between 2008 and 2012.
Extraordinary Loss
In June 1995, the Company refinanced its then-outstanding revolving credit
facility, term loan and senior notes. The net proceeds of the pudding business
sale and proceeds of the Del Monte Philippines sale were used for the early
retirement of debt. In conjunction with this early debt retirement, in the
second and fourth quarters of fiscal 1996, $5 million in capitalized debt issue
costs were written off and $5 million primarily related to a prepayment premium
were charged to income, both of which have been accounted for as an
extraordinary item. In conjunction with the debt retirement, capitalized debt
issue costs of $7 million were written off and accounted for as an extraordinary
loss as required by generally accepted accounting principles. In conjunction
with an exchange offer, capitalized debt issue costs of approximately $4
million, net of a discount, were charged to net income in fiscal 1997 and
accounted for as an extraordinary loss. In conjunction with the refinancing of
debt that occurred at the time of the Recapitalization, previously capitalized
debt issue costs of approximately $19 million and a note premium and a term loan
make-whole aggregating $19 million were charged to fiscal 1997 net income and
accounted for as an extraordinary loss.
Cumulative Effect of Accounting Change
Effective July 1, 1995, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The cumulative effect of adopting SFAS No. 121 resulted in a charge to
fiscal 1996 net earnings of $7 million.
Net Income
Net income for fiscal 1996 increased by $83 million from fiscal 1995 due to
the $107 million gain on sale of the Company's pudding business and Del Monte
Philippines in fiscal 1996. Net income for fiscal 1997 decreased by $144 million
as compared to fiscal 1996 primarily due to expenses associated with the
Recapitalization of $85 million and loss on the sale of Del Monte Latin America
of $5 million in fiscal 1996.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1996, the AICPA Accounting Standards Executive Committee issued
Statement of Position ("SOP") No. 96-1 "Environmental Remediation Liabilities."
The SOP provides guidance with respect to the recognition, measurement and
disclosure of environmental remediation liabilities. SOP No. 96-1 is required to
be adopted for fiscal years beginning after December 15, 1996. The Company has
adopted SOP 96-1 for the first quarter of fiscal year 1998 and, based on current
circumstances, does not believe the effect of adoption will be material.
The Financial Accounting Standards Board (the "FASB") recently issued SFAS
No. 129, "Disclosure of Information about Capital Structure"; SFAS No. 130,
"Reporting Comprehensive Income"; SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information"; and SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits." The Company believes the
effect of adoption of these statements will not be material.
YEAR 2000
In the first quarter of fiscal 1998, the Company contracted with its
information services outsourcing provider, Electronic Data Systems Corporation
("EDS"), to implement substantially all of the Company's Year 2000 compliance
project. EDS maintains and operates most of the Company's software applications
and
36
<PAGE> 43
also owns and operates a significant portion of the related hardware. The
Company's compliance project is expected to be completed by June 1999. The total
cost of the project is not material to the Company's expected cash outlays and
is being funded through operating cash flow. The Company is expensing all costs
associated with these system changes as the costs are incurred. The Company is
also conducting inquiries regarding the Year 2000 compliance programs of its key
suppliers and selected customers. No assurance can be given that the Company's
suppliers and customers will all be Year 2000 compliant. The Company cannot
predict to what extent its operations may be adversely affected if they are not
compliant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are to fund debt service, finance
seasonal working capital needs and make capital expenditures. Internally
generated funds and amounts available under the Revolving Credit Facility are
the Company's primary sources of liquidity. See Note D to the Company's
consolidated financial statements for the nine months ended March 31, 1998.
Management believes that cash flow from operations and availability under
the Revolving Credit Facility will provide adequate funds for the Company's
working capital needs, planned capital expenditures and debt service obligations
for at least the next 12 months. The Revolving Credit Facility is the Company's
only revolving credit facility. See "-- Financing Activity -- 1997 Activity --
Bank Financing" and "Description of Certain Indebtedness."
The Company's ability to fund its cash requirements and to remain in
compliance with all of the financial covenants under its debt agreements depends
on its future operating performance and cash flow, which, in turn, are subject
to prevailing economic conditions and to financial, business and other factors,
some of which are beyond its control. The Company actively considers various
means of reducing inventory levels to improve cash flow.
As part of its business strategy, the Company continuously reviews
acquisition opportunities. No agreement has been reached, however, with respect
to any such transaction. The Company believes that any acquisition would likely
require the incurrence of additional debt, which could exceed amounts available
under the Bank Financing. As a result, completion of any such acquisition could
require the consent of the lenders under the Bank Financing and the amendment of
the terms thereof, including for purposes of permitting the Company's compliance
with its covenants thereunder. There can be no assurance as to whether, or the
terms on which, the lenders under the Bank Financing would grant such consent.
Operating Activities
The working capital position of the Company is seasonally affected by the
growing cycle of the vegetables, fruit and tomatoes it processes. Substantially
all inventories are produced during the harvesting and packing months of June
through October and depleted through the remaining seven months. Accordingly,
working capital requirements fluctuate significantly. The Company uses funds
from its Revolving Credit Facility, which currently provides for a $350 million
line of credit, to finance the seasonal working capital needs of its operations.
See "Description of Certain Indebtedness -- Bank Financing."
Cash provided by operating activities in the nine months ended March 31,
1998 was $9 million as compared to $26 million for the same period in fiscal
1997. The increase in inventories (excluding the acquired Contadina inventory)
at March 31, 1998 from June 30, 1997 reflects the seasonal inventory buildup.
The increase in accounts payable and accrued expenses from June 30, 1997 to
March 31, 1998 primarily reflects accrued expenses resulting from higher levels
of trade and consumer promotions and accruals remaining from the peak production
period. As of March 31, 1998, $68 million was outstanding under the Revolving
Credit Facility, compared to $82 million at June 30, 1997.
Cash provided by operating activities decreased by $3 million in fiscal
1996 over fiscal 1995 primarily due to a decrease in inventories and in accounts
receivable offset by a decrease in accounts payable and accrued expenses. The
decrease in inventories resulted from high carry-over inventories from fiscal
1995 versus low inventory levels at the end of fiscal 1996 due to a tight
industry supply of certain inventory items. The decrease
37
<PAGE> 44
in accounts receivable resulted primarily from a decrease in sales activity
during June 1996 as compared to June 1995. The decrease in accounts payable and
accrued expenses was due primarily to a decrease in amounts payable to PCP due
to the termination of a joint venture at the end of fiscal 1995 and a decrease
in marketing accruals due to a change in marketing strategy during fiscal 1996.
Also affecting accrued expenses in fiscal 1996 was a charge to an accrual
established in fiscal 1993 to implement multi-year cost savings measures. The
decrease occurred as costs associated with fiscal 1996 consolidation efforts
were charged to this accrual. In fiscal 1997, cash provided by operations
decreased by $35 million over fiscal 1996 primarily due to various expenses
associated with the Recapitalization, as well as an increase in inventories due
to lower sales volume during the year than anticipated.
Investing Activities
The increase of $191 million in cash provided by investing activities in
fiscal 1996 versus fiscal 1995 and the decrease of $133 million in cash provided
by investing activities in fiscal 1997 versus fiscal 1996 was principally due to
net cash proceeds from the sale of the Company's pudding business ($85 million)
and the sale of the Company's interest in Del Monte Philippines ($98 million) in
fiscal 1996. The effect of the fiscal 1996 divested asset sales was partially
offset in fiscal 1997 by the sale of Del Monte Latin America ($48 million).
Capital expenditures for fiscal 1997 were $20 million including
approximately $1 million for environmental compliance. The Company expects that
capital expenditures during fiscal 1998 will be approximately $35 million as the
Company implements a new program which is intended to generate cost savings by
introducing new equipment that would result in general production efficiencies.
Approximately $15 million of such amount had been spent through March 1998. The
Company also plans an aggregate of approximately $136 million of additional
capital expenditures through 2001, of which $54 million, $58 million and $24
million is expected to be spent in fiscal 1999, 2000 and 2001, respectively. In
fiscal 1999, the Company intends to spend approximately $28 million in
connection with its plans to consolidate processing operations and $6 million
for general manufacturing improvements. Of the anticipated capital expenditures
for fiscal 2000, the Company plans to spend approximately $32 million in
connection with its plans to consolidate processing operations. In addition to
the foregoing, the Company budgets certain amounts for ordinary repairs and
maintenance. The Company continually evaluates its capital expenditure
requirements, and such plans are subject to change depending on market
conditions, the Company's cash position, the availability of alternate means of
financing and other factors. Capital expenditures are expected to be funded from
internally generated cash flows and by borrowing from available financing
sources.
Financing Activities -- 1998 Activity
The Refinancing. On April 15, 1998, the Company and Bank of America
National Trust and Savings Association ("BofA"), BancAmerica Robertson Stephens
and Bankers Trust Company entered into a commitment letter relating to the
amendment and restatement of the Bank Financing, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. For
a description of additional terms of the Bank Financing, as well as the proposed
terms of the amended and restated Bank Financing, see "Description of Certain
Indebtedness."
Contadina Acquisition. In connection with the $195 million Contadina
Acquisition, Del Monte issued the Del Monte Notes with an aggregate principal
amount at maturity of $230 million and received gross proceeds of approximately
$126 million. The Del Monte Notes accrue interest at 12.50% payable on each June
15 and December 15, which will be accreted through December 15, 2002, after
which time interest is required to be paid in cash until maturity. The Del Monte
Notes mature on December 15, 2007.
In connection with the Contadina Acquisition, the Company also amended the
Bank Financing and certain related debt covenants to permit additional funding
under the existing Term B loan in an amount of $50 million, thus increasing the
aggregate amount outstanding under the Term Loan Facility to $430 million.
Amortization of such additional Term B loan amount is incremental to the
scheduled amortization of the previously existing Term B loan. Such additional
amortization will begin on a quarterly basis in the second
38
<PAGE> 45
quarter of fiscal 1999 in the amount of $0.5 million on an annual basis with
such amortization increasing in the fourth quarter of fiscal 2004, through the
third quarter of fiscal 2005, to approximately $12 million per quarter.
Financing Activities -- 1997 Activity
The Recapitalization. On February 21, 1997, Del Monte entered into a merger
agreement (the "Merger Agreement"), which was amended and restated as of April
14, 1997, with TPG and a newly created merger vehicle ("Shield"). On April 18,
1997, Del Monte was recapitalized through the merger of Shield with and into Del
Monte, with Del Monte being the surviving corporation. By virtue of the
Recapitalization, shares of Del Monte's preferred stock having an implied value
of approximately $14 million held by certain of Del Monte's stockholders who
remained investors were cancelled and were converted into the right to receive
new Del Monte Common Stock. All other shares of Del Monte stock were cancelled
and were converted into the right to receive cash consideration. In connection
with the Recapitalization, the Company repaid substantially all of its funded
debt obligations existing immediately before the Recapitalization. In the
Recapitalization, the common stock and preferred stock of Shield was converted
into new shares of Common Stock and preferred stock, respectively, of Del Monte.
Cash funding requirements for the Recapitalization totaled $809 million and
included repayment of $158 million of then outstanding notes, $113 million of
the then-existing term loan, and $30 million of the then-existing revolving
credit facility. In addition, $422 million was paid to former shareholders as
cash consideration for their shares and approximately $86 million was paid in
other fees and expenses. These cash funding requirements were satisfied through
the following: (i) a cash equity investment by TPG and other investors of $126
million in Common Stock; (ii) a cash equity investment by TPG and other
investors of $35 million in shares of redeemable preferred stock and warrants to
purchase Common Stock; (iii) $380 million of borrowings under the Term Loan
Facility; (iv) $119 million of borrowings under the revolving credit facility
(the "Revolving Credit Facility" and, together with the Term Loan Facility, the
"Bank Financing"); (v) $147 million from the net proceeds of the offering of the
DMC Notes; and (vi) $2 million of proceeds from the sale of a surplus property.
Bank Financing. Concurrent with the Recapitalization, the Company entered
into the Bank Financing. The Term Loan Facility provides for term loans in the
aggregate amount of $380 million, consisting of Term Loan A of $200 million and
Term Loan B of $180 million. The Revolving Credit Facility provides for
revolving loans in an aggregate amount of $350 million, including a $70 million
Letter of Credit subfacility. The Revolving Credit Facility terminates in fiscal
2003, the Term Loan A will mature in fiscal 2003, and the Term Loan B will
mature in fiscal 2005. Scheduled principal payments on the Term Loan A begin in
the first quarter of fiscal 1999 and continue quarterly through maturity.
Initial quarterly amortization is approximately $8 million per quarter, rising
periodically at approximately $1 million per quarter to a final quarterly
amortization, beginning in the first quarter of fiscal 2003, of approximately
$17 million through maturity. Scheduled principal payments on the Term Loan B
begin in the third quarter of fiscal 1998 and continue quarterly through
maturity. Initial quarterly amortization amounts to approximately $2 million per
year. Substantial amortization begins in the fourth quarter of fiscal 2004, with
quarterly amortization of approximately $42 million. The interest rates
applicable to amounts outstanding under the Term Loan A and the Revolving Credit
Facility are currently, at the Company's option, either (i) the base rate (the
higher of .50% above the Federal Funds Rate and the bank's reference rate) plus
1.00% or (ii) the reserve adjusted offshore rate plus 2.00%. Interest rates on
Term Loan B are, at the Company's option, either (i) the base rate plus 2.00% or
(ii) the offshore rate plus 3.00%. The Bank Financing is the Company's only
syndicated bank loan.
Senior Subordinated Notes. In connection with the Recapitalization, on
April 18, 1997, Del Monte Corporation, a wholly owned subsidiary of Del Monte
("DMC"), issued the DMC Notes with an aggregate principal amount of $150 million
and received gross proceeds of $147 million. The DMC Notes accrue interest at
12.25% per year, payable semiannually in cash on each April 15 and October 15.
The DMC Notes are guaranteed by Del Monte and mature on April 15, 2007. Del
Monte's guarantee is secured by a pledge of the stock of DMC.
39
<PAGE> 46
The terms of the Company's indebtedness contain restrictive covenants, the
most restrictive of which is that the Company must maintain a minimum level of
EBITDA (as defined in the Bank Financing). See "Description of Certain
Indebtedness." The Company is in compliance with all such covenants.
Financing Activities -- 1996 Activity
The increase in net cash used in financing activities of $180 million in
fiscal 1996 as compared to fiscal 1995 reflects a lower balance under the
Revolving Credit Facility at year-end 1996 versus 1995 and higher net pay-down
of long-term debt. The higher payments on the Revolving Credit Facility and
long-term debt were due to cash available from the Company's sales of the
pudding business and Del Monte Philippines. In connection with the early debt
repayment a prepayment penalty of $5 million was charged to income and recorded
as an extraordinary loss. Included in other financing activities in fiscal 1996
was a deposit of $30 million of Del Monte Philippines sale proceeds into a
collateral account until agreement was reached with the term lenders as to final
application.
PENSION FUNDING
As described more fully in Note F to the audited consolidated financial
statements of the Company for the year ended June 30, 1997, the Company's
defined benefit pension plans were determined to be underfunded. It had been the
Company's policy to fund the Company's retirement plans in an amount consistent
with the funding requirements of federal law and regulations and not to exceed
an amount that would be deductible for federal income tax purposes. In
connection with the Recapitalization, the Company has entered into an agreement
with the U.S. Pension Benefit Guaranty Corporation dated April 7, 1997 whereby
the Company contributed $15 million within 30 days after the consummation of the
Recapitalization to its defined benefit pension plans. The Company will also
contribute a minimum of $15 million in calendar 1998, of which $10 million has
been paid, $9 million in calendar 1999, $8 million in calendar 2000 and $8
million in calendar 2001, for a total of $55 million. The agreement provides
that the contributions required to be made in 1999, 2000 and 2001 will be
secured by a $20 million letter of credit to be obtained by the Company prior to
August 31, 1998, which date will be extended until June 15, 1999 upon the
consummation of the Refinancing. The contribution required to be made in 1998
will be paid prior to any scheduled amortization under the Bank Financing in
excess of $1 million, and the Company has agreed not to make voluntary
prepayments of the loans under the Bank Financing prior to making the
contribution required to be made in 1998 or prior to obtaining the letter of
credit.
TAX NET OPERATING LOSS CARRYFORWARDS
As of June 30, 1997, the Company had $84 million in net operating loss
carryforwards, which will expire between 2008 and 2012. The Company's use of
these net operating loss carryforwards in any year may be limited by applicable
law.
INFLATION
The Company's costs are affected by inflation and the effects of inflation
may be experienced by the Company in future periods. However, the Company has
historically mitigated the inflationary impact of increases in its costs by
controlling its overall cost structure.
40
<PAGE> 47
BUSINESS
GENERAL
The Company was originally incorporated in 1916 and remained a publicly
traded company until its acquisition in 1979 by the predecessor of RJR Nabisco.
In December 1989, RJR Nabisco sold the Company's fresh produce operations
("Fresh Del Monte"), to Polly Peck International PLC ("Polly Peck"). In January
1990, an investor group led by Merrill Lynch & Co. ("ML&Co.") purchased the
Company and certain of its subsidiaries from RJR Nabisco for $1.5 billion (the
"RJR Nabisco Sale"). Following such sale, the Company divested several of its
non-core businesses and all of its foreign operations.
The Company, a branded marketer of premium quality, nutritious food
products, is the largest producer and distributor of canned vegetables and
canned fruit in the United States, with pro forma net sales of $1.1 billion and
$1.4 billion for the nine months ended March 31, 1998 and the fiscal year ended
June 30, 1997, respectively. Management believes that the Company's principal
brand, Del Monte, which has been in existence since 1892, has the highest
unaided brand awareness of any canned food brand in the United States. Del Monte
brand products are found in substantially all national grocery chains and
independent grocery stores throughout the United States. As the brand leader in
three major processed food categories (canned vegetables, fruit and solid tomato
products), the Company has a full-line multi-category presence that management
believes provides it with a substantial competitive advantage in selling to the
retail grocery industry. The Contadina Acquisition contributes another
established brand and positions the Company as the branded market leader in the
high margin canned solid tomato category and establishes a strong presence for
the Company in the branded paste-based tomato products category. See "-- Company
Products."
The Company sells its products to national grocery chains and wholesalers
through a nationwide sales network consisting primarily of independent food
brokers. The Company's direct sales force also sells to warehouse club stores,
selected mass merchandisers, such as Wal-Mart and Kmart, and larger mass
merchandising outlets that include full grocery sections, such as Wal-Mart
Supercenters and Kmart's SuperKs. In addition, the Company sells its products to
the foodservice industry, food processors and the military through different
independent food brokers. The Company also exports a small percentage of its
products to certain foreign countries directly and through independent exporters
based in the United States. See "-- Sales, Marketing and Distribution."
The Company operates 15 production facilities in California, the Midwest,
Washington and Texas, as well as six strategically located distribution centers.
The Company has over 2,500 contracts to purchase vegetables and fruit from
individual growers and cooperatives located in various geographic regions of the
United States, principally California, the Midwest, the Northwest and Texas.
This diversity of sourcing helps insulate the Company from localized disruptions
during the growing season, such as weather conditions, that can affect the price
and supply of vegetables, fruit and tomatoes. See "-- Supply and Production."
The Company owns a number of registered and unregistered trademarks that it
uses in conjunction with its business, including the trademarks Del Monte, Fruit
Cup, FreshCut, Snack Cups, Fruit Naturals, Orchard Select, Fruit Smoothie
Blenders, Del Monte Lite and Contadina. In connection with and subsequent to the
RJR Nabisco Sale, the Company granted various perpetual, exclusive royalty-free
licenses for the use of the Del Monte name and trademark, as well as the use of
certain copyrights, patents, and trade secrets, generally outside of the United
States. The licensees include Fresh Del Monte and its affiliates (which
succeeded to Polly Peck as the owner of the Company's former fresh produce
operations), Del Monte International, Kikkoman Corporation ("Kikkoman"),
affiliates of RJR Nabisco, and Yorkshire. None of the licensees is an affiliate
of the Company, other than Yorkshire with respect to which the Company owns 20%
of the common stock. See "Risk Factors -- Brand Risk" and "-- Intellectual
Property."
In April 1997, the Company completed the Recapitalization as a result of
which Texas Pacific Group, a private investment group, obtained a controlling
interest in the Company. Under a new senior management team introduced in
connection with the Recapitalization, the Company began implementing a new
business strategy designed to increase sales and improve operating margins, by:
(i) increasing market share and distribution of high margin value-added
products; (ii) introducing product and packaging innovations;
41
<PAGE> 48
(iii) increasing penetration of high growth distribution channels, such as
supercenters and warehouse clubs; (iv) achieving cost savings through
investments in new and upgraded production equipment and plant consolidations;
and (v) completing strategic acquisitions.
COMPETITIVE STRENGTHS
Management believes that the following elements contribute to the Company's
position as a leading branded producer, marketer and distributor of canned
vegetables, fruit and tomato products in the United States and provide a solid
foundation for the Company's business strategy.
- - STRONG BRAND NAME RECOGNITION AND LEADING MARKET SHARES -- The Del Monte
brand name, which has been in existence since 1892, is one of the leading
brand names in the food industry. Based on the ability of consumers to name
the Del Monte brand when asked to identify companies that manufacture canned
foods, management believes that the Del Monte brand has the highest unaided
brand awareness of any canned food brand in the United States. The Company
recently acquired the Contadina brand, an established national brand with a
strong reputation for quality. For the 52 weeks ended March 31, 1998, the
Company's 19.5% market share of canned vegetables was larger than the
combined market shares of the Company's two largest branded competitors, and
its 41.9% market share of canned fruit was larger than the combined market
shares of all other branded competitors. The Company, including its Contadina
business had a pro forma 16.3% market share in the high margin solid segment
of the canned tomato market for the 52 weeks ended March 31, 1998. See
"-- Company Products."
<TABLE>
<CAPTION>
MARKET SHARE FOR 52 WEEKS ENDED
MARCH 28, 1998
------------------------------------------------------
MARKET NEXT LEADING BRANDED
CATEGORY POSITION(A) PERCENTAGE COMPETITOR'S PERCENTAGE(A)
-------- ----------- ---------- --------------------------
<S> <C> <C> <C>
Canned vegetables........................ #1 19.5% 13.2% (Green Giant)
Canned fruit............................. #1 41.9% 11.4% (Libby's)
Canned solid tomato products(b).......... #1 16.3% 11.2% (Hunt's)
</TABLE>
- ---------------
(a) Excludes private label.
(b) Pro forma to include Contadina sales.
- - TECHNICAL EXPERTISE AND LOW COST PRODUCTION ADVANTAGES -- The Company has
significant experience in developing new products and packaging alternatives
and in engineering efficient food processing operations. These capabilities
are leveragable across many food categories. The Company has developed
proprietary vegetable seed varieties, which increase harvest and cannery
recoveries and improve flavor and quality. The Company also benefits from
many long-term relationships with experienced, geographically diverse growers
who work with the Company to maximize yields of raw product. These
relationships also help to ensure a consistent supply of raw product. As a
result of its technical expertise, proprietary seed varieties and raw product
sourcing diversity, as well as its modern processing equipment and labeling,
packaging, warehousing and distribution efficiencies, management believes
that the Company is one of the lowest cost producers of canned vegetables,
fruit and tomatoes in the United States. See "-- Company Products" and
"-- Supply and Production."
- - PREFERRED SUPPLIER STATUS -- Competitive pressures in the retail food
industry are causing many retailers to prefer large suppliers such as the
Company that are able to provide consumer-favored brands, full product lines
and sophisticated inventory and category management programs. Del Monte
anticipated this trend and has developed proprietary software tools to assist
its customers and promote sales of its products. Del Monte's proprietary
category management system is designed to address retailers' efforts to
maximize profitability of shelf space dedicated to canned food categories. A
substantial majority of the Company's customers that have employed Del
Monte's category management system have increased the relative amount of
shelf space dedicated to the Company's products as compared to competing
products. The Company's proprietary vendor-managed inventory software allows
Del Monte to manage directly its customers' inventories of the Company's
products. This inventory management software is designed to reduce customers'
overhead costs and to enable them to achieve lower average inventory levels
while
42
<PAGE> 49
enhancing the Company's opportunities to sell its products. Retailers also
rely on Del Monte's in-depth knowledge as the leading branded marketer in the
canned fruit, vegetable and tomato categories, and they seek the Company's
advice on marketing and promoting these categories. Finally, Del Monte has
strong, well-developed relationships with all major participants in the
retail grocery trade. The Company believes that these relationships will
become increasingly important as consolidation among grocery retailers
continues. The Company is seeking to use its category knowledge, customer
relationships and software tools, along with its multi-category product line
that can readily be ordered and shipped on a full truck-load basis, to become
the preferred supplier in its product categories. See "-- Sales, Marketing
and Distribution."
- - EXTENSIVE NATIONAL SALES AND DISTRIBUTION SYSTEM -- The Company's extensive
sales and distribution network is responsible for the distribution of
finished goods to over 2,400 customer destinations nationwide. This network
enables the Company to compete with other national brands and regional
competitors, and to introduce new products on a regional or national basis.
The Company operates six strategically located distribution centers offering
customers a variety of services, including electronic data interchange and
direct store shipments. Management believes that the Company's distribution
system makes an important contribution to the Company's success and provides
the Company with a competitive advantage over regional and private label
competitors. See "-- Sales, Marketing and Distribution."
- - EXPERIENCED MANAGEMENT TEAM -- Richard G. Wolford and Wesley J. Smith, the
Company's Chief Executive Officer and Chief Operating Officer, respectively,
are veteran managers with extensive food industry experience. Mr. Wolford has
30 years of experience in the food industry, 20 of which were with Dole. He
was president of Dole Packaged Foods from 1982 to 1987, and during Mr.
Wolford's tenure at Dole, Dole experienced increased profitability, sales
volume and market share. Mr. Wolford played a key role in redefining the Dole
brand and expanding the range of products sold under the brand. From 1988 to
1996, he was Chief Executive Officer of HK Acquisition Corp. where he
developed food industry investments with venture capital investors and
managed the investor-owned companies. Mr. Smith has 25 years of experience,
23 of which were with Dole, where he oversaw the building of Dole's domestic
fresh pineapple business and the restructuring of Dole's sizable Hawaiian
operations. In addition, Mr. Smith was responsible for establishing Dole's
juice business at Dole with minimal capital investment. See "Management."
BUSINESS STRATEGY
Following the consummation of the Recapitalization in 1997, the Company
implemented a new business strategy designed to increase sales and improve
operating margins. The key elements of this new business strategy are discussed
below.
- - LEVERAGE BRAND EQUITY TO INCREASE SALES AND MARKET SHARE OF HIGH MARGIN
PRODUCTS -- The Company plans to leverage the Del Monte and Contadina brand
names and its strong relationships with customers to increase sales of its
existing product lines, focusing specifically on high margin products, such
as its specialty fruits and vegetables, diced tomatoes and its Fruit Cup
line, where the Company has historically had either low market share or low
household penetration relative to its overall category position.
- - FOCUS ON CONSUMPTION-DRIVEN MARKETING STRATEGY -- To enhance its ability to
leverage its brand equity, the Company has refocused its marketing efforts
and promotional strategy. To leverage its brand strength, the Company has
increased consumer-targeted marketing programs, primarily through the
distribution of free-standing coupon inserts, and has established clearly
differentiated product positioning that emphasizes the Company's premium
quality. The Company increased spending on consumer promotions from $12
million in fiscal 1996 to $46 million in fiscal 1997 and anticipates that its
consumer spending in fiscal 1998 and 1999 will be generally consistent with
levels of consumer spending in fiscal 1997. The Company has also improved the
effectiveness of its trade promotion strategy. The Company has implemented
performance-based programs under which trade spending, which consists of the
costs of promotional activities with grocery chains and other customers, such
as special displays, discounts and advertisements, is managed based on
retailers' sales of the Company's products to consumers rather than on
purchases
43
<PAGE> 50
from the Company. The Company believes that this performance-based strategy,
coupled with the Company's category management capabilities, will continue to
increase sales and reduce costs.
- - IMPROVE PROFITABILITY THROUGH NEW PRODUCTS AND PACKAGING -- The Company is
emphasizing new higher margin products and line extensions designed to
leverage the Company's presence in its current product categories and to
capitalize on its food technology expertise. The Company has successfully
introduced flavored diced tomatoes, two lines of flavored canned fruit,
Orchard Select, a premium fruit product packaged in glass, and Fruit Smoothie
Blenders, a flavored fruit drink. These products extend the Company's
traditional product lines and appeal to consumers' demands for high quality,
convenient and nutritious food products. The Company is evaluating
introductions of other new products packaged in glass and plastic to further
expand its presence in the market beyond the processed food aisle.
- - INCREASE PENETRATION OF HIGH-GROWTH DISTRIBUTION CHANNELS -- Changes in the
retail grocery environment have resulted in substantial growth of alternative
retailers such as warehouse clubs, mass merchandisers and supercenters. The
Company believes it is well-positioned to benefit from these changes because
these vendors generally seek leading brand name products that generate high
inventory turnover. In addition, vendors in this category generally are
attracted to large, technologically sophisticated suppliers such as the
Company that have the ability to meet their stringent inventory and
shelf-management requirements. Based on internal estimates and the broad
range of products supplied by the Company to such retailers, the Company
believes it is currently the leading supplier of canned vegetables and fruit
to Wal-Mart's Sam's Club, and is a major supplier to PriceCostco. Based on
such estimates, the Company also believes it is currently the leading
supplier of canned vegetables, fruit and solid tomato products as a group to
Wal-Mart Supercenters.
- - IMPLEMENT FURTHER COST SAVINGS -- The Company is aggressively pursuing cost
reduction opportunities, which have already contributed to an increase in
Adjusted EBITDA margins (excluding the results of Divested Operations) from
6.9% in 1995 to 10.4% in 1997 and 10.2% for the nine months ended March 31,
1998. Management's strategy is to improve profitability through the
implementation of capital projects that offer rapid returns on investment,
and through plant consolidations and increased operating efficiencies. The
Company has announced plans to consolidate, over the next three fiscal years,
six existing fruit and tomato operations in California into four facilities,
including one large state-of-the-art facility acquired as part of the
Contadina Acquisition. The Company continually evaluates its production
facilities and believes that further consolidations may be warranted in the
future. In addition, the Company plans to continue to invest in new,
state-of-the-art production equipment to increase production efficiencies and
strengthen its position as a low cost producer. For example, such equipment
includes high-speed, high-resolution vision sorting technology, which allows
the rapid detection of defects in raw product, as well as high-speed,
volumetric filling and continuous cooking equipment, which ensures accurate
fill weights and uniform product quality.
- - COMPLETE STRATEGIC ACQUISITIONS -- The Company will pursue strategic
acquisitions when there are opportunities to leverage the Company's key
strengths in product development, food processing, marketing, sales and
distribution. In evaluating potential acquisition candidates, the Company
seeks, among other things: (i) strong brands, including those in new product
lines, that can be expanded by leveraging the Company's technical and
manufacturing expertise and/or its sales and distribution systems; (ii) new
products that can achieve growth through re-branding; and (iii) economies of
scale in manufacturing, distribution and capacity utilization. The Contadina
Acquisition, for example, adds a leading national brand which strengthens the
Company's market share in key tomato segments and allows the Company to
realize cost savings through plant consolidations. The Contadina Acquisition
also allows the Company to introduce new branded retail products and to
increase sales to the branded foodservice market. The Company continuously
reviews acquisition opportunities and at any time may be engaged in
discussions with respect to an acquisition that may be material to its
operations. No agreement has been reached, however, with respect to any such
acquisition. The Company believes that any acquisition would likely require
the incurrence of additional debt, which could exceed amounts available under
the Bank Financing. As a result, completion of an acquisition could require
the consent of the lenders under the
44
<PAGE> 51
Bank Financing and the amendment of the terms thereof, including for purposes
of permitting the Company's compliance with its covenants thereunder.
THE INDUSTRY
The Company believes that the domestic canned food industry is generally
characterized by relatively stable growth based on modest price and population
increases. Within the industry, however, the Company believes that certain
categories have been experiencing substantial growth. Over the last ten years,
the industry has experienced consolidation as competitors have disposed of
non-core business lines and made strategic acquisitions to complement category
positions, maximize economies of scale in raw material sourcing and production
and expand retail distribution. The Company also believes that sustaining strong
relationships with retailers has become a critical success factor for food
companies and is driving initiatives such as category management. Food companies
with category leadership positions and strong retail relationships appear to
have increasingly benefited from these initiatives as a way to maintain and
increase shelf space and maximize distribution efficiencies.
Pricing and innovation in the canned food segments in which the Company
competes are typically led by branded food manufacturers. A majority of market
share in these categories is, however, attributable to private label
manufacturers based on statistical information compiled by ACNielsen. The
Company believes that the private label segment has historically been highly
fragmented among regional producers seeking to compete principally based on
price, although the aggregate market share of these manufacturers has remained
relatively stable over the past several years in each of the Company's principal
product categories. For the 52 weeks ended March 28, 1998, private label
manufacturers as a group represented 43.8%, 39.7% and 30.7% of canned vegetable,
fruit and solid tomato product sales, respectively. Recently, some consolidation
has occurred among private label manufacturers in the canned vegetable category.
The Company believes that this consolidation may result in increasing
rationalization of production capacity in the industry, which may in turn result
in higher price positioning by private label manufacturers of canned vegetable
products.
The Company increased vegetable and fruit prices in fiscal 1996 to cover
higher raw product costs and to improve margins. Higher prices put the Company
at a significant price disadvantage in the marketplace for most of the year as
competition did not raise prices until late in the fiscal year. As a result, the
Company experienced an anticipated volume loss and market share decline. In the
case of its fruit operations, however, the Company's significantly improved
margins generally offset the effects of the lower volume, and the Company's
market share recovered by year-end 1997 to achieve a higher level than that
experienced prior to the price increases. In the case of its vegetable
operations, the Company's market share has stabilized at a level lower than its
share prior to the price increases. See "Risk Factors -- Competition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPANY PRODUCTS
The Company has a full-line, multi-category presence with products in four
major processed food categories: canned vegetable, fruit, tomato and pineapple
products.
45
<PAGE> 52
The following table sets forth, for the periods indicated, the Company's
net sales by canned product category, expressed in dollar amounts and as a
percentage of the Company's total pro forma net sales for such period:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED JUNE 30, ENDED MARCH 31,
1997 1998
--------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Vegetables (a)....................................... $ 437 32% $ 358 34%
Fruit(a)............................................. 431 31 343 32
Tomato products(a)(b)................................ 385 28 303 29
Pineapple(a)......................................... 65 5 50 5
Other(c)............................................. 55 4 6 --
------ --- ------ ---
Total(b)................................... $1,373 100% $1,060 100%
====== === ====== ===
</TABLE>
- ---------------
(a) Includes sales of the entire product line across each channel of
distribution, including sales to grocery chains, warehouse clubs,
supercenters, mass merchandisers and other grocery retailers, as well as the
Company's foodservice, food ingredients, export and vegetable private label
business and military sales.
(b) Includes $156 million and $92 million of sales of tomato products by
Contadina, on a pro forma basis, for the fiscal year ended June 30, 1997 and
the nine months ended March 31, 1998, respectively.
(c) Includes pickles, dried fruit and certain other retail products, as well as
sales of Divested Operations.
Vegetables
Based on internal estimates using data compiled by ACNielson from various
industry and other sources, the Company believes that the canned vegetable
industry in the United States generated more than $3 billion in sales in fiscal
1997. The Company believes that the domestic canned vegetable industry is a
mature segment characterized by high household penetration.
The Company views the retail canned vegetable market as consisting of three
distinct segments: major, flanker and specialty products. The Company competes
in each of these segments. The major segment consists of corn, green beans and
peas and represents the largest volume segment, accounting for $780 million or
approximately 65% of fiscal 1997 canned vegetable supermarket case sales
(excluding pickles and tomato products). The Company's entries in the major
segment include cut green beans and French-style green beans, as well as whole
kernel and cream-style corn. The flanker segment, which includes mixed
vegetables, spinach, beets, carrots, potatoes and sauerkraut, accounted for $237
million or approximately 17% of fiscal 1997 canned vegetable supermarket case
sales. The specialty segment, comprised of asparagus, zucchini, baby beets and a
variety of corn and bean offerings, represents $284 million or approximately 12%
of fiscal 1997 canned vegetable supermarket case sales. Many of the Company's
specialty vegetable products are enhanced with flavors and seasonings, such as
the Company's zucchini in tomato sauce and its Fiesta corn, which is made with
green peppers and seasonings. The Company's specialty vegetables are priced at a
premium to its other vegetable products and carry higher margins. All of the
Company's vegetable products are offered to the retail market principally in
14-15 oz. sizes and to the foodservice market primarily in a larger commercial
size can. The Company produces six or eight can multi-packs primarily for its
club store customers. A cross-segment, buffet products, includes all of the
above varieties in smaller can sizes. The Company also offers a no-salt product
line across most of its core varieties. Within these segments, the Del Monte
brand accounted for $349 million in retail sales in fiscal 1997. During the 52
weeks ended March 28, 1998, Del Monte brand vegetable products enjoyed an
average premium of 20c (44%) per item over private label products and the
Company held a 19.5% share of the canned vegetable market for that period.
The canned vegetable market is concentrated among a small number of branded
manufacturers and a large, fragmented pool of private label competitors. In the
major vegetable market, the Company is the branded market share leader and for
the 52 weeks ended March 28, 1998, held a 23.2% market share in green beans, a
18.6% market share in corn and a 16.1% market share in peas. The Company also is
the branded market share leader in the flanker segment and is the overall market
share leader in the buffet segment.
46
<PAGE> 53
Private label products taken as a whole command the largest share of the canned
vegetable market, but their market share has remained relatively stable over the
past decade. The Company's primary branded competitors in the market include
Green Giant nationally, and regional brands such as Freshlike, Stokely and
Libby's, in addition to private label producers.
VEGETABLE MARKET SHARE
<TABLE>
<S> <C>
DEL MONTE................................................... 19.5%
Green Giant (Pillsbury)..................................... 13.2%
Libby's (Seneca)............................................ 3.6%
Stokely (Chiquita).......................................... 2.3%
Freshlike (Dean Foods)...................................... 2.0%
All private label combined.................................. 43.8%
</TABLE>
- ---------------
Source: ACNielsen SCANTRACK, 52 weeks ended March 28, 1998 (based on equivalent
cases).
The Company has relationships with approximately 900 vegetable growers
located primarily in Wisconsin, Illinois, Minnesota, Washington and Texas.
Fruit
Based on internal estimates using data compiled by ACNielsen from various
industry and other sources, the Company believes that the processed canned fruit
industry in the United States generated more than $2 billion in sales in fiscal
1997. The Company believes that the domestic canned fruit industry is a mature
segment characterized by high household penetration.
The Company is the largest processor of branded canned fruit in the United
States. The Company competes in three distinct segments of the canned fruit
industry: major, specialty and pineapple products, which together account for
over 60% of the canned fruit industry's total sales. The major segment consists
of cling peaches, pears and fruit cocktail/mixed fruit and fruit cups. The
specialty segment includes apricots, freestone and spiced peaches, mandarin
oranges and cherries. The Company believes that the major fruit and specialty
fruit segments of the canned fruit market together accounted for more than $1
billion of total canned fruit industry sales in fiscal 1997. The pineapple
segment is discussed separately below.
Major fruit accounted for sales by retailers of $624 million in fiscal
1997. Sales by retailers of Del Monte brand major fruit products totaled $291
million in fiscal 1997. For the 52 weeks ended March 28, 1998, the Company was
the branded share leader with a 41.9% market share. The Company is also the
share leader in every major sub-segment of the major category. In single serve
sizes, the Company has over a 67% market share. The Company's major fruit and
fruit cup products are distributed in substantially all grocery outlets.
The Company is the branded leader in the specialty category as a whole and
the market leader in apricots and freestone and spiced peaches. Specialty fruits
are higher margin, lower volume "niche" items, which benefit from the Company's
brand recognition. Del Monte apricots and freestone peaches are distributed in
over 71% and 65% of grocery outlets, respectively. Mandarin oranges and cherries
are distributed in 30% and 8% of grocery outlets, respectively.
The Company believes that it has substantial opportunities to leverage the
Del Monte brand name to increase sales of its existing high margin specialty
products, such as its Fruit Cup line. The Company has also been developing new
high margin products designed to leverage the Company's presence in existing
categories, to capitalize on its existing manufacturing capabilities and to
expand the Company's presence in the market beyond the canned food aisle. For
example, following initial success in test markets, the Company is planning
national distribution of its Orchard Select, a premium fruit product packaged in
glass. The Company is also test marketing a new flavored fruit drink, Fruit
Smoothie Blenders, to expand its presence into the beverage aisle. An important
focus of the Company's new product development efforts is the production of high
quality, convenient and nutritious products, particularly snack-type products.
47
<PAGE> 54
The Company competes in the canned fruit business on the basis of product
quality and category support to both the trade and consumers. On the industry's
highest volume can size (15-16 oz.), the Del Monte brand commanded an average 8c
(9%) per item premium. The Company faces competition in the canned fruit segment
primarily from Tri-Valley Growers and PCP, both of which are grower
co-operatives that produce private label products. Tri-Valley Growers also packs
the Libby's and S&W brands.
MAJOR FRUIT MARKET SHARE
<TABLE>
<S> <C>
DEL MONTE................................................... 41.9%
Libby's (Tri-Valley)........................................ 11.4%
All private label combined.................................. 39.7%
</TABLE>
- ---------------
Source: ACNielsen SCANTRACK, 52 weeks ended March 28, 1998 (based on equivalent
cases).
The Company has relationships with approximately 600 fruit growers located
primarily in California, Oregon and Washington.
Tomato Products
Based on internal estimates using data compiled by ACNielsen from various
industry and other sources, the Company believes that processed tomato products
generated fiscal 1997 industry-wide sales in the United States of more than $5
billion. While total sales of tomato products have grown steadily in recent
years, the Company believes that the diced segment of the retail canned solid
tomato segment (which also includes chunky tomatoes and tomato wedges) has been
growing at a substantially greater rate than the category as a whole, as
consumer preferences have trended toward more convenient cut and seasoned tomato
products.
The processed tomato category can be separated into more than ten distinct
product segments which differ widely in terms of profitability, price
sensitivity and growth potential. Consumers use tomato products for a variety of
purposes ranging from ingredients to condiments, beverages and main dishes.
The Company's tomato product offerings consist of two major segments: solid
tomato products, which are differentiated primarily by cut style, with varieties
including stewed, crushed, diced, chunky and wedges, and paste-based tomato
products, such as ketchup, tomato sauce and tomato paste and value-added
products, including spaghetti, pasta and sloppy joe sauces.
The Company is the leading producer of canned solid tomato products, which
are generally higher margin tomato products and are the fastest growing segment
of the Company's tomato products. As a result of the Contadina Acquisition, the
Company extended its presence in this segment through the addition of
Contadina's share of the market for crushed tomato products. The canned solid
tomato segment has evolved to include additional value-added items, such as
flavored diced tomato products. The Company believes that there is substantial
opportunity to increase sales of solid tomato products, including particularly
crushed tomato products, through similar line extensions that capitalize on the
Company's manufacturing and marketing expertise.
SOLID TOMATO PRODUCTS MARKET SHARE
<TABLE>
<S> <C>
DEL MONTE/CONTADINA......................................... 16.3%
Hunt's (ConAgra)............................................ 11.2%
S&W (Tri Valley Growers).................................... 5.1%
All private label combined.................................. 30.7%
</TABLE>
- ---------------
Source: ACNielsen SCANTRACK, 52 weeks ended March 28, 1998 (based on equivalent
cases).
With the Contadina Acquisition, the Company has strengthened its position
in the branded paste-based tomato products categories in which it competes. The
Company markets its spaghetti, pasta and sloppy joe sauces, as well as its
ketchup products, under the Del Monte brand name using a "niche" marketing
strategy targeted toward value-conscious consumers seeking a branded, high
quality product. The Company's tomato
48
<PAGE> 55
paste products are marketed under the Contadina brand name, which is an
established national brand for Italian-style food products. Contadina also
targets the branded food service tomato market, including small restaurants that
use Contadina brand products, such as finished spaghetti and pasta sauces. The
Company plans to use this presence as a platform to expand its branded
foodservice business, including sales of Del Monte brand products to new and
existing Contadina foodservice customers.
The Company faces competition in the tomato product market from brand name
competitors including S&W and Hunt's in the solid tomato category; Heinz and
Hunt's in the ketchup category; and Hunt's, Campbell Soup's Prego and Unilever's
Ragu in the spaghetti sauce category. Hunt's is the Company's chief competitor
in the tomato paste segment. In addition, the Company faces competition from
private label products in all major categories. While the Company has a small
share of the overall tomato product market (with market shares for the 52 weeks
ended March 28, 1998 of 4.2% in spaghetti sauce and 5.6% in tomato sauce), it is
the largest branded competitor in the solid tomato segment with a market share
of 16.3% for the 52 weeks ended March 28, 1998. Hunt's, the next largest branded
processor, possessed a 11.2% share of the solid tomato segment for this period.
In other key categories, for the 52 weeks ended March 28, 1998, Heinz was the
market leader in ketchup with a 46.2% market share, and Hunt's was the leader in
tomato sauce with a 35.2% market share.
The Company has relationships with approximately 40 tomato growers located
primarily in California, where approximately 95% of domestic tomatoes are
produced. See "Risk Factors -- Severe Weather Conditions and Natural Disasters."
Pineapple
Based on internal estimates using data compiled by ACNielsen from various
industry and other sources, the Company believes that the canned pineapple
industry in the United States generated more than $300 million in sales in
fiscal 1997. The Company believes that the domestic canned pineapple industry is
a mature segment of the canned fruit industry that has generated stable sales.
Individual pineapple items are differentiated by cut style, with varieties
including sliced, chunk, tidbits and crushed. Currently, approximately 84% of
pineapple product sold is packed in juice, with the remaining 16% packed in
heavy syrup. Size offerings include the 20 oz. size, which accounts for 74% of
category sales. Other sizes offered include the 8 oz. and 15 oz. varieties.
The Company's retail pineapple line consists of sliced, chunk, crushed and
juice products in a variety of container sizes. In addition to sales by
retailers, which totaled $35 million in fiscal 1997, the Company sells a
significant amount of juice concentrate and crushed pineapple through the food
ingredients channel and also sells pineapple solids and juice products to
foodservice customers.
The Company is the second leading brand of canned pineapple, with a 14.3%
market share for the 52 weeks ended March 28, 1998. Dole is the industry leader
with a market share of 44.6%. Private label and foreign pack brands comprise the
low-price segment of this category and hold market shares of 28.3% and 11.6%,
respectively. The five major foreign pack brands, Geisha, Libby's, Liberty Gold,
Empress and 3-Diamond, have regional distribution and are supplied by Thai and
Indonesian packers. Certain foreign brands grew through 1995 by "dumping"
product in the United States at below cost prices which depressed category
pricing. In 1995, the U.S. Government imposed anti-dumping tariffs on Thai
packers which allowed the domestic industry to recover some of its margins and
volume.
PINEAPPLE MARKET SHARE
<TABLE>
<S> <C>
DEL MONTE................................................... 14.3%
Dole........................................................ 44.6%
Foreign pack................................................ 11.6%
All private label combined.................................. 28.3%
</TABLE>
- ---------------
Source: ACNielsen SCANTRACK, 52 weeks ended March 28, 1998 (based on equivalent
cases).
49
<PAGE> 56
The Company sources virtually all of its pineapple requirements from its
former subsidiary, Del Monte Philippines, under a long-term supply agreement.
The agreement provides for a guaranteed supply of quality pineapple with pricing
based on fixed retail and foodservice margins.
SUPPLY AND PRODUCTION
The Company owns virtually no agricultural land. Each year, the Company
buys over one million tons of fresh vegetables, fruit and tomatoes pursuant to
over 2,500 contracts with individual growers and cooperatives located primarily
in the United States, many of which are long-term relationships. No supplier
accounts for more than 5% of the Company's raw product requirements, and the
Company does not consider its relationship with any particular supplier to be
material to its operations. The Company is exploring ways in which to extend its
growing season. For example, it has been planting green bean crops in Texas,
which has a longer growing season than the Company's other bean growing
locations in the Midwest region. Like other processed vegetable, fruit and
tomato product manufacturers, the Company is subject to market-wide price
fluctuations resulting from seasonal or other factors, although its long-term
relationships with growers help to ensure a consistent supply of raw product.
The Company's vegetable growers are located in Wisconsin, Illinois,
Minnesota, Washington, Texas and Arizona. The Company provides the growers with
planting schedules, seeds, insecticide management and hauling capabilities and
actively participates in agricultural management and quality control with
respect to all sources of supply. The Company's vegetable supply contracts are
generally for a one-year term and require delivery of a specified quantity.
Prices are renegotiated each year. The Company believes that one of its
competitive advantages in the canned vegetable category derives from its
proprietary seed varieties. For example, the Company believes that its "Del
Monte Blue Lake Green Bean" variety is higher yielding than green bean varieties
used by the Company's competitors. In addition, the Company's green bean
production is primarily on irrigated fields, which facilitates production of
high quality, uniformly-sized beans.
The Company's fruit and tomato growers are located primarily in California;
pear growers are also located in Oregon and Washington. The Company's fruit
supply contracts range from one to ten years. See Note J to the Company's
consolidated financial statements for the nine months ended March 31, 1998.
Prices are generally negotiated with grower associations and are reset each
year. Contracts to purchase yellow cling peaches generally require the Company
to purchase all of the fruit produced by a particular orchard or block of trees.
Contracts for other fruits require delivery of specified quantities each year.
The Company actively participates in agricultural management and quality control
and provides insecticide management and hauling capabilities. Where appropriate,
the Company manages the growers' agricultural practices.
Fifteen Company-owned plants, located throughout the United States, process
the Company's products. The Company produces the majority of its products
between June and October. Most of the Company's seasonal plants operate at close
to full capacity during the packing season.
50
<PAGE> 57
The following table lists the Company's production facilities:
<TABLE>
<CAPTION>
LOCATION PRIMARY PRODUCT LINE SQUARE FOOTAGE*
-------- -------------------- ---------------
<S> <C> <C>
Hanford, CA....................... Solid and Paste-Based Tomato Products 651,000
Kingsburg, CA..................... Peaches, Zucchini and Corn 229,000
Modesto, CA....................... Solid and Paste-Based Tomato Products and 220,000
Snap-E-Tom
San Jose, CA...................... Apricots, Fruit Cups, Fruit Cocktail, 458,000
Chunky Fruit and Diced Pears
Stockton, CA...................... Peaches, Cocktail Cherries, Fruit Cocktail 446,000
and Fruit Concentrate
Woodland, CA...................... Bulk Paste and Bulk Diced Tomatoes 465,000
Mendota, IL....................... Peas, Corn, Lima Beans, Mixed Vegetables, 246,000
Carrots and Peas & Carrots
Plymouth, IN...................... Paste-Based Tomato Products, Snap-E-Tom 156,000
and Pineapple Juice
Sleepy Eye, MN.................... Peas and Corn 230,000
Crystal City, TX.................. Green Beans, Spinach, Carrots, Beets and 362,000
Potatoes
Toppenish, WA..................... Asparagus, Corn, Lima Beans and Peas 228,000
Yakima, WA........................ Cherries and Pears 214,000
Arlington, WI..................... Peas, Corn and Sauerkraut 209,000
Markesan, WI...................... Green Beans, Wax Beans and Italian Beans 299,000
Plover, WI........................ Beans, Carrots, Beets and Potatoes 298,000
</TABLE>
- ---------------
* Includes owned manufacturing and on-site warehouse and storage capacity.
In January 1998, the Company announced a four-year plan to consolidate its
California production facilities in order to enhance the efficiency of its fruit
and tomato processing operations and to better meet the competitive challenges
of the market. Tomato production currently taking place at the Modesto plant is
expected to be transferred to the Company's newly acquired state-of-the-art
facility in Hanford in 1999. The Modesto location would then be converted to a
fruit processing plant allowing production currently processed at the San Jose
plant to be transferred to Modesto. At the end of the production season in 2000,
the Company is also expected to close its Stockton fruit plant and transfer
production from that plant to Modesto. Considerations of plant age and location
were primary factors in the decision to close the 80-year-old San Jose plant and
the 70-year-old Stockton plant and transfer production closer to growing areas.
The Company plans an aggregate of approximately $136 million of capital spending
through 2001 to increase production efficiency and reduce costs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "-- Liquidity and Capital Resources -- Investing
Activities."
Co-packers are used for pickles and certain other non-core products and to
supplement supplies of certain canned vegetables, fruit and tomato products.
Prior to December 1993, the Company produced almost all of the cans used to
package its products in the United States at its nine can manufacturing
facilities located throughout the United States. In December 1993, the Company
sold substantially all the assets (and certain related liabilities) of the
Company's can manufacturing business to Silgan Container Corporation ("Silgan").
The transaction included the sale or lease of the Company's nine can
manufacturing facilities. In connection with this agreement, Silgan and the
Company entered into a ten-year supply agreement, with optional successive
five-year extensions by either party under which the Company has agreed to
purchase all of its requirements for metal food and beverage containers in the
United States from Silgan. If Silgan is unable to supply all of such
requirements for any reason, the Company is entitled to purchase the excess from
another supplier. In addition, beginning in the sixth year of the agreement, the
Company is entitled to seek a competitive bid for a portion of its requirements.
Price levels were originally set based on the Company's costs of
self-manufactured containers.
51
<PAGE> 58
Price changes under the contract reflect changes in the manufacturer's costs.
Upon any extension of the agreement, the parties have agreed to negotiate in
good faith the amount of Silgan's margin. The Company's total annual can usage
is approximately two billion cans.
SALES, MARKETING AND DISTRIBUTION
Sales and Marketing
The Company's sales organization for retail products is divided into three
groups: (i) a retail broker network (which consists of 100% independent broker
representation at the market level, managed by Company sales managers); (ii) an
in-house sales force with responsibility for warehouse clubs, mass merchandisers
and supercenters; and (iii) an in-house team responsible for trade promotion.
Retail brokers are independent, commissioned sales organizations that represent
multiple manufacturers and, during fiscal 1997, accounted for 67% of the
Company's total net sales. The Company retains its brokers through a
standardized retail grocery brokerage agreement, and brokers are generally paid
at a percentage of billed and collected sales, which percentage may be increased
based on the broker's accomplishment of specified sales objectives. The
Company's broker network represents the Company to a broad range of grocery
retailers. The Company's warehouse club, mass merchandiser and supercenter group
calls on these customers directly (non-brokered) and is responsible for the
development and implementation of sales programs for non-grocery channels of
distribution that include Wal-Mart, PriceCostco, Kmart and Target. During fiscal
1997, this group accounted for 12% of the Company's total net sales.
Foodservice, food ingredients, private label and military and export sales are
accomplished through both direct sales and brokers and, during fiscal 1997,
accounted for 21% of the Company's total net sales.
The Company's marketing group directs product development, pricing
strategy, consumer promotion, advertising, publicity and package design.
Consumer advertising and promotion support are used, together with trade
spending, to support awareness of new items and initial trial by consumers and
to build recognition of the Del Monte and Contadina brand names.
The Company has been enhancing its sales and marketing efforts with
proprietary software applications, principally its Trade Wizard application and
applications designed to assist customers in managing product categories. The
Trade Wizard application assists the Company in implementing and managing the
timing and scope of its trade and consumer promotions. Customers using the
Company's category management software tools are able to more rapidly identify
sales levels for various product categories so as to achieve an optimal product
mix. Use of these category management tools has resulted in increased shelf
presence for the Company's products, particularly fruit products, relative to
those of the Company's competitors. The Company also has proprietary tools that
allows it to manage its customers' inventory requirements for its products,
thereby reducing customers' inventory levels while enhancing the Company's
opportunities to sell its products.
Distribution
The Company's distribution organization is responsible for the distribution
of finished goods to over 2,400 customer destinations. Customers can order
products to be delivered via third party trucking, rail or on a customer pickup
basis. The Company's distribution centers provide, among other services, casing,
labeling, special packaging, cold storing and fleet trucking services. Other
services the Company provides to customers include One Purchase Order/One
Shipment, in which the Company's most popular products are listed on a
consolidated invoicing service; the UCS Electronic Data Interchange, a paperless
system of purchase orders and invoices; and the Store Order Load Option (SOLO),
in which products are shipped directly to stores.
52
<PAGE> 59
The following table lists the Company's distribution centers:
<TABLE>
<CAPTION>
LOCATION OWNED/LEASED SQUARE FOOTAGE
-------- ------------ --------------
<S> <C> <C>
Birmingham, AL................... Leased 292,000
Clearfield, UT................... Leased 80,000
Dallas, TX....................... Leased 175,000
Rochelle, IL..................... Owned 425,000
Stockton, CA..................... Leased 512,000
Swedesboro, NJ................... Owned 267,000
</TABLE>
CUSTOMERS
The Company's customer base is broad and diverse, and no single customer
accounted for more than 10% of fiscal 1997 sales. The Company's 15 largest
customers during fiscal 1997 represented approximately 47.8% of the Company's
sales. These companies have all been Del Monte customers for at least ten years
and, in some cases, for 20 years or more. The Company has sought to establish
and strengthen its alliances with key customers by offering sophisticated
proprietary software applications to assist customers in managing inventories.
The Company plans to expand its promotion of these applications with its
customers.
COMPETITION
The Company faces substantial competition throughout its product lines from
numerous well-established businesses operating nationally or regionally with
single or multiple branded product lines, as well as with private label
manufacturers. In general, the Company competes on the basis of quality, breadth
of product line and price. See "Risk Factors -- Competition" and "-- Company
Products."
INFORMATION SERVICES
In November 1992, the Company entered into an agreement with EDS to provide
services and administration to the Company in support of its information
services functions. Payments under the terms of the agreement are based on
scheduled monthly base charges subject to various adjustments based on such
factors as production levels and inflation. The agreement expires in November
2002 with optional successive one-year extensions. The Company periodically
reviews its general information system needs, including Year 2000 compliance.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."
RESEARCH AND DEVELOPMENT
The Company's research and development organization provides product,
packaging and process development and analytical and microbiological services,
as well as agricultural research and seed production. In fiscal 1995, 1996 and
1997, R&D expenditures (net of revenue for services to third parties) were $6
million, $6 million and $5 million, respectively. The Company maintains an R&D
facility in Walnut Creek, California where it conducts research in a number of
areas related to its business including seed production, packaging, pest
management, food and nutrition science and plant breeding.
EMPLOYEES
At March 31, 1998, the Company had approximately 2,550 full-time employees.
In addition, approximately 10,900 individuals are hired on a temporary basis
during the pack season. The Company considers its relations with its employees
to be good. In the past several years, the Company has not experienced any work
stoppages or strikes.
The Company has ten collective bargaining agreements with seven union
locals covering approximately 10,600 of its hourly and seasonal employees. One
collective bargaining agreement expires in calendar 1999. The remaining
agreements expire in calendar 2000, 2001 and 2002.
53
<PAGE> 60
INTELLECTUAL PROPERTY
The Company owns a number of registered and unregistered trademarks for use
in connection with various food products, including the marks Del Monte, Snack
Cups, Fruit Cup, FreshCut, Fruit Naturals, Orchard Select, Fruit Smoothie
Blenders, Del Monte Lite and Contadina. These trademarks are important to the
Company because brand name recognition is a key factor in the success of the
Company's products. The current registrations of these trademarks in the United
States and foreign countries are effective for varying periods of time, and may
be renewed periodically, provided that the Company, as the registered owner, or
its licensees, where applicable, comply with all applicable renewal requirements
including, where necessary, the continued use of the marks in connection with
similar goods. The Company is not aware of any material challenge to the
ownership by the Company of its major trademarks.
DMC owns approximately 12 issued U.S. patents covering machines used in
filling, cleaning, and sealing cans, food preservation methods, extracts and
colors, and peeling and coring devices. The patents expire between 2002 and 2014
and cannot be renewed. Patents are generally not material to the Company's
business.
The Company claims copyright protection in its proprietary category
management software and vendor-managed inventory software. The Company's
customers receive reports generated by these software programs and provide data
to the Company for use in connection with the programs. The software itself,
however, is not currently licensed to the Company's customers. The copyrights
are not registered.
The Company has developed a number of proprietary vegetable seed varieties
which it protects against disclosure by restricting access and/or by the use of
non-disclosure agreements. There can be no assurance that the means taken by the
Company to protect the secrecy of its seed varieties will be sufficient to
protect their secrecy or that others will not independently develop similar
technology. The Company has obtained U.S. plant variety protection certificates
under the Plant Variety Protection Act on some of its proprietary seed
varieties. Under such a certificate, the breeder has the right, among other
rights, to exclude others from offering or selling the variety or reproducing it
in the United States. The protection afforded by a plant variety protection
certificate generally runs for 20 years from the date of its issuance.
In connection with the RJR Nabisco Sale, and the divestitures of the
Company's non-core and foreign operations subsequent to that sale, the Company
granted various perpetual, exclusive, royalty-free licenses for use of the Del
Monte name and mark along with certain other trademarks, patents, copyrights and
trade secrets to the acquiring companies or their affiliates. In particular,
with respect to all food and beverage products other than fresh fruits,
vegetables and produce, affiliates of RJR Nabisco hold the rights to use Del
Monte trademarks in Canada and South America; Kikkoman holds the rights to use
Del Monte trademarks in the Far East and Pacific Rim (excluding the
Philippines); Del Monte International holds the rights in Europe, Africa, the
Middle East and the Indian Subcontinent. Fresh Del Monte holds the rights to use
the Del Monte name and trademark with respect to fresh fruit, vegetables, and
produce and certain chilled and frozen products related thereto throughout the
world. With respect to dried fruit, nut and snack products, Yorkshire holds the
rights to use Del Monte trademarks in the United States, Mexico, Central America
and the Caribbean. In connection with agreements to sell Del Monte Latin
America, an affiliate of Hicks, Muse, Tate & Furst acquired the right to use the
Del Monte trademarks with respect to all food and beverage products other than
fresh fruits, vegetables and produce in Mexico and Capital Universal Ltd. (an
affiliate of Donald W. Dickerson, Inc.) acquired similar rights in Central
America and the Caribbean. Dewey Limited (an affiliate of Del Monte
International) owns the rights in the Philippines to the Del Monte brand name.
See "Risk Factors -- Brand Risk."
The Company retains the right to review the quality of the licensee's
products under each of its license agreements. The Company generally may inspect
the licensees' facilities and the licensees must periodically submit samples to
the Company for inspection. Licensees may grant sublicenses but all sublicensees
are bound by these quality control standards and other terms of the license.
The Company has also granted various security and tangible interests in its
trademarks and related trade names, copyrights, patents, trade secrets and other
intellectual property to its creditors, in connection with the
54
<PAGE> 61
Bank Financing, and to its licensees, to secure certain of the Company's
obligations under the license agreements.
GOVERNMENTAL REGULATION
As a manufacturer and marketer of food products, the Company's operations
are subject to extensive regulation by various federal government agencies,
including the Food and Drug Administration, the United States Department of
Agriculture and the FTC, as well as state and local agencies, with respect to
production processes, product attributes, packaging, labeling, storage and
distribution. Under various statutes and regulations, such agencies prescribe
requirements and establish standards for safety, purity and labeling. In
addition, advertising of the Company's products is subject to regulation by the
FTC, and the Company's operations are subject to certain health and safety
regulations, including those issued under the Occupational Safety and Health
Act. The Company's manufacturing facilities and products are subject to periodic
inspection by federal, state and local authorities. The Company believes that it
is in compliance in all material respects with all government environmental laws
and regulations, and maintains all material permits and licenses relating to its
operations. The Company believes its facilities and practices are sufficient to
maintain compliance with applicable governmental laws and regulations.
Nevertheless, there can be no assurance that the Company will be able to comply
with any future laws and regulations. Failure by the Company to comply with
applicable laws and regulations could subject the Company to civil remedies
including fines, injunctions, recalls or seizures as well as potential criminal
sanctions.
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings
incidental to its business, including claims with respect to product liability,
worker's compensation and other employee claims, tort and other general
liability, for which the Company carries insurance or is self-insured, as well
as trademark, copyright and related litigation. The Company believes that no
such legal proceedings will have a material adverse effect on the results of
operations, cash flow, liquidity or financial condition of the Company. See "--
Environmental Compliance" for a description of certain environmental matters in
which the Company is involved.
ENVIRONMENTAL COMPLIANCE
As a result of its agricultural, food processing and canning activities,
the Company is subject to numerous environmental laws and regulations. Many of
these laws and regulations are becoming increasingly stringent and compliance
with them is becoming increasingly expensive. The Company is in compliance in
all material respects with all such laws and regulations. The Company cannot
predict the extent to which any environmental law or regulation that may be
enacted or enforced in the future may affect its operations. The Company is
engaged in a continuing program to maintain its compliance with existing laws
and regulations and to establish compliance with anticipated future laws and
regulations.
In connection with the sale of one of its facilities, the Company is
currently remediating conditions resulting from the release of petroleum from
underground storage tanks ("USTs"). The Company is also conducting a groundwater
investigation at one currently owned property for hydrocarbon contamination that
it believes resulted from the operations of an unaffiliated prior owner of the
property. At the present time, the Company is unable to predict the total cost
for the remediation or the extent to which it may obtain contribution from the
prior owner. Further, there can be no assurance that investigation and
remediation of environmental conditions will not be required at other properties
currently or formerly owned or operated by the Company. Nonetheless, the Company
does not expect that these and other such remediation costs will have a material
adverse effect on the Company's financial condition or results of operations.
The Company has been notified by governmental authorities and private
claimants that it is a PRP or may otherwise be potentially responsible for
environmental investigation and remediation costs at certain contaminated sites
under CERCLA or under similar state laws. With the exception of one previously
owned site, the Company has potential liability at each site because it
allegedly sent certain wastes from its operations
55
<PAGE> 62
to these sites for disposal or recycling. These wastes consisted primarily of
empty metal drums (which previously held raw materials), used oils and solvents,
solder dross and paint waste.
The Company is indemnified for any liability at two of these sites,
including the previously owned site. With respect to a majority of the sites at
which the Company has been identified as a PRP and is not indemnified by another
party, the Company has settled its liability with the responsible regulatory
agency. The Company believes that it has no liability for the remaining sites,
except with respect to one site at which it is a member of the PRP group. The
PRP group is conducting a Remedial Investigation and Feasibility Study to
analyze the nature and extent of the contamination and to evaluate remedial
alternatives for the site. Based upon the information currently available, the
Company does not expect that its liability for this site will be material. There
can be no assurance that the Company will not be identified as a PRP at
additional sites in the future.
The Company spent approximately $5 million on domestic environmental
capital projects and expenditures from fiscal 1995 through fiscal 1997,
primarily related to UST remediation activities and upgrades to boilers and
wastewater treatment systems. The Company projects that it will spend an
aggregate of approximately $4 million in fiscal 1998 and 1999 on capital
projects and other expenditures in connection with environmental compliance,
primarily for boiler upgrades, compliance costs related to the consolidation of
its fruit and tomato processing operations and continued UST remediation
activities. The Company believes that its CERCLA and other environmental
liabilities will not have a material adverse effect on the Company's financial
position or results of operations.
PROPERTIES
As of December 31, 1997, the Company operated 15 production facilities and
six distribution centers. See "-- Supply and Production" and "-- Sales,
Marketing and Distribution." The Company's production facilities are owned
properties, while its distribution centers are owned or leased. The Company has
various warehousing and storage facilities, which are primarily leased
facilities. The Company's leases are generally long-term. Virtually all of the
Company's properties, whether owned or leased, are subject to liens or security
interests.
The Company's principal administrative headquarters are located in leased
office space in San Francisco, California. The Company owns its primary research
and development facility in Walnut Creek, California.
The Company holds certain excess properties for sale and periodically
disposes of excess land and facilities through sales.
Management considers its facilities to be suitable and adequate for its
business and to have sufficient production capacity for the purposes for which
they are currently intended.
56
<PAGE> 63
CORPORATE HISTORY
DMC was acquired in 1979 by the predecessor of RJR Nabisco. In 1990, DMC
and certain of its subsidiaries and affiliates were sold in the RJR Nabisco Sale
for $1.5 billion to Del Monte and DMPF Corp., a Delaware corporation, which were
organized by ML&Co. and capitalized by ML&Co. and certain other investors
including Court Square Capital, L.P., an affiliate of Citibank, N.A., Kikkoman,
Polly Peck, W.R. Huff Asset Management Co., Charterhouse Equity Partners, L.P.
and certain present and former members of management of the Company. The RJR
Nabisco Sale excluded certain businesses that were retained by RJR Nabisco, such
as the Del Monte processed foods operations in Canada and South America. Certain
other Del Monte businesses were not acquired, including the Del Monte fresh
produce business, which was sold by RJR Nabisco to Polly Peck, which, in turn,
sold it to Fresh Del Monte. In connection with the RJR Nabisco Sale and,
subsequently, in connection with the sale of the Company's foreign operations,
as described below, the Company granted various perpetual, exclusive
royalty-free licenses for the use of the Del Monte name and trademark. The
licensees of the Del Monte name and trademark include Del Monte International,
Kikkoman, Fresh Del Monte and Yorkshire. None of the licensees is affiliated
with the Company except for Yorkshire, of which the Company owns 20% of the
common stock. See "Risk Factors -- Brand Risk" and "Business -- Intellectual
Property."
Following the RJR Nabisco Sale, the Company sold certain of its properties,
including the Company's processed foods operations in the Far East (other than
the Philippines) to Kikkoman for approximately $104 million; the Hawaiian Punch
business to Procter & Gamble for approximately $147 million; and Del Monte
International to Gravelgrove Limited for approximately $360 million, and applied
substantially all of the proceeds from such sales to the partial repayment of
the bank financing used to finance the RJR Nabisco Sale. In connection with the
sale of Del Monte International, the Company acquired an 8.35% equity investment
in Del Monte International. Subsequently, in the fiscal quarter ended March 31,
1993, the Company sold such equity investment for approximately $23 million.
In January 1991, the Company completed the sale of a 49.9% interest in Del
Monte Philippines. As a result of this transaction, the Company received $16.7
million in cash, $17.9 million in notes (which were subsequently repaid), $8.7
million in a future purchase price adjustment (all of which has been paid) and
$1.3 million of preferred stock of a subsidiary of Del Monte Philippines (20% of
which was redeemed in May 1994 and 20% redeemed in May 1995). The Company
retained a 50.1% interest in Del Monte Philippines. In March 1996, the Company
sold its 50.1% interest in Del Monte Philippines and the remaining preferred
stock to a joint venture affiliated with Del Monte International for $100
million. In connection with the sale of its interest in Del Monte Philippines,
the Company signed an eight-year supply agreement under which the Company is
required to source substantially all of its pineapple requirements from Del
Monte Philippines over the term of the agreement.
In August 1993, the Company sold its dried fruit and snack operation to
Yorkshire for cash and stock totaling $22.6 million. As part of the asset sale
transaction, the Company acquired 20% of the outstanding common stock and 1,000
shares of 7% preferred stock of Yorkshire. Following the expiration of a
standstill agreement in July 1996, the Company granted a right of first refusal
to Yorkshire to acquire the Company's equity interest in Yorkshire, and
Yorkshire Foods, Inc., the parent of Yorkshire ("YFI"), granted a right of
co-sale to the Company in the event that YFI proposed to sell its equity
interest in Yorkshire.
In December 1993, the Company sold substantially all of the assets and
certain related liabilities of its can manufacturing operations in the United
States to Silgan for $72 million. At the same time, the Company entered into a
ten-year supply agreement under which Silgan would, effective immediately after
the sale, provide the Company with substantially all of its domestic can
requirements. The supply agreement provides the Company with a long-term supply
of cans at prices that adjust over time for normal manufacturing cost increases
or decreases. See "Business -- Supply and Production."
On June 27, 1994, Del Monte entered into an Agreement and Plan of Merger
(the "1994 Merger Agreement") with Grupo Empacador de Mexico, S.A. de C.V. and
CCP Acquisition Company of Maryland, Inc., which were formed by an investor
group led by Mr. Carlos Cabal Peniche for the purpose of effecting an
acquisition (the "Proposed Acquisition") of the Company. The Merger Agreement
provided that Del Monte
57
<PAGE> 64
was entitled to terminate the 1994 Merger Agreement if the effective date of the
Proposed Acquisition failed to occur on or prior to September 19, 1994. The
effective date of the Proposed Acquisition did not occur on or prior to such
date and, on September 21, 1994, Del Monte terminated the 1994 Merger Agreement
in accordance with its terms. Pursuant to the 1994 Merger Agreement, because the
Proposed Acquisition failed to occur by September 19, 1994, Del Monte drew $30
million under a letter of credit issued by Banco Union, S.A., a bank affiliated
with Mr. Cabal. Such amount was applied to the repayment of indebtedness then-
outstanding under the Company's then-existing revolving credit agreement.
In November 1995, the Company sold its pudding business to Kraft for $89
million.
In October 1996, the Company sold its Mexican subsidiary for $38 million,
and, in November 1996, sold its Central American and Caribbean operations for
$12 million.
On April 18, 1997, Del Monte was recapitalized through the merger of Shield
with and into Del Monte, with Del Monte being the surviving corporation. By
virtue of the Recapitalization, shares of Del Monte's preferred stock having an
implied value of approximately $14 million held by certain of Del Monte's
stockholders who remained investors were cancelled and were converted into the
right to receive new Del Monte Common Stock. All other shares of Del Monte
capital stock were cancelled and were converted into the right to receive cash
consideration. In connection with the Recapitalization, the Company repaid
substantially all of its funded debt obligations existing immediately before the
Recapitalization. In the Recapitalization, the common stock and preferred stock
of Shield was converted into new shares of Common Stock and preferred stock,
respectively, of Del Monte.
On December 19, 1997, the Company acquired the Contadina business for $177
million in cash, plus an estimated working capital adjustment of approximately
$20 million. The purchase price was subject to adjustment based on the final
calculation of net working capital as of the closing date. Nestle provided its
calculation of the net working capital, which resulted in a payment to the
Company of approximately $2 million, and therefore a reduction in the purchase
price to $195 million. The Contadina Acquisition also included the assumption of
certain liabilities of approximately $2 million, consisting primarily of
liabilities in respect of reusable packaging materials and accrued vacation.
On May 1, 1998, Del Monte merged with and into a newly created,
wholly-owned subsidiary incorporated under the laws of the State of Delaware to
change Del Monte's state of incorporation from Maryland to Delaware.
Following the Offering, TPG will own approximately 48.4% of the Common
Stock (approximately 44.9% if the U.S. Underwriters' overallotment option is
exercised in full) and will have the power to influence substantially and
possibly to control the management and policies of the Company, as well as the
determination of matters requiring stockholder approval. TPG is part of Texas
Pacific Group, which was founded by David Bonderman, James G. Coulter and
William S. Price, III in 1992 to pursue public and private investment
opportunities. Texas Pacific Group's other investments include such branded
consumer products companies as Beringer Wine Estates Holdings, Inc., Ducati
Motors S.p.A., Favorite Brands International, Inc. and J. Crew Group, Inc.
58
<PAGE> 65
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of individuals
who are serving as directors and executive officers of Del Monte. Such
individuals hold the same positions with DMC. Each director will hold office
until the next annual meeting of shareholders or until his successor has been
elected and qualified. Officers are elected by the Board of Directors and serve
at the discretion of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Richard W. Boyce....................... 44 Chairman of the Board; Director
Richard G. Wolford..................... 53 Chief Executive Officer; Director
Wesley J. Smith........................ 51 Chief Operating Officer; Director
Timothy G. Bruer....................... 41 Director
Al Carey............................... 46 Director
Patrick Foley.......................... 66 Director
Brian E. Haycox........................ 56 Director
Denise M. O'Leary...................... 40 Director
William S. Price, III.................. 42 Director
Jeffrey A. Shaw........................ 33 Director
David L. Meyers........................ 52 Executive Vice President,
Administration and Chief Financial
Officer
Glynn M. Phillips...................... 60 Executive Vice President, Sales
Brent D. Bailey........................ 45 Executive Vice President, Marketing
Thomas E. Gibbons...................... 50 Senior Vice President and Treasurer
William J. Spain....................... 56 Senior Vice President, Technology
Richard L. French...................... 40 Vice President and Chief Accounting
Officer
William R. Sawyers..................... 35 Vice President, General Counsel and
Secretary
</TABLE>
Richard W. Boyce, Chairman of the Board; Director. Mr. Boyce became
Chairman of the Board and a director of Del Monte in August 1997. Mr. Boyce
became President of SRB, Inc., which provides management services to TPG and its
affiliated companies, in 1997. He was employed by PepsiCo from 1992 to 1997,
most recently as Senior Vice President of Operations for Pepsi-Cola North
America. From 1980 to 1992, Mr. Boyce was employed by Bain & Co. He is also a
director of J. Crew Group, Inc., certain of its subsidiaries and Favorite Brands
International, Inc.
Richard G. Wolford, Chief Executive Officer; Director. Mr. Wolford joined
Del Monte as Chief Executive Officer and a director in April 1997 upon
consummation of the Recapitalization. From 1967 to 1987, he held a variety of
positions at Dole Foods, including President of Dole Packaged Foods from 1982 to
1987. From 1988 to 1996, he was Chief Executive Officer of HK Acquisition Corp.
where he developed food industry investments with venture capital investors.
Wesley J. Smith, Chief Operating Officer; Director. Mr. Smith joined Del
Monte as Chief Operating Officer and a director in April 1997 upon consummation
of the Recapitalization. From 1972 to 1995, he was employed by Dole Foods in a
variety of positions, including senior positions in finance, marketing,
operations and general management in California, Hawaii and Honduras.
Timothy G. Bruer, Director. Mr. Bruer became a director of Del Monte in
August 1997. Mr. Bruer has been President and Chief Executive Officer and a
director of Silverado Foods, Inc. since March 1997. From 1993 until that time,
he was Vice President and General Manager of the Culinary Division of Nestle. He
is also a director of Authentic Specialty Foods Inc.
Al Carey, Director. Mr. Carey became a director of Del Monte in November
1997. He is the Chief Operating Officer of Frito-Lay, Inc., a division of
PepsiCo, Inc., and has been employed in various capacities with that company
since 1981.
59
<PAGE> 66
Patrick Foley, Director. Mr. Foley became a director of Del Monte in August
1997. Mr. Foley is Chairman, President and Chief Executive Officer of DHL
Corporation, Inc. and its major subsidiary, DHL Airways, Inc. He joined DHL in
September 1988, with more than 30 years experience in hotel and airline
industries. He was formerly Chairman and President of Hyatt Hotel Corporation.
Mr. Foley serves on the Boards of Directors of Continental Airlines, Inc., DHL
International, Flextronics International, Foundation Health Systems, Inc. and
Glenborough Realty Trust, Inc.
Brian E. Haycox, Director. Mr. Haycox was elected to the Board of Directors
of Del Monte in June 1995. He was elected as Co-Chairman and Co-Chief Executive
Officer of Del Monte in December 1995, and he served in those capacities until
the consummation of the Recapitalization. Mr. Haycox served as President and
Chief Executive Officer of Del Monte Tropical Fruit Company from 1988 until
1993. Prior to that time Mr. Haycox served in a variety of management positions
within the Del Monte organization.
Denise M. O'Leary, Director. Ms. O'Leary became a director of Del Monte in
August 1997. Ms. O'Leary has been a Special Limited Partner of Menlo Ventures
since 1996. From 1983 to 1996, she was a General Partner of Menlo Ventures. Ms.
O'Leary serves on the Boards of Directors of various private companies as well
as on the Board of ALZA Corporation. She is a member of the Board of Trustees of
Stanford University and a director of UCSF Stanford Health Care.
William S. Price, III, Director. Mr. Price became a director of Del Monte
in August 1997. Mr. Price was a founding partner of TPG in 1992. Prior to
forming TPG, he was Vice President of Strategic Planning and Business
Development for G. E. Capital, and from 1985 to 1991, he was employed by Bain &
Company, where he was a partner and co-head of the Financial Services Practice.
Mr. Price serves on the Boards of Directors of Belden & Blake Corporation,
Beringer Wine Estates Holdings, Inc., Continental Airlines, Inc., Denbury
Resources, Inc., Favorite Brands International, Inc., Vivra Specialty Partners,
Inc. and Zilog, Inc.
Jeffrey A. Shaw, Director. Mr. Shaw became a director of Del Monte in May
1997. Mr. Shaw is a partner of TPG and has been an executive of TPG since 1993.
Prior to joining TPG, Mr. Shaw was a principal of Acadia Partners, L.P., an
investment partnership affiliated with the Robert M. Bass Group, for three
years. Mr. Shaw serves as a director of Ducati Motors S.p.A., Ducati North
America, Inc., Favorite Brands International, Inc. and Ryanair PLC.
David L. Meyers, Executive Vice President, Administration and Chief
Financial Officer. Mr. Meyers joined the Company in 1989. He was elected Chief
Financial Officer of Del Monte in December 1992 and served as a member of the
Board of Directors of Del Monte from January 1994 until consummation of the
Recapitalization. Prior to joining the Company, Mr. Meyers held a variety of
financial and accounting positions with RJR Nabisco (1987 to 1989), Nabisco
Brands USA (1983 to 1987) and Standard Brands, Inc. (1973 to 1983).
Glynn M. Phillips, Executive Vice President, Sales. Mr. Phillips joined Del
Monte in October 1994. Prior to joining the Company, Mr. Phillips was Vice
President, Sales of The Clorox Company where he also held various sales and
marketing positions from 1973 to 1994.
Brent D. Bailey, Executive Vice President, Marketing. Mr. Bailey joined Del
Monte in his current position in January 1998. Prior to that he was with The
Dial Corporation since 1992 as Senior Vice President and General
Manager -- Household Division, and Senior Vice President -- Portfolio Group.
From 1974 to 1992, Mr. Bailey held marketing management positions with Procter &
Gamble, Frito-Lay and Pillsbury.
Thomas E. Gibbons, Senior Vice President and Treasurer. Mr. Gibbons joined
Del Monte in 1969 and was elected to his current position in February 1995. He
was elected Vice President and Treasurer of Del Monte in January 1990. Mr.
Gibbons' prior experience also includes a variety of positions within the
Company's and RJR Nabisco's tax and financial organizations.
William J. Spain, Senior Vice President, Technology. Mr. Spain joined Del
Monte in 1966 and was elected to his current position in February 1995.
Previously, he was Vice President, Research, Government and Industry Relations
of Del Monte. Mr. Spain has also held various positions within Del Monte in
corporate
60
<PAGE> 67
affairs, production management, quality assurance, environmental and energy
management, and consumer services.
Richard L. French, Vice President and Chief Accounting Officer. Mr. French
joined Del Monte in 1980 and was elected to his current position in August 1993.
Mr. French was Controller and Chief Accounting Officer of Del Monte from March
1990 through August 1993 and has held a variety of positions within the
Company's financial organization.
William R. Sawyers, Vice President, General Counsel and Secretary. Mr.
Sawyers joined Del Monte in November 1993 and was elected to his current
position in 1995. Prior to joining the Company, Mr. Sawyers was an associate
with the law firm of Shearman & Sterling from 1987 to 1993.
COMMITTEES OF THE BOARD OF DIRECTORS; TERM
Del Monte's Board of Directors has the committees described below.
The Nominating and Compensation Committee (the "Compensation Committee")
has authority to determine executive compensation and will approve the terms of
stock options and stock purchase rights pursuant to the Company's plans and
arrangements (as described below). The Compensation Committee's current members
are Messrs. Price and Shaw and Ms. O'Leary.
The Audit Committee is responsible for reviewing the activities of the
Company's independent accountants and internal audit department. The Audit
Committee's members are Messrs. Bruer, Foley and Haycox. The directors on the
Audit Committee are not affiliated with the Company or TPG, in accordance with
applicable New York Stock Exchange requirements.
The Board of Directors of Del Monte is divided into three classes, as
nearly equal in number as possible, with each director serving a three year term
and one class being elected at each year's annual meeting of stockholders.
Messrs. Bruer, Haycox and Price are in the class of directors whose term expires
at the 1999 annual meeting of Del Monte's stockholders. Messrs. Foley, Shaw and
Smith are in the class of directors whose term expires at the annual meeting of
Del Monte's stockholders to be held in the year 2000. Messrs. Boyce, Carey and
Wolford and Ms. O'Leary are in the class of directors whose term expires at the
2001 annual meeting of Del Monte's stockholders. At each annual meeting of Del
Monte's stockholders, successors to the class of directors whose term expires at
such meeting will be elected to serve for three year terms and until their
successors are elected and qualified.
61
<PAGE> 68
EXECUTIVE COMPENSATION
The following table sets forth compensation paid by the Company for fiscal
years 1995, 1996 and 1997 to each individual serving as its Chief Executive
Officer during fiscal 1997 and to each of the four other most highly compensated
executive officers of the Company as of the end of fiscal 1997, and to one
executive officer whose employment terminated prior to the end of fiscal 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(3)
---------------
OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITIONS FISCAL YEAR SALARY(1) BONUS COMP.(2) PAYOUTS COMP.(4)
- ---------------------------- ----------- --------- ------- ------------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Wolford(5)....... 1997 $100,641 $ -- $ -- $-- $ 251,196
Chief Executive Officer
Brian E. Haycox............. 1997 602,404 -- 73,471 -- 5,323,303
Co-Chairman/Co-CEO(6) 1996 420,673 -- 247,780 -- 8,052
Paul H. Mullan.............. 1997 602,404 -- 221,940 -- 5,288,452
Co-Chairman/Co-CEO(7) 1996 420,673 -- 817,978 -- 8,052
David L. Meyers............. 1997 286,000 159,400 -- 421,000 2,959,771
Executive Vice President, 1996 273,000 143,000 55,386 421,000 11,242
Administration & CFO 1995 302,500 -- 145,954 421,000 9,786
Glynn M. Phillips........... 1997 239,118 118,300 -- 280,000 1,974,454
Executive Vice President, 1996 225,750 118,250 -- 280,000 9,206
Sales
1995 158,907 -- -- 280,000 52,724
Thomas E. Gibbons........... 1997 183,458 59,900 -- 210,000 115,829
Senior Vice President and 1996 175,600 63,900 -- 54,600 4,717
Treasurer 1995 161,703 53,600 -- 50,400 4,728
William J. Spain............ 1997 147,917 49,500 -- 162,000 115,766
Senior Vice President, 1996 139,167 49,700 -- 42,100 4,417
Technology 1995 126,542 40,700 -- 38,900 4,024
David M. Little(8).......... 1997 250,250 -- -- 421,000 3,363,581
Executive Vice President, 1996 286,650 150,150 -- 421,000 10,660
Worldwide Operations 1995 309,500 -- -- 421,000 10,302
</TABLE>
- ---------------
(1) Reflects actual base earnings for the fiscal year specified.
(2) Fiscal 1995 reflects certain perquisites, including moving expenses for Mr.
Meyers ($129,838). Fiscal 1996 reflects certain perquisites, including
relocation related expenses for Mr. Haycox ($243,092) and Mr. Mullan
($812,333); moving expenses for Mr. Meyers ($33,091) and company car
($15,500). Fiscal 1997 reflects certain perquisites, including relocation
related taxes for Mr. Haycox ($57,005) and Mr. Mullan ($198,955).
(3) Reflects payments under the Company's Old MEP (as defined below) and Long
Term Incentive Plan.
(4) For fiscal 1995: Company contributions to the Del Monte Corporation Savings
Plan -- Mr. Meyers $4,500; Mr. Gibbons $4,500; Mr. Spain $3,796; Mr. Little
$4,500, Company paid term life premiums -- Mr. Meyers $1,960; Mr. Phillips
$2,724; Mr. Gibbons $228; Mr. Spain $228; Mr. Little $2,080, a sign-on bonus
for Mr. Phillips $50,000, amount paid under the nonqualified Additional
Benefits Plan -- Mr. Meyers $3,326; Mr. Little $3,722. For fiscal 1996:
Company contributions to the Del Monte Corporation Savings Plan -- Mr.
Haycox $4,500; Mr. Mullan $4,500; Mr. Meyers $4,500; Mr. Phillips $4,500;
Mr. Gibbons $4,500; Mr. Spain $4,200; Mr. Little $4,500, Company paid term
life premiums -- Mr. Haycox $3,552; Mr. Mullan $3,552; Mr. Meyers $3,407;
Mr. Phillips $4,706; Mr. Gibbons $217; Mr. Spain $217; Mr. Little $2,428,
amount paid under the nonqualified Additional Benefits Plan -- Mr. Meyers
$3,335; Mr. Little $3,732. For fiscal 1997: Company contributions to the Del
Monte Corporation Savings Plan -- Mr. Haycox $4,800; Mr. Mullan $5,738; Mr.
Meyers $4,500; Mr. Phillips $4,500; Mr. Gibbons $4,500; Mr. Spain $4,437;
Mr. Little $3,003; Company paid term life premiums --
62
<PAGE> 69
Mr. Wolford $1,196; Mr. Haycox $13,057; Mr. Mullan $10,657; Mr. Meyers
$4,198; Mr. Phillips $5,325; Mr. Gibbons $217; Mr. Spain $217; Mr. Little
$2,739, amount paid under the nonqualified Additional Benefits Plan -- Mr.
Meyers $4,130; Mr. Little $4,567, amount paid due to termination for Mr.
Haycox $393,874; Mr. Mullan $360,485; Mr. Little $406,329, amounts under the
New MEP (as defined below) paid April 1997 -- Mr. Haycox $4,911,572; Mr.
Mullan $4,911,572; Mr. Meyers $2,946,943; Mr. Phillips $1,964,629; Mr.
Gibbons $111,112; Mr. Spain $111,112; Mr. Little $2,946,943. For Mr.
Wolford, the fiscal 1997 amount includes a consulting fee of $250,000 paid
in December 1997 for the period prior to April 18, 1997.
(5) Mr. Wolford became Chief Executive Officer as of April 18, 1997.
(6) Mr. Haycox's employment as Co-Chairman/Co-CEO terminated as of April 18,
1997.
(7) Mr. Mullan's employment as Co-Chairman/Co-CEO terminated as of April 18,
1997.
(8) Mr. Little's employment as Executive Vice President, Worldwide Operations
terminated as of April 30, 1997.
EMPLOYMENT AND OTHER ARRANGEMENTS
The Management Equity Plan
Established beginning in fiscal 1995 and modified in March 1996, the
Company's Management Equity Plan ("New MEP") provided awards to certain key
executives upon the sale of the Company or upon the public offering of the
Company's Common Stock. Under the terms of the New MEP, the "Base Value" of the
Company's preferred and Common Stock was established at $125 million. To the
extent that proceeds from the sale of the Company to preferred and common
stockholders (after repayment of debt but without reduction for payment to
executives under the New MEP) exceeded the $125 million Base Value, an award
pool of 6% of such excess was set aside for payment to the Company's executive
officers. The New MEP was terminated concurrent with the Recapitalization.
In connection with the Recapitalization, the Company made payments
aggregating approximately $19.7 million pursuant to the New MEP. This amount was
allocated as follows:
<TABLE>
<S> <C>
Mr. Haycox............................................... $4,911,572
Mr. Mullan............................................... 4,911,572
Mr. Little............................................... 2,946,943
Mr. Meyers............................................... 2,946,943
Mr. Phillips............................................. 1,964,629
Other officers(1)........................................ 2,000,016
</TABLE>
- ---------------
(1) Other officers include Messrs. Gibbons and Spain and 16 other senior
officers.
Messrs. Meyers, Little and Phillips were participants in the MEP prior to
its modification in March 1996 (the "Old MEP"), and as such became eligible for
awards for fiscal 1995 based on the annual equity growth formula in effect under
the Old MEP for such year. Messrs. Meyers, Little and Phillips were paid
installment payments of the Old MEP awards in the amounts of $421,000, $421,000
and $280,000, respectively, in June 1996 and remained eligible for installment
payment of the Old MEP awards in the amounts of $421,000, $421,000 and $280,000,
respectively, for fiscal 1997. The Company paid these fiscal 1997 awards at the
time of the Recapitalization.
Long Term Incentive Plan
Established on July 1, 1990, amended and restated on July 1, 1995, the Long
Term Incentive Plan ("LTIP") provided certain key management employees with a
long-term incentive program based on Company performance. The LTIP had a
performance cycle of three fiscal years with interim award payments at the end
of each fiscal year based on the employee's target award. The three-year target
award was determined by multiplying (i) the executive's base pay by (ii) a
percentage based on salary grade level, and multiplying the result by (iii)
three (for each fiscal year in the performance cycle). Interim awards were
63
<PAGE> 70
determined by comparing actual financial performance compared to target goals
and subject to a percentage payout schedule. Mr. Gibbons received fiscal 1995
and fiscal 1996 awards of $50,400 and $54,600, respectively. Mr. Gibbons
received the final fiscal 1997 award in the amount of $210,000 at the time of
the Recapitalization. Mr. Spain received fiscal 1995 and fiscal 1996 awards of
$38,900 and $42,100, respectively. Mr. Spain received the final fiscal 1997
award in the amount of $162,000 at the time of the Recapitalization. This plan
was terminated following the Recapitalization.
The Annual Incentive Award Plan
The Annual Incentive Award Plan ("AIAP") provides annual cash bonuses to
certain management employees, including certain of the named senior executives.
The target bonus for each eligible employee is based on a percentage of base
salary. Actual payment amounts are based on the Company's achievement of annual
earnings objectives and individual performance objectives at fiscal year end.
The targeted percentage of base salary is as follows: Mr. Little -- 50%, Mr.
Meyers -- 50%, Mr. Phillips -- 50%, Mr. Gibbons -- 30% and Mr. Spain -- 30%. Mr.
Haycox and Mr. Mullan were not eligible for the AIAP for fiscal 1996 or fiscal
1997. Mr. Wolford was not eligible for the AIAP for fiscal 1997. Mr. Little
received his fiscal 1997 AIAP payment of $150,150 at the time of his termination
as of April 30, 1997.
Stock Purchase Plan
The Del Monte Foods Company Employee Stock Purchase Plan was approved on
August 4, 1997 and amended on November 4, 1997. Under the Plan, key employees
are allowed to purchase up to $5 million in Common Stock. To date, 454,146
shares of the Company's Common Stock have been purchased by and issued to
eligible employees.
Stock Incentive and Option Plans
The Del Monte Foods Company 1997 Stock Incentive Plan was approved on
August 4, 1997 and amended on November 4, 1997. Under the 1997 Stock Incentive
Plan, grants of incentive stock options and nonqualified stock options
representing 1,784,980 shares of Common Stock may be made to key employees. With
the exception of options for 151,701 shares issued to Mr. Bailey on January 19,
1998, the options were granted at an exercise price equal to the fair market
value of the shares at the time of such grant and have a ten-year term. Two
different vesting schedules have been approved under the 1997 Stock Incentive
Plan. The first provides for annual vesting on a proportionate basis over five
years and the second provide for monthly vesting on a proportionate basis over
four years. Pursuant to this plan, options for 1,736,520 shares of Common Stock
have been granted to eligible employees to date and of which options for
1,690,167 shares remain outstanding.
The Del Monte Foods Company 1998 Stock Option Plan (the "1998 Stock Option
Plan") was approved by the Board of Directors of Del Monte on April 24, 1998.
Under the 1998 Stock Option Plan, grants of incentive and nonqualified stock
options ("Options"), stock appreciation rights ("SARs") and stock bonuses
(together with Options and SARs, "Awards") representing 3,064,672 shares of
Common Stock may be made to employees of the Company. Subject to certain
limitations, the Compensation Committee has authority to grant Awards under the
1998 Stock Option Plan and to set the terms of any such Awards. As of May 1,
1998, no Awards had been made under the 1998 Stock Option Plan.
The Del Monte Retirement Plan for Salaried Employees
The Del Monte Corporation Retirement Plan for Salaried Employees (the "Del
Monte Corporation Retirement Plan"), which became effective as of January 1,
1990, is a non-contributory defined benefit retirement plan covering salaried
employees of the Company. Credits are made monthly to each participant's
personal retirement account ("PRA") consisting of a percentage of that month's
eligible compensation, plus interest on his or her account balance. A
participant is fully vested upon completion of five years of service.
64
<PAGE> 71
The percentage of monthly compensation credited varies according to age as
follows:
<TABLE>
<CAPTION>
ALL MONTHLY MONTHLY COMPENSATION
PARTICIPANT AGE COMPENSATION ABOVE SOCIAL SECURITY BASE
--------------- ------------ --------------------------
<S> <C> <C>
Below 35................................... 4.0% 3.0%
35 but below 45............................ 5.0 3.0
45 but below 55............................ 6.0 3.0
55 and over................................ 7.0 3.0
</TABLE>
The Del Monte Corporation Retirement Plan was amended effective January 1,
1998 to change the interest credit from 110% of the U.S. Pension Benefit
Guaranty Corporation ("PBGC") rate to the yield on the 12-month Treasury Bill
rate plus 1.5%. In addition, the factors for annuity conversions were changed
from specific Company factors to factors based on 30-year Treasury Bond yields
and an Internal Revenue Service ("IRS") specified mortality table. A
participant's annual age 65 annuity benefit will be the greater of an annuity
based on (i) the credit balance as of December 31, 1997 increased by interest
credits (and not compensation credits) of 110% of the December 31, 1997 PBGC
rate divided by 8.2 or (ii) the credit balance at the time of retirement using
an annuity factor based on 30-year Treasury Bond yields and an IRS specified
mortality table. Alternatively, a participant at retirement or other termination
of employment may elect a lump sum distribution of his or her account balance.
Participants who, as of January 1, 1988, were at least age 40 with ten or
more years' service, or at least age 55 with five or more years' service, are
eligible to receive an alternative retirement benefit that is based on the terms
of the prior Del Monte Corporation Retirement Plan. For credited service after
December 31, 1981, such participants have accrued an annual benefit of 1.75% of
average final compensation multiplied by years of credited service. Average
final compensation is the participant's highest five years' average compensation
during his or her last ten years of credited service; compensation generally
includes base salary and awards under the AIAP but not other forms of incentive
compensation. The amount determined by this alternative benefit formula is
reduced by 0.75% of the participant's Social Security benefit, multiplied by
years of credited service. For credited service prior to January 1, 1982, a
similar benefit formula is applied.
The Del Monte Corporation Retirement Plan was amended effective April 30,
1992 to cease recognition of any future credited service or average final
compensation under the alternative retirement benefit. At retirement, a
participant who was eligible for the alternative retirement benefit will receive
an annual retirement benefit equal to the greater of the retirement benefit
determined by his or her PRA, or his or her alternative retirement benefit based
on compensation and credited service to April 30, 1992. Alternatively, a
participant may elect the greater of a lump sum distribution of his or her PRA
account balance or the actuarial equivalent lump sum of the alternative benefit.
Nonqualified Retirement Plans. Effective January 1, 1990, the Company
established the Del Monte Corporation Additional Benefits Plan and the Del Monte
Corporation Supplemental Benefits Plan (the "Nonqualified Retirement Plans").
The Nonqualified Retirement Plans are "top hat" and "excess" benefit plans
designed to provide benefits in excess of those otherwise permitted under the
Del Monte Corporation Retirement Plan and the Del Monte Corporation Savings Plan
(which is qualified under Section 401(k) of the Internal Revenue Code) by
Sections 401(a)(17) and 415 of the Internal Revenue Code. The Nonqualified
Retirement Plans also provide benefits in respect of certain amounts of
severance not taken into account under the Del Monte Corporation Retirement Plan
or the Del Monte Corporation Savings Plan. Employees who participate in the Del
Monte Corporation Retirement Plan or the Del Monte Corporation Savings Plan are
generally eligible to participate in the Nonqualified Retirement Plans. Benefits
under the Nonqualified Retirement Plans are unfunded and paid from the general
assets of the Company.
65
<PAGE> 72
Set forth below are the estimated annual benefits payable at age 65
(assuming lump sum payments are not elected) under the Del Monte Corporation
Retirement Plan and the Nonqualified Retirement Plans:
<TABLE>
<CAPTION>
YEAR ATTAINING ESTIMATED ANNUAL
PARTICIPANT AGE 65 RETIREMENT BENEFIT(A)
----------- -------------- ---------------------
<S> <C> <C>
Mr. Wolford................................... 2009 $125,819
Mr. Phillips.................................. 2002 28,260
Mr. Meyers.................................... 2010 179,742
Mr. Gibbons................................... 2012 178,762
Mr. Spain..................................... 2007 104,915
</TABLE>
- ---------------
(a) The estimated annual retirement benefits shown assumes no increase in
compensation or AIAP and interest credits of 6.68%.
Employment Arrangements. During fiscal 1997, the Company had employment
agreements with each of Messrs. Haycox, Mullan, Meyers, Little, Phillips,
Gibbons and Spain. The following summaries of the material provisions of the
employment agreements with Messrs. Haycox and Mullan (each, a "CEO Agreement"
and collectively, the "CEO Agreements"), the employment agreements with Messrs.
Meyers and Little (each, an "EVP Employment Agreement" and collectively, the
"EVP Employment Agreements") and the employment agreement with Mr. Phillips (the
"Phillips Employment Agreement") do not purport to be complete and are qualified
in their entirety by reference to such agreements. The employment of Messrs.
Haycox and Mullan pursuant to the CEO Agreements was terminated effective as of
April 18, 1997. The employment of Mr. Little pursuant to his EVP Employment
Agreement was terminated effective as of April 30, 1997. The employment
agreements of Messrs. Meyers, Phillips, Gibbons and Spain have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The CEO Agreements provided for an initial term ending on December 31,
1997. Under the terms of the CEO Agreements, if an executive is terminated for
any reason other than for cause, if he resigns for good reason or if his
employment is terminated upon a sale of the Company, he shall be entitled to a
lump sum payment, within ten days of his termination, equal to the base salary
that he would have earned through December 31, 1997. The executive will also
receive any amounts due under the MEP, and will continue to participate in any
employee benefit plans and programs maintained by the Company until the earlier
of (i) December 31, 1997, or (ii) such time as he is covered by comparable
programs of a subsequent employer.
Each of the EVP Employment Agreements is for an indefinite term and
contains virtually identical terms. Specifically, each EVP Employment Agreement
provides that if the executive's employment terminates for any reason other than
for cause or if the executive resigns for good reason, such executive would
receive as severance, subject to the executive's not competing with the Company
or disclosing confidential information or trade secrets of the Company,
severance payments over a three-year period commencing on the date of such
termination or resignation. The aggregate amount of the severance payable to the
executive over such three-year period would equal two times the sum of: (a) the
executive's highest annual base salary in effect during the 12-month period
prior to such termination or resignation and (b) the target award (50% of annual
base salary) under the AIAP (or successor thereto) for the year in which such
termination or resignation occurs (or, if greater, the amount of the award for
the next preceding year). In addition, the executive would receive a pro rata
annual bonus under the AIAP for the year in which such termination or
resignation occurs and would be entitled to participate in the employee benefit
plans and programs maintained by the Company in which the executive participates
until the earlier of (i) the end of the three-year period and (ii) such time as
the executive is covered by comparable programs of a subsequent employer.
The Phillips Employment Agreement is for an indefinite term. The Phillips
Employment Agreement provides that if Mr. Phillips' employment terminates for
any reason other than for cause or if Mr. Phillips resigns for good reason, Mr.
Phillips would receive as severance three months of his then current base pay.
In addition, if Mr. Phillips executes and delivers to the Company a written
agreement confirming his commitment not to compete with the Company and not to
disclose confidential information or trade secrets of the Company, the Company
would then provide Mr. Phillips severance payments over an 18-month period
66
<PAGE> 73
commencing on the date of such termination or resignation. The aggregate amount
of the severance payable to Mr. Phillips over such 18-month period would equal
the sum of (a) Mr. Phillips' highest annual rate of base salary in effect during
the 12-month period prior to such termination or resignation, and (b) the target
award under the AIAP (or successor thereto) for the year in which such
termination or resignation occurs (or, if greater, the amount of the award for
the next preceding year of employment). In addition, Mr. Phillips would receive
a pro rata annual bonus under the AIAP for the year in which such termination or
resignation occurs and would be entitled to participate in the employee benefit
plans and programs maintained by the Company in which Mr. Phillips participates
until the earlier of (i) the end of the 18-month period or (ii) such time as Mr.
Phillips is covered by comparable programs of a subsequent employer.
Messrs. Gibbons' and Spain's employment agreement is similar to that of Mr.
Phillips except that it does not require Messrs. Gibbons or Spain to execute an
agreement not to compete or disclose confidential information in order to
receive severance payments over an 18-month period.
On March 16, 1998, Del Monte entered into employment agreements with Mr.
Wolford and Mr. Smith (the "Wolford/Smith Employment Agreements") as Chief
Executive Officer and Chief Operating Officer, respectively. Copies of the
Wolford/Smith Employment Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The Wolford/Smith
Employment Agreements are for an indefinite term. Under the terms of the
Wolford/Smith Employment Agreements, if the employment of Mr. Wolford or Mr.
Smith is terminated by Del Monte for any reason other than for cause or by such
executive for any reason, he would be entitled to continue to receive his base
salary and target award under the AIAP (50% of base salary) and to participate
in certain employee welfare benefit plans and programs of the Company for up to
two years after the date of such termination of employment, subject to his not
competing with the Company, not soliciting employees of the Company and not
disclosing proprietary or confidential information of the Company and subject to
his signing a general release and waiver with respect to certain claims he may
have against the Company.
DIRECTORS' COMPENSATION
Under Company policy, Messrs. Bruer, Carey, Foley and Haycox and Ms.
O'Leary will each receive $25,000 per year to be paid in cash or in Common
Stock, at the option of the director. Each of these directors will also receive
$2,000 for each committee meeting of the Board of Directors attended in person.
In February 1998, the Company adopted a stock incentive plan with terms
substantially identical to the terms of the Del Monte Foods 1997 Stock Incentive
Plan for the benefit of directors and independent contractors of the Company.
Pursuant to that plan, Mr. Boyce received options representing 148,828 shares of
Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the period following consummation of the Recapitalization through
the end of Del Monte's last completed fiscal year, Del Monte did not have a
compensation committee or other board committee performing equivalent functions.
During that period, the entire Board of Directors had authority to consider
executive compensation matters. The membership of the Board of Directors during
that period is described under "Management -- Directors and Executive Officers"
above. No person who was an officer, employee or former officer of Del Monte or
any of its subsidiaries participated in deliberations of Del Monte's Board of
Directors concerning executive officer compensation.
67
<PAGE> 74
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 31, 1998, and as adjusted to reflect
the sale of the shares offered hereby (i) by each person who is known by the
Company to own beneficially more than 5% of the Common Stock; (ii) by each of
the Company's directors; (iii) by each of the executive officers of the Company
identified in the table set forth under the heading "Management -- Executive
Compensation;" (iv) by all executive officers and directors as a group; and (v)
the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(A) SHARES OFFERING(B)
NAME AND ADDRESS OF ----------------------- BEING -----------------------
BENEFICIAL OWNER NUMBER PERCENT(C) OFFERED NUMBER PERCENT(C)
------------------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
TPG Partners, L.P.................. 24,682,809(d)(e) 70.1% 3,098,478 21,584,331 44.3%
201 Main Street, Suite 2420
Fort Worth, TX 76102
TPG Parallel I, L.P................ 2,459,828(d)(f) 7.0 308,786 2,151,042 4.4
201 Main Street, Suite 2420
Forth Worth, TX 76102
399 Venture Partners, Inc.......... 2,490,046 7.1 -- 2,490,046 5.1
399 Park Avenue, 14th Floor
New York, NY 10043
Richard W. Boyce................... 148,828(g) 0.4 -- 148,828 0.3
Richard G. Wolford................. 636,111(h) 1.8 -- 636,111 1.3
Wesley J. Smith.................... 636,111(h) 1.8 -- 636,111 1.3
Timothy G. Bruer................... -- -- -- -- --
Al Carey........................... 1,532(i) 0.0 -- 1,532 0.0
Patrick Foley...................... 2,873(i) 0.0 -- 2,873 0.0
Brian E. Haycox.................... 4,214(i) 0.0 -- 4,214 0.0
Denise M. O'Leary.................. 2,873(i) 0.0 -- 2,873 0.0
William S. Price, III.............. --(d) -- -- -- --
Jeffrey A. Shaw.................... -- -- -- -- --
David L. Meyers.................... 199,587(j) 0.6 -- 199,587 0.4
Glynn M. Phillips.................. 48,652(k) 0.1 -- 48,652 0.1
Thomas E. Gibbons.................. 33,328(l) 0.1 -- 33,328 0.1
William J. Spain................... 13,983(l) 0.0 -- 13,983 0.0
All executive officers and
directors as a group (14
persons)......................... 28,870,729(m) 79.0 3,407,264 25,463,465 50.9
Vencap Investment Pte Ltd.......... 1,335,239 3.8 167,614 1,167,625 2.4
255 Shoreline Drive, Suite 600
Redwood City, CA 94065
BT Investment Partners............. 957,710 2.7 120,223 837,487 1.7
130 Liberty Street
New York, NY 10006
Westar Capital..................... 957,710 2.7 120,223 837,487 1.7
949 South Coast Drive, Suite 650
Costa Mesa, CA 92626
BankAmerica Investment
Corporation...................... 861,939 2.5 108,201 753,738 1.6
231 South LaSalle Street,
7th Floor
Chicago, IL 60697
TCW/Crescent Mezzanine Partners,
L.P.............................. 421,149(n) 1.2 52,868 368,282 0.8
11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
</TABLE>
68
<PAGE> 75
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(A) SHARES OFFERING(B)
NAME AND ADDRESS OF ----------------------- BEING -----------------------
BENEFICIAL OWNER NUMBER PERCENT(C) OFFERED NUMBER PERCENT(C)
------------------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Squam Lake Investors II, L.P....... 191,542 0.5% 24,045 167,497 0.3%
Two Copley Place
Boston, MA 02116
Sunapee Securities, Inc............ 191,542 0.5 24,045 167,497 0.3
Two Copley Place
Boston, MA 02116
TCW/Crescent Mezzanine Trust....... 128,241(o) 0.4 16,098 112,143 0.2
11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
MIG Partners III................... 95,771 0.3 12,022 83,749 0.2
231 South LaSalle Street,
7th Floor
Chicago, IL 60697
TCW/Crescent Mezzanine
Investment Partners, L.P........... 11,554(p) 0.0 1,451 10,103 0.0
11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
</TABLE>
- ---------------
(a) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in this table and these notes.
(b) Assumes no exercise of U.S. Underwriters' overallotment option.
(c) Calculated excluding all shares issuable pursuant to agreements, options or
warrants of Del Monte, except as to each individual, entity or group, the
shares issuable to such individual, entity or group pursuant to agreements,
options or warrants of Del Monte, as described below in notes (e) through
(p), as the case may be.
(d) TPG Partners, L.P. and TPG Parallel I, L.P. are entities affiliated with
William S. Price, III. Mr. Price disclaims beneficial ownership of all
shares owned by such entities.
(e) Includes 248,832 shares issuable upon exercise of warrants.
(f) Includes 24,799 shares issuable upon exercise of warrants.
(g) Includes 148,828 shares issuable upon exercise of options issued to Mr.
Boyce.
(h) In each case, includes 569,071 shares issuable upon exercise of options.
(i) Messrs. Carey, Foley and Haycox and Ms. O'Leary have elected to receive
shares of Common Stock in lieu of cash for their directors' fees. See
"-- Directors' Compensation."
(j) Includes 151,701 shares issuable upon exercise of options.
(k) Includes 29,497 shares issuable upon exercise of options.
(l) In each case, includes 12,067 shares issuable upon exercise of options.
(m) Includes all shares held by entities affiliated with a director as described
in note (d) above and all shares issuable by Del Monte pursuant to
arrangements as described in notes (e) through (l) above.
(n) Includes 205,473 shares issuable upon exercise of warrants.
(o) Includes 62,542 shares issuable upon exercise of warrants.
(p) Includes 5,616 shares issuable upon exercise of warrants.
Each of the Selling Stockholders has granted the U.S. Underwriters an
option to purchase up to the additional number of shares of Common Stock set
forth following its name solely to cover overallotments: TPG Partners, L.P.,
1,032,826 shares; TPG Parallel I, L.P., 102,929 shares; Vencap Investment Pte
Ltd, 55,871 shares; BT Investment Partners, 40,074 shares; Westar Capital,
40,074 shares; BankAmerica Investment Corporation, 36,067 shares; TCW/Crescent
Mezzanine Partners, L.P., 17,623 shares; Squam
69
<PAGE> 76
Lake Investors II, L.P., 8,015 shares; Sunapee Securities Inc., 8,015 shares;
TCW/Crescent Mezzanine Trust, 5,366 shares; MIG Partners III, 4,007 shares; and
TCW/Crescent Mezzanine Investment Partners, L.P., 484 shares. The Company has
also granted the U.S. Underwriters an option to purchase up to 1,283,783
additional shares of Common Stock but such option from the Company is
exercisable (in whole or in part) by the U.S. Underwriters only if the U.S.
Underwriters have exercised all of the options granted by the Selling
Stockholders.
The 35,490,461 shares of Common Stock issued to and owned by TPG and other
existing stockholders prior to the Offering (assuming the exercise of warrants
to purchase 547,262 shares of Common Stock) were originally acquired in
connection with the Recapitalization and the Contadina Acquisition for total
consideration of approximately $182 million, or $5.13 per share, as compared
with new investors who will pay $250 million, or $18.50 per share, for the
13,513,513 shares of Common Stock offered by Del Monte hereby (assuming an
initial public offering price of $18.50 per share). Accordingly, TPG and other
existing stockholders will benefit from an appreciation of $7.17 per share of
Common Stock ($254 million in the aggregate) in the value of their shares of
Common Stock as a result of the Offering (assuming an initial public offering
price of $18.50 per share and no exercise of the U.S. Underwriters'
overallotment option). Moreover, because the Selling Stockholders are offering
4,054,054 shares of Common Stock in the Offering and are expected to receive net
proceeds of approximately $71 million (assuming an initial public offering price
of $18.50 per share and no exercise of the U.S. Underwriters overallotment
option), they will be able to realize, in part, the gain described above. See
"Dilution."
70
<PAGE> 77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Recapitalization, the Company entered into a
ten-year agreement dated April 18, 1997 (the "Management Advisory Agreement")
with TPG pursuant to which TPG is entitled to receive an annual fee from the
Company for management advisory services equal to the greater of $500,000 and
0.05% of the budgeted consolidated net sales of the Company for each fiscal year
under the contract term. In addition, the Company has agreed to indemnify TPG,
its affiliates and shareholders, and their respective directors, officers,
controlling persons, 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 TPG thereunder. Such indemnification
may not extend to actions arising under the U.S. federal securities laws. The
Management Advisory Agreement makes available the resources of TPG concerning a
variety of financial and operational matters, including advice and assistance in
reviewing the Company's business plans and its results of operations and in
evaluating possible strategic acquisitions, as well as providing investment
banking services in identifying and arranging sources of financing. The
Management Advisory Agreement does not specify a minimum number of TPG personnel
who must provide such services or the individuals who must provide them, nor
does it require that a minimum amount of time be spent by such personnel on
Company matters. The services that will be provided by TPG cannot 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 Management Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arm's-length transaction with an unaffiliated third party.
In connection with the Recapitalization, the Company also entered into a
ten-year agreement dated April 18, 1997 (the "Transaction Advisory Agreement")
with TPG pursuant to which TPG received a cash financial advisory fee of
approximately $8.4 million upon the closing of the Recapitalization as
compensation for its services as financial advisor for the Recapitalization,
which included assistance in connection with the evaluation of the fairness of
the Recapitalization and the valuation of the Company in connection therewith.
TPG also is entitled to receive a fee of 1.5% of the "transaction value" for
each transaction in which the Company is involved, which may include
acquisitions, refinancings and recapitalizations. The term "transaction value"
means the total value of any subsequent transaction, including, without
limitation, the aggregate amount of the funds required to complete the
subsequent transaction (excluding any fees payable pursuant to the Transaction
Advisory Agreement and 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 transaction) including the amount of any
indebtedness, preferred stock or similar items assumed (or remaining
outstanding). The Transaction Advisory Agreement includes indemnification
provisions similar to those in the Management Advisory Agreement, which
provisions also may not extend to actions arising under the U.S. federal
securities laws. In connection with the Contadina Acquisition, TPG received from
the Company a transaction fee of approximately $3 million. In connection with
the Offering, TPG expects to receive approximately $4 million as compensation
for its services as financial advisor. In management's opinion, the fees
provided for under the Transaction Advisory Agreement reasonably reflect the
benefits received and to be received by the Company and are comparable to those
obtainable in an arm's-length transaction with an unaffiliated third party.
Also in connection with the Recapitalization, Del Monte and the holders of
the Common Stock, including TPG and 399 Venture Partners, Inc. ("399 Venture
Partners"), an affiliate of one of the Company's bank lenders, entered into a
stockholders' agreement dated as of April 18, 1997 (the "Stockholders'
Agreement"). Among other things, the Stockholders' Agreement (i) imposes certain
restrictions on the transfer of shares of Common Stock by such holders and (ii)
gives such holders registration rights under certain circumstances. Del Monte
will bear the costs of preparing and filing any such registration statement and
will indemnify and hold harmless, to the extent customary and reasonable,
holders selling shares covered by such a registration statement. Directors and
members of management of the Company to date have received 465,639 restricted
shares of Common Stock, which are subject to stockholders' agreements with the
Company which impose similar restrictions.
71
<PAGE> 78
As set forth in the Merger Agreement, an affiliate of 399 Venture Partners,
and certain current and former employees of an affiliate of 399 Venture
Partners, received approximately $7.9 million, and $215,000, respectively, in
return for shares of Del Monte preferred stock which were surrendered and were
cancelled by virtue of the Merger. Since the beginning of fiscal 1996, in
connection with certain interest rate protection transactions, the Company has
also paid fees and made other payments to banking and other affiliates of 399
Venture Partners totaling approximately $442,000, consisting of fees for banking
services. In addition, in consideration of advisory services rendered and its
participation in connection with the Recapitalization, the Company paid to 399
Venture Partners a transaction advisory fee of approximately $900,000. The
Company believes that the terms of these transactions were comparable to those
obtainable in an arm's-length transaction with a disinterested third party.
The employment of Mr. Haycox pursuant to the CEO Agreement was terminated
effective as of April 18, 1997. Mr. Haycox continued to receive the salary that
he would have earned pursuant to the CEO Agreement until September 1997. In
September 1997, the Company paid to Mr. Haycox a lump sum payment of salary.
Such lump sum payment was $250,000, which was equal to the base salary that Mr.
Haycox would have earned pursuant to the CEO Agreement between the date the lump
sum payment was made and December 31, 1997. The Company believes that the terms
of these transactions were comparable to those obtainable in an arm's-length
transaction with an unaffiliated third party.
During the second and third quarters of fiscal 1998, the Company sold
shares of Common Stock to certain key employees, including the executive
officers of the Company, pursuant to the Company's Employee Stock Purchase Plan.
See "Management -- Employment and Other Arrangements -- Stock Purchase Plan."
Messrs. Wolford and Smith each borrowed $175,000 from the Company in order to
acquire a portion of the stock purchased by him pursuant to such plan, all of
which remains outstanding. At March 31, 1998, these loans bore interest at a
rate of 5.84%, which rate is adjusted semi-annually, and are evidenced by
promissory notes which are secured by a pledge of the stock purchased with the
proceeds of the loans. The Bank Financing limits the ability of the Company to
make loans or advances to employees to a maximum amount outstanding at any time
of $5 million. Aside from the loans to Messrs. Wolford and Smith, the Company's
other loans or advances to employees consist primarily of loans made to
facilitate the relocation of employees. Any vote by the party receiving any loan
must be made in accordance with Delaware law.
The Company will address any future transactions it may have with its
affiliates or other interested parties in accordance with applicable law.
Delaware law provides that any transaction with any director or officer or other
entity in which any of the Company's directors or officers are also directors or
officers, or have a financial interest, will not be void or voidable solely due
to the fact of the interest or affiliation, nor because the votes of interested
directors are counted in approving the transaction, so long as (i) the material
facts of the relevant party and its interest are disclosed to the Board of
Directors or the stockholders, as applicable, and the transaction is approved in
good faith by a majority of the disinterested directors or by a specific vote of
the stockholders, as applicable; or (ii) the transaction is fair to the Company
at the time it is authorized, approved or ratified.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description summarizes Del Monte's capital stock and does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Certificate of Incorporation, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The Certificate of Incorporation authorizes the issuance of an aggregate of
500,000,000 shares of Common Stock. Upon consummation of the Offering, of those
authorized shares of Common Stock, 49,003,974 shall have been validly issued,
fully paid and nonassessable (assuming the exercise of all
72
<PAGE> 79
outstanding warrants). Prior to the consummation of the Offering, there were 43
holders of record of Common Stock.
The holders of the shares of Common Stock are entitled to receive, when, as
and if declared by the Board of Directors out of legally available funds,
dividends and other distributions in cash, shares or property of the Company.
Dividends or distributions so declared by the Board will be paid ratably in
proportion to the number of shares held by the holders of Common Stock.
In the case of the voluntary or involuntary liquidation, dissolution or
winding up of Del Monte, after payment of the creditors of Del Monte, the
remaining assets and funds of Del Monte available for distribution to Del
Monte's stockholders shall be divided among and paid ratably to the holders of
the shares of Common Stock.
Except as provided by statute or the Certificate of Incorporation, holders
of the shares of the Common Stock have the sole right and power to vote on all
matters on which a vote of Del Monte's stockholders is to be taken. At every
meeting of the stockholders, each holder of the shares of Common Stock is
entitled to cast one vote provided such holder is present in person or by proxy
for each share of Common Stock standing in his or her name as of the record date
for such a vote.
The holders of the shares of Common Stock are entitled, by a majority vote
of those present, to nominate and thereafter elect and remove directors to and
from the Board of Directors of Del Monte.
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of an aggregate of
2,000,000 shares of preferred stock. Upon consummation of the Offering, there
will be no shares of preferred stock outstanding.
Del Monte's Board of Directors may, from time to time, direct the issue of
shares of preferred stock in series and may, at the time of issue, determine the
rights, preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding preferred stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Holders of
shares of preferred stock may be entitled to receive a preference payment in the
event of any liquidation, dissolution or winding-up of Del Monte before any
payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of preferred stock may render more difficult or tend
to discourage a merger, tender offer or proxy contest, the assumption of control
by a holder of a large block of Del Monte's securities or the removal of
incumbent management. Upon the affirmative vote of a majority of the total
number of directors then in office, the Board of Directors of Del Monte may
issue shares of preferred stock with voting and conversion rights which could
adversely affect the holders of shares of Common Stock.
Prior to the consummation of the Offering, there were approximately 37,253
shares of Series A Preferred Stock outstanding. The Company intends to use a
portion of the proceeds of the Offering to redeem such shares. See "Use of
Proceeds."
The Series A Preferred Stock accumulates dividends at the rate of 14% per
annum, which dividends are payable in cash or additional shares of Series A
Preferred Stock, at the option of Del Monte, subject to availability of funds
and the terms of its loan agreements. The Series A Preferred Stock has an
initial liquidation preference of $1,000 per share, and may be redeemed at the
option of Del Monte, in whole at any time or in part from time to time, at a
redemption price ranging from 103% of the liquidation preference, if redeemed
prior to October 1998, to 100% of the liquidation preference, if redeemed after
October 2000, plus accumulated and unpaid dividends to the redemption date. Del
Monte will be required to redeem all outstanding shares of Series A Preferred
Stock on April 18, 2008 at such redemption price. In certain other
circumstances, including the occurrence of a change of control of Del Monte, the
holders of the Series A Preferred Stock will have the right to require Del Monte
to repurchase said shares at 101% of the liquidation preference, plus
accumulated and unpaid dividends to the redemption date. Holders of Series A
Preferred Stock will not have any voting rights with respect thereto, except for
such rights as are provided under applicable law, the right to elect, as a
class, two directors of Del Monte in the event that six consecutive quarterly
dividends are in arrears and class voting rights with respect to transactions
adversely affecting the
73
<PAGE> 80
rights, preferences or powers of the Series A Preferred Stock. In January 1998,
TPG sold approximately 93% of its holdings of Series A Preferred Stock to
unaffiliated investors, and TPG currently holds approximately 1,315 shares of
the approximately 37,253 shares of Series A Preferred Stock outstanding.
WARRANTS
There are currently outstanding warrants to purchase at any time prior to
the expiration thereof, at an exercise price of $0.01 per share, subject to
adjustment in certain circumstances involving dilutive transactions,
approximately 547,262 shares of Common Stock. The Company issued the warrants,
together with shares of its preferred stock, to TPG and other investors for $35
million. Of those warrants which are outstanding, TPG holds warrants to purchase
approximately 273,631 shares of Common Stock. All of the warrants which have not
been exercised will expire upon consummation of the Offering. All holders of
warrants have indicated that the warrants will be exercised prior to the
consummation of the Offering.
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The Certificate of Incorporation provides for the Board of Directors of Del
Monte to be divided into three classes, as nearly equal in number as possible,
serving staggered terms. Approximately one-third of the Board of Directors will
be elected each year. See "Management." The provision for a classified board
could prevent a party who acquires control of a majority of the outstanding
voting shares from obtaining control of the Board of Directors until the second
annual stockholders meeting following the date the acquiror obtains the
controlling share interest. The classified board provision is designed to have
the effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of Del Monte and to increase the
likelihood that incumbent directors will retain their positions.
The Certificate of Incorporation provides that stockholder action can be
taken only at a general meeting of stockholders and cannot be taken by written
consent in lieu of a meeting. The Bylaws provide that, except as otherwise
required by law, general meetings of the stockholders can only be called
pursuant to a resolution adopted by a majority of the Board of Directors or by
the Chairman of the Board. Stockholders are not permitted to call a general
meeting or to require the Board of Directors to call a general meeting.
The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before a general meeting of stockholders of Del Monte, including
proposed nominations of persons for election to the Board of Directors.
Stockholders at a general meeting may only consider proposals or
nominations specified in the notice of meeting or brought before the meeting by
or at the direction of the Board of Directors or by a stockholder who was a
stockholder of record on the record date for the meeting, who is entitled to
vote at the meeting and who has given to Del Monte's Secretary timely written
notice, in proper form, of the stockholder's intention to bring that business
before the meeting. Although the Certificate of Incorporation does not give the
Board of Directors the power to approve or disapprove stockholder nominations of
candidates or proposals regarding other business to be conducted at a general
meeting, the Certificate of Incorporation may have the effect of precluding the
conduct of certain business at a meeting if the proper procedures are not
followed or may discourage or deter a potential acquiror from conducting a
solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of Del Monte.
The Certificate of Incorporation provides that the provisions of Section
203 of the Delaware General Corporation Law, which relate to business
combinations with interested stockholders, do not apply to Del Monte.
74
<PAGE> 81
DESCRIPTION OF CERTAIN INDEBTEDNESS
The summaries of the indebtedness contained herein do not purport to be
complete and are qualified in their entirety by reference to the provisions of
the various agreements and indentures related thereto, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.
BANK FINANCING
The Bank Financing consists of the Revolving Credit Facility and the Term
Loan Facility, which are described below. Borrowings under the Bank Financing
are syndicated among a group of banks led by BofA.
On April 15, 1998, the Company and BofA, BancAmerica Robertson Stephens and
Bankers Trust Company entered into a commitment letter relating to an amendment
and restatement of the Bank Financing. The Company expects that borrowings under
the amended and restated Bank Financing will be syndicated among a group of
banks, which will be led by BofA and Bankers Trust Company.
The principal anticipated revisions to the Bank Financing that are
contemplated by the Refinancing are summarized below. Such summaries do not
purport to be complete and remain subject to change pending the execution of
definitive agreements. The Company anticipates that definitive agreements will
be executed on or prior to the closing of the Offering and that such closing
will be a condition to the initial borrowings under the amended and restated
Bank Financing.
Revolving Credit Facility
The existing Revolving Credit Facility provides for revolving loans in an
aggregate amount of $350 million, including a letter of credit sublimit of $70
million and a "swingline loan" sublimit of $25 million (representing funds that
DMC may borrow with only limited advance notice). Amounts available under the
Revolving Credit Facility are subject to certain borrowing base limitations
based upon, among other things, the amounts and applicable advance rates in
respect of DMC's eligible accounts receivable and eligible inventory. Interest
rates per annum applicable to amounts outstanding under the Revolving Credit
Facility are currently, at DMC's option, either (i) the Base Rate (as defined)
plus 1.00% (the "Applicable Base Rate Margin") or (ii) the reserve adjusted
Offshore Rate (as defined) plus 2.00% (the "Applicable Offshore Rate Margin").
In addition, DMC is required to pay to lenders under the Revolving Credit
Facility a commitment fee (the "Commitment Fee") of 0.425%, payable quarterly in
arrears, on the unused portion of such Revolving Credit Facility. DMC is also
required to pay to lenders under the Revolving Credit Facility letter of credit
fees (collectively, the "Letter of Credit Fees") of 1.50% for commercial letters
of credit and 2.00% for all other letters of credit, as well as an additional
fee in the amount of 0.25% to the bank issuing such letters of credit. Upon
attainment of certain levels of the Senior Debt Ratio (as defined), such
Applicable Base Rate Margin and Applicable Offshore Rate Margin, as well as the
Commitment Fee and Letter of Credit Fees, will be adjusted. At March 31, 1998,
borrowings under the Revolving Credit Facility were $68.1 million, and the
weighted average interest rate thereon was approximately 8.3%.
The Company expects that the Refinancing will increase the aggregate amount
of available revolving loans from $350 million to $400 million. Initial interest
rates, which will be subject to quarterly adjustment upon attainment of certain
levels of the Senior Debt Ratio (as defined), will be at DMC's option, either
(i) the Base Rate (as defined) plus 0.50% or (ii) the Euro-Dollar Rate (as
defined) plus 1.50%. The Commitment Fee is expected to be reduced to 0.375%, and
the Letter of Credit Fees are expected to be changed to the Euro-Dollar margin
for Revolving Credit Loans (as defined) minus 0.50% for trade letters of credits
and to the Euro-Dollar margin for Revolving Credit Loans for all other letters
of credit.
Term Loan Facility
The existing Term Loan Facility consists of amortizing term loans in an
aggregate amount of $429 million, consisting of a $200 million Tranche A term
loan and a $229 million Tranche B term loan. Interest rates per annum applicable
to the Tranche A term loan are, at DMC's option, either (i) the Base Rate plus
the Applicable Base Rate Margin, or (ii) the Offshore Rate plus the Applicable
Offshore Rate Margin. Upon attainment of certain levels of the Senior Debt
Ratio, such Applicable Base Rate Margin and
75
<PAGE> 82
Applicable Offshore Rate Margin will be adjusted. Interest rates applicable to
the Tranche B term loan are, at DMC's option, either (i) the Base Rate plus
2.00% or (ii) the Offshore Rate plus 3.00%. At March 31, 1998, the outstanding
principal amounts of the Tranche A and B term loans were $200 million and $229
million, respectively, and the weighted average interest rate on the Term Loan
Facility was approximately 8.3%.
Consummation of the Contadina Acquisition required certain amendments under
the Bank Financing agreements to permit additional funding under the existing
Tranche B term loan in an amount of $50 million. Amortization of the additional
Tranche B term loan amount is incremental to scheduled amortization of the
existing Tranche B term loan. Such additional amortization will commence in the
second quarter of fiscal 1999 in a quarterly amount equal to $0.1 million, with
such amortization increasing in the fourth quarter of fiscal 2004, through the
third quarter of fiscal 2005, to $11.8 million per quarter.
The Company expects that the Refinancing will decrease the aggregate amount
of term loans from $429 million to $300 million, consisting of a $150 million
Tranche A term loan and a $150 million Tranche B term loan. The Company also
expects that the Refinancing will change the initial interest rates per annum
applicable to the Tranche A term loan, at DMC's option, either to (i) the Base
Rate is plus 0.50%; or (ii) the Euro-Dollar Rate plus 1.50% and those applicable
to the Tranche B term loan, at DMC's option, either to (i) the Base Rate plus
0.875%; or (ii) the Euro-Dollar Rate plus 1.875%. Additionally, under the terms
of the Refinancing, interest rates applicable to both the Tranche A and Tranche
B term loans will be subject to quarterly adjustment upon attainment of certain
levels of the Senior Debt Ratio (as defined).
Amortization/Prepayment
The existing Revolving Credit Facility terminates March 31, 2003. The
existing Tranche A term loan matures March 31, 2003, and is subject to quarterly
amortization, commencing with the first quarter of fiscal 1999, in the quarterly
amounts of $7.50 million, $8.75 million, $10.00 million and $11.25 million
during the fiscal years 1999 through 2002, respectively, and $16.67 million per
quarter for the first three quarters of fiscal 2003. The existing Tranche B term
loan matures March 31, 2005, and is subject to quarterly amortization,
commencing with the third quarter of fiscal 1998, in the quarterly amount of
$0.45 million, with such amortization increasing to $42.19 million per quarter
in the fourth quarter of fiscal 2004 through the first three quarters of fiscal
2005. The incremental amortization which results from the additional Tranche B
term loan is described in the paragraph immediately above. With certain
exceptions, as set forth in the Bank Financing agreements, DMC will be required
to make prepayments under both the Revolving Credit Facility and the Term Loan
Facility from excess cash flow, asset sales, issuance or condemnation
proceedings and issuances of debt and equity securities, including the Offering.
In connection with the Refinancing, the Company expects that (i) the
amended Revolving Credit Facility will terminate in approximately six years;
(ii) the amended Tranche A term loan will mature in approximately six years; and
(iii) the amended Tranche B term loan will mature in approximately eight years,
in each case, after the closing of the transactions contemplated by the
Refinancing. Commencing on June 30, 1999, amortization payments on the amended
Tranche A term loan will be required in aggregate quarterly amounts of $7.5
million. Also commencing on June 30, 1999, amortization payments on the amended
Tranche B term loan will be required for 24 consecutive quarters in aggregate
quarterly amounts of $375,000 and thereafter, in the eighth year, in an
aggregate annual amount, payable in equal quarterly installments, of $141
million.
Guarantees and Collateral
Del Monte has guaranteed DMC's obligations under the Bank Financing. DMC's
obligations are secured by substantially all personal property of DMC. Del
Monte's guarantee is secured by a pledge of the stock of DMC. DMC's obligations
also are secured by first priority liens on certain of its unencumbered real
property fee interests.
Covenants
Pursuant to the terms of the Bank Financing, DMC is required to meet
certain financial tests, certain of which are set forth below. In addition, DMC
has covenanted that, among other things, it will limit the
76
<PAGE> 83
incurrence of additional indebtedness, dividends, transactions with affiliates,
asset sales, acquisitions, mergers, prepayment of other indebtedness, liens and
encumbrances and other matters customarily restricted in loan agreements.
The extent to which the above described covenants will be modified in
connection with the execution of the Refinancing has not been determined.
The following is a summary of certain financial tests which currently apply
under the Bank Financing (capitalized terms have the meanings set forth in the
Bank Financing):
Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio (a
ratio of EBITDA to certain interest expense and scheduled principal payments
under the Term Loan Facility) for any Computation Period may not be less than
1.2 times through September 26, 1999, increasing over specified periods to 1.5
times at June 30, 2004 and thereafter.
Maximum Senior Debt Ratio. The Senior Debt Ratio (a ratio of outstanding
debt other than subordinated debt to EBITDA) for any Computation Period may not
exceed 5.25 times through March 29, 1998, decreasing over specified periods to
2.25 times at June 30, 2003 and thereafter.
Maximum Total Debt Ratio. The Total Debt Ratio (a ratio of total
indebtedness to EBITDA) on the last day of any fiscal year may not exceed 6.25
times through June 30, 1998, decreasing at specified dates to 3.50 times at June
30, 2003 and thereafter.
Maximum Capital Expenditures. The aggregate amount of all Capital
Expenditures by the Company for any fiscal year may not exceed $45 million at
June 30, 1998, varying during specified periods to $40 million at June 30, 2001
and thereafter.
Minimum EBITDA. EBITDA for Del Monte for any Computation Period may not be
less than $110 million through March 29, 1998, increasing over specified periods
to $155 million at June 30, 2002 and thereafter.
Events of Default
The Bank Financing contains customary events of default, including payment
defaults, breach of representations and warranties, covenant defaults,
cross-defaults, certain events of bankruptcy and insolvency, ERISA judgment
defaults, failure of any guaranty or security agreement supporting DMC's
obligations under the Bank Financing to be in full force and effect and a change
of control of Del Monte or DMC.
THE DMC NOTES AND THE DEL MONTE NOTES
On April 15, 1997, DMC issued and sold $150 million principal amount of
12 1/4% Senior Subordinated Notes due 2007 (the "Original DMC Notes"). On
December 17, 1997, Del Monte issued and sold $230 million principal amount at
maturity of 12 1/2% Senior Discount Notes due 2007 (the "Original Del Monte
Notes"). Such notes were initially sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
pursuant to Section 4(2) thereof and Regulation S thereunder and applicable
state securities laws. On July 31, 1997, DMC completed an exchange offer whereby
the Original DMC Notes were exchanged into the DMC Notes, which are registered
under the Securities Act with terms substantially identical to the Original DMC
Notes. On March 4, 1998, Del Monte filed a registration statement with the
Commission in contemplation of an exchange offer whereby the Original Del Monte
Notes will be exchanged into the Del Monte Notes, which will be registered under
the Securities Act with terms substantially identical to the Original Del Monte
Notes.
The DMC Notes and Del Monte Notes will mature on April 15, 2007 and
December 15, 2007, respectively. Interest accrues at the rate of 12 1/4% and
12 1/2% per annum on the DMC Notes and the Del Monte Notes, respectively.
Interest is payable on the DMC Notes in cash, while interest on the Del Monte
Notes accretes until December 15, 2002, after which date interest is payable in
cash. Payment of principal, premium and interest on the DMC Notes is
subordinated, as set forth in the indenture governing the DMC Notes, to the
prior payment in full of DMC's senior debt. The obligations of DMC under the DMC
Notes are
77
<PAGE> 84
unconditionally guaranteed on a senior subordinated basis by Del Monte. The DMC
Notes and Del Monte Notes are redeemable by DMC and Del Monte, respectively, in
certain circumstances, including upon a change of control of Del Monte.
The indentures for the Del Monte Notes and the DMC Notes contain various
restrictive covenants that limit the ability of Del Monte and DMC and their
subsidiaries to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments, consummate certain asset
sales, enter into certain transactions with affiliates, incur certain types of
indebtedness, incur liens, impose restrictions on the ability of a subsidiary to
pay dividends or make certain payments, merge or consolidate or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets of Del Monte and DMC.
78
<PAGE> 85
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the purchase, ownership and disposition of Common
Stock by a person that, for U.S. federal income tax purposes, is not a U.S.
Person (a "non-U.S. holder"). For purposes of this section, a "U.S. Person"
means a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source or a trust if (i)
a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more United States persons have the authority to
control all of the trust's substantial decisions, and the term "United States"
means the United States of America (including the States and the District of
Columbia).
THE DISCUSSION DOES NOT CONSIDER SPECIFIC FACTS AND CIRCUMSTANCES THAT MAY
BE RELEVANT TO A PARTICULAR NON-U.S. HOLDER'S TAX POSITION. ACCORDINGLY, EACH
NON-U.S. HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S.
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON STOCK, AS
WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE,
MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock ordinarily will be
subject to withholding of U.S. federal income tax at a 30% rate, or at a lower
rate under an applicable income tax treaty that provides for a reduced rate of
withholding. However, if the dividends are effectively connected with the
conduct by the holder of a trade or business within the United States, then the
dividends will be exempt from the withholding tax described above and instead
will be subject to U.S. federal income tax on a net income basis.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain realized on a disposition of Common Stock, provided that (a)
the gain is not effectively connected with a trade or business conducted by the
non-U.S. holder in the United States and (b) in the case of a non-U.S. holder
who is an individual and who holds the Common Stock as a capital asset, such
holder is present in the United States for less than 183 days in the taxable
year of the sale and other conditions are met.
FEDERAL ESTATE TAXES
Common Stock owned or treated as being owned by a non-U.S. holder at the
time of death will be included in such holder's gross estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
U.S. information reporting requirements and backup withholding tax will not
apply to dividends paid on Common Stock to a non-U.S. holder at an address
outside the United States, except that with regard to payments made after
December 31, 1998, a non-U.S. holder will be entitled to such an exemption only
if it provides a Form W-8 (or satisfies certain documentary evidence
requirements for establishing that it is a non-United States person) or
otherwise establishes an exemption. As a general matter, information reporting
and backup withholding also will not apply to a payment of the proceeds of a
sale of Common Stock effected outside the United States by a foreign office of a
foreign broker. However, information reporting requirements (but not backup
withholding) will apply to a payment of the proceeds of a sale of Common Stock
effected outside the United States by a foreign office of a broker if the broker
(i) is a U.S. person, (ii) derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, or (iii)
is a "controlled foreign corporation" as to the United States or (iv) with
respect to payments made after December 31, 1998, is a foreign partnership that,
at any time during its taxable year is 50% or more (by income or capital
interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or
business, unless the broker has documentary evidence in its records that the
holder is a non-U.S. holder and certain
79
<PAGE> 86
conditions are met, or the holder otherwise establishes an exemption. Payment by
a United States office of a broker of the proceeds of a sale of Common Stock
will be subject to both backup withholding and information reporting unless the
holder certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the shares of
Common Stock. There can be no assurance that an active trading market for the
shares of Common Stock will develop or will continue if it develops. Further,
Del Monte cannot predict the effect, if any, of sales under Rule 144 or Rule
144A under the Securities Act or otherwise of "restricted" shares of Common
Stock or the availability of restricted shares of Common Stock for sale in the
public market. Sales of a substantial number of shares of Common Stock in the
public market following the Offering could adversely affect the market price of
the shares of Common Stock prevailing from time to time.
Upon completion of the Offering, Del Monte will have 49,003,974 shares of
Common Stock outstanding (assuming the exercise of all outstanding warrants and
no exercise of the U.S. Underwriters' overallotment option). Of these shares,
the 17,567,567 shares sold in the Offering will be freely transferable without
restriction or registration under the Securities Act, except for any shares
purchased by an "affiliate" of Del Monte, as that term is defined by the
Securities Act (an "Affiliate"), which shares will be subject to the resale
limitations of Rule 144 adopted under the Securities Act ("Rule 144").
Substantially all of the remaining outstanding shares of Common Stock will be
owned by TPG and certain other existing stockholders of Del Monte and will be
"restricted securities" as defined in Rule 144. "Restricted securities" may not
be sold in the absence of an effective registration statement under the
Securities Act other than in accordance with Rule 144 or another exemption from
registration.
Each of Del Monte, TPG and certain other stockholders of the Company and
each of the directors and executive officers of Del Monte have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, they will not, during the period ending 180 days after the
date of this Prospectus, engage in specified transactions relating to the Common
Stock. See "Underwriters."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
restricted securities for at least one year (including the holding period of any
prior owner except an Affiliate) would be entitled to sell within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the number of shares of Common Stock then outstanding (approximately
490,039 shares immediately after the Offering); or (ii) the average weekly
trading volume of the shares of Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale and notice requirements and to
the availability of current public information about Del Monte. Under Rule
144(k), a person who is not deemed to have been an Affiliate at any time during
the 90 days preceding a sale, and who has beneficially owned restricted
securities for at least two years (including the holding period of any prior
owner except an Affiliate), is entitled to sell such shares without complying
with the manner of sale, public information requirements, volume limitations or
notice requirements of Rule 144. Accordingly, subject to the contractual
restrictions described above in the case of Del Monte, the "restricted" shares
of Common Stock held by TPG will be eligible for sale in the public market
without registration under the Securities Act, subject to compliance with the
resale volume limitations and other restrictions of Rule 144 under the
Securities Act.
Rule 144A under the Securities Act ("Rule 144A") would allow the existing
stockholders of Del Monte to sell their current holdings of shares of Common
Stock to qualified institutional buyers (as defined in such Rule), and would
permit resales among such institutions, without regard to any volume or other
restrictions. There can be no assurance that Rule 144A will not have an adverse
effect on the liquidity and trading price of the Common Stock in the public
market.
80
<PAGE> 87
REGISTRATION RIGHTS AGREEMENT
Under a registration rights agreement (the "Registration Rights Agreement")
between the Company and TPG Partners, the Company has granted TPG Partners the
right to require the Company to register shares of Common Stock held by TPG
Partners and its affiliates for public sale (a "demand registration"). So long
as TPG Partners and its affiliates continue to hold at least 5% of the
outstanding shares of Common Stock, TPG will have the right to request one
demand registration in each nine-month period.
The Company is required to pay all expenses (other than underwriting
discounts and commissions) incurred by TPG in connection with each demand
registration.
81
<PAGE> 88
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below, for whom Morgan Stanley & Co. Incorporated,
BancAmerica Robertson Stephens, Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation are acting
as U.S. Representatives, and the International Underwriters named below, for
whom Morgan Stanley & Co. International Limited, BancAmerica Robertson Stephens,
Bear, Stearns International Limited, BT Alex. Brown International, a division of
Bankers Trust International PLC, and Donaldson, Lufkin & Jenrette International
are acting as International Representatives, have severally agreed to purchase,
and Del Monte and the Selling Stockholders have agreed to sell to them,
severally, the respective number of shares of Common Stock set forth opposite
the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
BancAmerica Robertson Stephens............................
Bear, Stearns & Co. Inc...................................
BT Alex. Brown Incorporated...............................
Donaldson, Lufkin & Jenrette Securities Corporation.......
----------
Subtotal............................................... 14,054,054
----------
International Underwriters:
Morgan Stanley & Co. International Limited................
BancAmerica Robertson Stephens............................
Bear, Stearns International Limited.......................
BT Alex. Brown International, a division of Bankers Trust
International PLC......................................
Donaldson, Lufkin & Jenrette Securities International.....
----------
Subtotal............................................... 3,513,513
----------
Total............................................. 17,567,567
==========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any of such shares are
taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S.
82
<PAGE> 89
Underwriter and an International Underwriter, the foregoing representations and
agreements (i) made by it in its capacity as a U.S. Underwriter apply only to it
in its capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement Between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 (the "U.K. Regulations"); (ii) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
and the U.K. Regulations with respect to anything done by it in relation to the
Shares in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the offering of the Shares to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $. a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $. a share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.
Del Monte and the Selling Stockholders have granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 2,635,135 additional shares of
83
<PAGE> 90
Common Stock, at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The Company's portion of such
option (relating to 1,283,784 shares) is exercisable, in whole or in part, only
if all of the Selling Stockholders' portion of such option (relating to
1,351,351 shares) is exercised. See "Principal and Selling Stockholders." The
U.S. Underwriters may exercise such option solely for the purpose of covering
overallotments, if any, made in connection with the Offering. To the extent such
option is exercised, each U.S. Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as the number set forth next to such U.S.
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock set forth next to the names of all U.S. Underwriters in the
preceding table.
The Underwriters have informed Del Monte that they do not intend sales to
discretionary accounts to exceed 5% of the total number of shares of Common
Stock offered by them.
Application has been made to list the shares of Common Stock on the New
York Stock Exchange under the symbol "DLM."
Each of Del Monte, TPG and certain other stockholders of the Company and
each of the directors and executive officers of Del Monte have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, they will not, during the period ending 180 days after the
date of this Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (x) the sale of the
Shares to the Underwriters, (y) the issuance by Del Monte of shares of Common
Stock upon the exercise of an option or a warrant or the conversion of a
security outstanding on the date of this Prospectus or (z) transactions by any
person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
Offering.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed shares of Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, certain financial advisory services to Del Monte and its
subsidiaries for which they have received customary fees and commissions.
Del Monte and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
DIRECTED SHARE PROGRAM
At the request of Del Monte, the Underwriters have reserved for sale, at
the initial offering price, up to 878,378 shares, which may be offered to
directors, officers, employees, retirees and related persons of Del Monte. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Such
related persons include officers, partners and principals of independent brokers
that represent the Company's products to the grocery trade. Any reserved shares
which are not so purchased will be offered by the Underwriters to the general
public on the same basis as the other shares offered hereby.
84
<PAGE> 91
PRICING OF THE OFFERING
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
among Del Monte, the Selling Stockholders and the U.S. Representatives. Among
the factors to be considered in determining the initial public offering price
will be the future prospects of the Company and its industry in general, sales,
earnings and certain other financial and operating information of the Company in
recent periods, and the price-earnings ratios, price-sales ratios, market prices
of securities and certain financial and operating information of companies
engaged in activities similar to those of the Company. The estimated initial
public offering price range set forth on the cover page of this Preliminary
Prospectus is subject to change as a result of market conditions and other
factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain other
legal matters in connection with the Offering will be passed upon for Del Monte
by Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York
10006, counsel for Del Monte. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Brown & Wood LLP, 555
California Street, San Francisco, California 94104.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1997,
and for the year then ended, and as of March 31, 1998, and for the nine months
then ended, appearing in this Prospectus and Registration Statement have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, and
as of June 30, 1996, and for each of the two years in the period ended June 30,
1996, by Ernst & Young LLP, independent certified public accountants, as set
forth in their respective reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of said firms as
experts in accounting and auditing.
The combined financial statements of Contadina (a division of Nestle USA,
Inc.) as of December 31, 1996 and December 18, 1997, and for the year ended
December 31, 1996 and the period January 1 through December 18, 1997, appearing
in this Prospectus and Registration Statement have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance on such
report given upon the authority of said firm as experts in accounting and
auditing.
85
<PAGE> 92
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets -- June 30, 1996 and 1997....... F-3
Consolidated Statements of Operations -- Years ended June
30, 1995, 1996 and 1997................................... F-4
Consolidated Statements of Stockholders' Equity
(Deficit) -- Years ended June 30, 1995, 1996 and 1997..... F-5
Consolidated Statements of Cash Flows -- Years ended June
30, 1995, 1996 and 1997................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Report of Independent Auditors.............................. F-27
Report of Independent Auditors.............................. F-28
Consolidated Balance Sheets -- March 31, 1997 (unaudited)
and March 31, 1998........................................ F-29
Consolidated Statements of Operations -- Nine-month Periods
ended March 31, 1997 (unaudited) and March 31, 1998....... F-30
Consolidated Statement of Stockholders' Equity
(Deficit) -- Nine-month period ended March 31, 1998....... F-31
Consolidated Statements of Cash Flows -- Nine-month Periods
ended March 31, 1997 (unaudited)
and March 31, 1998........................................ F-32
Notes to Consolidated Financial Statements.................. F-31
CONTADINA (A DIVISION OF NESTLE USA, INC.)
Independent Auditors' Report................................ F-50
Combined Balance Sheets at December 31, 1996 and December
18, 1997.................................................. F-51
Combined Statements of Operations and Divisional Equity for
the year ended December 31, 1996 and the period from
January 1, 1997 through December 18, 1997................. F-52
Combined Statements of Cash Flows for the year ended
December 31, 1996 and the period from January 1, 1997
through December 18, 1997................................. F-53
Notes to Combined Financial Statements for the year ended
December 31, 1996 and the period from January 1, 1997
through December 18, 1997................................. F-54
</TABLE>
F-1
<PAGE> 93
The consolidated financial statements included herein have been adjusted to
give effect to the anticipated 191.542-for-one stock split of all the Company's
post-Recapitalization outstanding shares of Common Stock (the "Stock Split")
prior to effectiveness of a public offering as described in Note M to the
Company's consolidated financial statements. We expect to be in a position to
render the following audit report upon the effectiveness of the Stock Split
assuming that through the effective date of the Stock Split, no other events
will have occurred that would affect the consolidated financial statements.
KPMG Peat Marwick LLP
San Francisco, California
May 1, 1998
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Del Monte Foods Company
We have audited the accompanying consolidated balance sheet of Del Monte
Foods Company and subsidiaries as of June 30, 1997, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The accompanying financial statements
of Del Monte Foods Company and subsidiaries as of June 30, 1996 and for each of
the years in the two-year period ended June 30, 1996 were audited by other
auditors whose report, dated August 29, 1996, on those statements included an
explanatory paragraph that described the change in the Company's method of
accounting for impairment of long-lived assets and for long-lived assets to be
disposed of discussed in Note A to the financial statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Del Monte Foods Company and subsidiaries as of June 30, 1997 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
F-2
<PAGE> 94
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
--------------
1996 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 6 $ 5
Restricted cash........................................... 30 --
Trade accounts receivable, net of allowance............... 98 67
Other receivables......................................... 8 2
Inventories............................................... 304 339
Prepaid expenses and other current assets................. 13 9
---- ----
Total current assets.............................. 459 422
Property, plant and equipment, net........................ 247 222
Other assets.............................................. 30 23
---- ----
Total assets...................................... $736 $667
==== ====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $202 $222
Short-term borrowings..................................... 43 82
Current portion of long-term debt......................... 7 2
---- ----
Total current liabilities......................... 252 306
Long-term debt.............................................. 323 526
Other noncurrent liabilities................................ 250 215
Redeemable common stock ($.01 par value per share, 1,650,000
shares authorized; issued and outstanding: 159,386 at June
30, 1996)................................................. 2 --
Redeemable preferred stock ($.01 par value per share,
32,493,000 shares authorized; issued and outstanding:
17,300,041 at June 30, 1996; aggregate liquidation
preference: $579)......................................... 213 --
Redeemable preferred stock ($.01 par value per share,
1,000,000 shares authorized; issued and outstanding:
35,000 at June 30, 1997; aggregate liquidation preference:
$35)...................................................... -- 32
Stockholders' equity (deficit):
Common stock ($.01 par value per share, 1,700,000
shares authorized; issued and outstanding: 223,468 in
1996)................................................. -- --
Common stock ($.01 par value per share, 500,000,000
shares authorized;
issued and outstanding: 26,815,880 in 1997).......... -- --
Paid-in capital........................................ 3 129
Retained earnings (deficit)............................ (281) (541)
Cumulative translation adjustment...................... (26) --
---- ----
Total stockholders' equity (deficit).............. (304) (412)
---- ----
Total liabilities and stockholders' equity........ $736 $667
==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 95
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Net sales................................................. $ 1,527 $ 1,305 $ 1,217
Cost of products sold..................................... 1,183 984 817
-------- -------- ----------
Gross profit............................................ 344 321 400
Selling, advertising, administrative and general
expense................................................. 264 239 327
-------- -------- ----------
Operating income........................................ 80 82 73
Interest expense.......................................... 76 67 52
Loss (gain) on sale of divested assets (Note B)........... -- (107) 5
Other (income) expense (Note D)........................... (11) 3 30
-------- -------- ----------
Income (loss) before income taxes, minority interest,
extraordinary item and cumulative effect of
accounting change.................................... 15 119 (14)
Provision for income taxes................................ 2 11
Minority interest in earnings of subsidiary............... 1 3 --
-------- -------- ----------
Income (loss) before extraordinary item and cumulative
effect of accounting change.......................... 12 105 (14)
Extraordinary loss from refinancing of debt and early debt
retirement.............................................. 7 10 42
Cumulative effect of accounting change.................... -- 7 --
-------- -------- ----------
Net income (loss)............................... $ 5 $ 88 $ (56)
======== ======== ==========
Net income (loss) attributable to common shares........... $ (66) $ 6 $ (126)
======== ======== ==========
Weighted average numbers of shares outstanding............ 400,285 391,806 6,991,111
======== ======== ==========
Income (loss) per common share:
Income (loss) before extraordinary item and cumulative
effect of accounting change............................. $(145.35) $ 59.40 $ (12.06)
Extraordinary loss from early debt retirement............. (18.34) (26.39) (5.95)
Cumulative effect of accounting change.................... -- (18.14) --
-------- -------- ----------
Net income (loss) per common share........................ $(163.69) $ 14.87 $ (18.01)
======== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 96
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES TOTAL
RECEIVABLE RETAINED CUMULATIVE STOCKHOLDERS'
COMMON PAID-IN FROM EARNINGS TRANSLATION EQUITY
STOCK CAPITAL STOCKHOLDERS (DEFICIT) ADJUSTMENT (DEFICIT)
------ ------- ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994............ $-- $ 3 $(1) $(374) $(12) $(384)
Repurchase of shares................ -- -- -- -- -- --
Net income.......................... -- -- -- 5 -- 5
Cumulative translation adjustment... -- -- -- -- (14) (14)
--- ---- --- ----- ---- -----
Balance at June 30, 1995............ -- 3 (1) (369) (26) (393)
Repayment of notes receivable from
stockholders...................... -- -- 1 -- -- 1
Repurchase of shares................ -- -- -- -- -- --
Net income.......................... -- -- -- 88 -- 88
--- ---- --- ----- ---- -----
Balance at June 30, 1996............ -- 3 -- (281) (26) (304)
Cancellation of shares in connection
with the Recapitalization......... -- (3) -- (204) -- (207)
Issuance of shares.................. -- 129 -- -- -- 129
Net loss............................ -- -- -- (56) -- (56)
Cumulative translation adjustment... -- -- -- -- 26 26
--- ---- --- ----- ---- -----
Balance at June 30, 1997............ $-- $129 $-- $(541) $ -- $(412)
=== ==== === ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------------------------
COMMON TOTAL COMMON
STOCK CLASS A CLASS B CLASS E SHARES
---------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Shares issued and outstanding at
June 30, 1994.................... -- 218,062 -- 25,000 243,062
Repurchase of shares............... -- (3,353) -- -- (3,353)
---------- -------- ------ ------- ----------
Shares issued and outstanding at
June 30, 1995.................... -- 214,709 -- 25,000 239,709
Repurchase of shares............... -- (16,241) -- -- (16,241)
---------- -------- ------ ------- ----------
Shares issued and outstanding at
June 30, 1996.................... -- 198,468 -- 25,000 223,468
Cancellation of shares............. -- (198,468) -- (25,000) (223,468)
Issuance of shares................. 26,815,880 -- -- -- 26,815,880
---------- -------- ------ ------- ----------
Shares issued and outstanding at
June 30, 1997.................... 26,815,880 -- -- -- 26,815,880
========== ======== ====== ======= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 97
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net income (loss)......................................... $ 5 $ 88 $ (56)
Adjustments to reconcile net income (loss) to net cash
flows:
Extraordinary loss from early debt retirement.......... 7 10 42
Cumulative effect of accounting change................. -- 7 --
Loss (gain) on sale of divested assets................. -- (107) 5
Loss on sales of assets................................ 3 2 3
Depreciation and amortization.......................... 40 31 29
Minority interest in earnings of subsidiary............ 1 -- --
Changes in operating assets and liabilities:
Accounts receivable.................................... (37) 33 24
Inventories............................................ (21) 11 (48)
Prepaid expenses and other current assets.............. 3 (2) 3
Other assets........................................... 4 1 6
Accounts payable and accrued expenses.................. 25 (28) 29
Other non-current liabilities.......................... 33 14 (12)
------- ------- -------
Net cash provided by operating activities......... 63 60 25
Investing activities:
Capital expenditures................................... (24) (16) (20)
Proceeds from sales of fixed assets.................... 3 4 9
Proceeds from sales of divested assets................. -- 182 48
------- ------- -------
Net cash provided by (used in) investing
activities...................................... (21) 170 37
Financing activities:
Short-term borrowings.................................. 1,901 1,276 1,137
Payment on short-term borrowings....................... (1,867) (1,354) (1,098)
Proceeds from long-term borrowings..................... 188 -- 582
Principal payments on long-term debt................... (238) (108) (407)
Deferred debt issuance costs........................... (24) (2) (26)
Prepayment penalty..................................... -- (5) (20)
Payments to previous shareholders for cancellation of
stock................................................ -- -- (422)
Issuance of common and preferred stock................. -- -- 161
Specific Proceeds Collateral Account................... -- (30) 30
Dividends paid to minority shareholders................ (1) -- --
Other.................................................. (3) (1) --
------- ------- -------
Net cash used in financing activities............. (44) (224) (63)
Effect of exchange rate changes on cash and cash
equivalents............................................... 3 (8) --
------- ------- -------
Net change in cash and cash equivalents........... 1 (2) (1)
Cash and cash equivalents at beginning of year.............. 7 8 6
------- ------- -------
Cash and cash equivalents at end of year.......... $ 8 $ 6 $ 5
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 98
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Business: Del Monte Foods Company ("DMFC") and its wholly owned
subsidiary, Del Monte Corporation ("DMC"), (DMFC together with DMC, the
"Company") purchased the Del Monte processed foods division of RJR Nabisco, Inc.
effective January 9, 1990 ("the Acquisition"). The Company operates in one
business segment: the manufacturing and marketing of processed foods, primarily
canned vegetables, fruits and tomato products. The Company primarily sells its
products under the Del Monte brand to a variety of food retailers, supermarkets
and mass merchandising stores. The Company holds the rights to the Del Monte
brand in the United States.
Basis of Accounting: Pursuant to the Agreement and Plan of Merger, dated
February 21, 1997, and amended and restated as of April 14, 1997 (the "Merger
Agreement"), entered into among TPG Partners, L.P., a Delaware partnership
("TPG"), TPG Shield Acquisition Corporation, a Maryland corporation ("Shield"),
and DMFC, Shield merged with and into DMFC (the "Merger"), with DMFC being the
surviving corporation. By virtue of the Merger, shares of DMFC's preferred stock
having an implied value of approximately $14 held by certain of DMFC's
stockholders, who remained investors, were cancelled and were converted into the
right to receive common stock of the surviving corporation. All other shares of
DMFC stock were cancelled and were converted into the right to receive cash
consideration as set forth in the Merger Agreement. In the Merger, the common
stock and preferred stock of Shield was converted into shares of new DMFC common
stock and preferred stock, respectively. The Merger was accounted for as a
leveraged recapitalization for accounting purposes (the "Recapitalization");
accordingly, all assets and liabilities are stated at historical cost. In
connection with the Merger, DMC repaid substantially all of its funded debt
obligations existing immediately before the closing of the Merger.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates: Certain amounts reported in the consolidated financial
statements are based on management estimates. The ultimate resolution of these
items may differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
Restricted Cash: Restricted cash at June 30, 1996 represents a portion of
the proceeds from the Company's sale of its 50.1% interest in Del Monte Pacific
Resources Limited ("Del Monte Philippines"), a joint venture operating primarily
in the Philippines, which were deposited into the Specific Proceeds Collateral
Account until agreement was reached with the Term Loan lenders as to final
application of the funds (see Note B). These funds were used to repurchase
outstanding PIK Notes in September 1996.
Inventories: Inventories are stated at the lower of cost or market. The
cost of substantially all inventories is determined using the LIFO method. The
Company has established various LIFO pools that have measurement dates
coinciding with the natural business cycles of the Company's major inventory
items.
Inflation has had a minimal impact on production costs since the Company
adopted the LIFO method as of July 1, 1991. Accordingly, there is no significant
difference between LIFO inventory costs and current costs.
Property, Plant and Equipment and Depreciation: Property, plant and
equipment are stated at cost and depreciated over their estimated useful lives,
principally by the straight-line method. Maintenance and repairs are expensed as
incurred. Significant expenditures that increase useful lives are capitalized.
F-7
<PAGE> 99
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The principal estimated useful lives are: land improvements -- 10 to 30
years; building and leasehold improvements -- 10 to 30 years; machinery and
equipment -- 7 to 15 years. Depreciation of plant and equipment and leasehold
amortization was $34, $26 and $24 for the years ended June 30, 1995, 1996 and
1997, respectively.
Revenue Recognition. Revenue from sales of product, and related cost of
product is recognized upon shipment of product, at which time title passes to
the customer. Customers generally do not have the right to return product unless
damaged or defective.
Cost of Products Sold: Cost of products sold includes raw material, labor
and overhead.
Advertising Expenses. The Company expenses all costs associated with
advertising as incurred or when the advertising takes place. Advertising expense
was $8, $5 and $6 for the years ended June 30, 1995, 1996 and 1997,
respectively.
Research and Development: Research and development costs are included as a
component of "Selling, advertising, administrative and general expense."
Research and development costs charged to operations were $6, $6 and $5 for the
years ended June 30, 1995, 1996 and 1997, respectively.
Foreign Currency Translation: For the Company's operations in countries
where the functional currency is other than the U.S. dollar, asset and liability
accounts were translated at the rate in effect at the balance sheet date, and
revenue and expense accounts were translated at the average rates during the
period. Translation adjustments were reflected as a separate component of
stockholders' equity.
Interest Rate Contracts: To manage interest rate exposure, the Company
uses interest-rate swap agreements. These agreements involve the receipt of
fixed rate amounts in exchange for floating rate interest payments over the life
of the agreement without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.
Fair Value of Financial Instruments: The carrying amount of the Company's
financial instruments, which primarily include cash, accounts receivable,
accounts payable, and accrued expenses, approximates fair value due to the
relatively short maturity of such instruments.
The carrying amounts of the Company's borrowings under its short-term
revolving credit agreement and long-term debt instruments, excluding the
Subordinated Notes, approximate their fair value. At June 30, 1997, the fair
value of the Subordinated Notes was $161, as estimated based on quoted market
prices from dealers.
The fair value of the interest rate swap agreements at June 30, 1997 was
$(1). The fair value of interest rate swap agreements are the estimated amounts
that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
credit worthiness of the counterparties.
Net Income (Loss) per Common Share: The Company has adopted the provision
of Statement of Financial Accounting Standards No. 128. Net income (loss) per
common share is computed by dividing net income (loss) attributable to common
shares by the weighted average number of common and redeemable common shares
outstanding during the period (Note E). Net income (loss) attributable to common
shares is computed as net income (loss) reduced by the cash and in-kind
dividends for the period on redeemable preferred stock. The weighted average
number of common and redeemable common shares outstanding for 1997 was computed
based on weighting the shares outstanding under the capital structures in place
prior to
F-8
<PAGE> 100
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
and subsequent to the Recapitalization, adjusting for the Common Stock split for
shares subsequent to the Recapitalization.
Minority Interest: Minority interest represents the minority shareholders'
proportionate share of the earnings of Del Monte Philippines, a consolidated
subsidiary.
Change in Accounting Principle: Effective July 1, 1995, the Company
adopted the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The statement requires that
assets held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has identified certain events as possible indicators
that an asset's carrying value may not be recoverable, including the elimination
of or a significant reduction in a product line. Future cash flows will be
estimated based on current levels of production, market sales price and
operating costs adjusted for expected trends. The statement also requires that
all long-lived assets, for which management has committed to a plan to dispose,
be reported at the lower of carrying amount or fair value. During fiscal 1996, a
review of assets to be disposed of resulted in identification of certain assets
(farm lands and plants no longer in use) whose carrying value exceeded their
present fair value, and a loss of $7 was recorded. The Company does not
depreciate long-lived assets held for sale.
Reclassification: Beginning in the fourth quarter of fiscal 1997, certain
merchandising allowances, which previously were included as a cost of products
sold, have been reclassified to selling expense. Such merchandising allowances
totaled $106, $100 and $143 in the fiscal years ended June 30, 1995, 1996, and
1997, respectively. In addition, certain military distributor allowances, which
previously were treated as a reduction in net sales, have been reclassified to
selling expense. Such military distributor allowances amounted to $1, $1 and $2
in fiscal years ended June 30, 1995, 1996 and 1997, respectively. All financial
information has been restated to conform to this presentation.
NOTE B -- DIVESTED ASSETS
Del Monte Latin America. On August 27, 1996, the Company signed a stock
purchase agreement to sell its Latin America subsidiaries to an affiliate of
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"). This agreement was
amended and restated on October 25, 1996 for the sale of only the Company's
Mexican subsidiary, Productos Del Monte, S.A. de C.V. ("PDM") to an affiliate of
Hicks Muse for $38 which was completed on October 28, 1996. The sale of the
Central America and Caribbean subsidiaries to an affiliate of Donald W.
Dickerson, Inc. for $12 was completed on November 13, 1996. The sales price for
PDM is subject to adjustment based on the final balance sheet. The amount of any
adjustment to the purchase price is currently in dispute but is not expected to
be material. In addition, the purchasers have alleged, among other things, that
the Company breached the purchase agreement because the financial statements of
the Mexican subsidiary did not fairly present its financial condition and
results of operations in accordance with U.S. generally accepted accounting
principles. The Company does not believe that this claim will have a material
adverse effect on the Company's financial position or results of operations (see
Note H). The combined proceeds of both sales of $50, reduced by $2 of related
transaction expenses, resulted in a loss of $5.
F-9
<PAGE> 101
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The following results of the Latin American operations are included in the
Statements of Operations:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales............................................... $65 $55 $17
Costs and expenses...................................... 62 50 17
--- --- ---
Income from operations before income taxes.............. 3 5 --
Provision for income taxes.............................. 1 1 --
--- --- ---
Income from Latin American operations................... $ 2 $ 4 $--
=== === ===
</TABLE>
Del Monte Philippines. On March 29, 1996, the Company sold its 50.1%
interest in Del Monte Philippines, a joint venture operating primarily in the
Philippines, for $100 net of $2 of related transaction expenses. This sale
resulted in a gain of $52, reduced by taxes of $6. Of the net gain of $46, $16
was deferred and $30 was recognized in fiscal 1996. The purchase price included
a premium paid to the Company as consideration for signing an eight-year supply
agreement whereby the Company must source substantially all of its pineapple
requirements from Del Monte Philippines over the agreement term. The gain
associated with the value of the premium was deferred and will be amortized over
the term of the agreement.
The following results of the Del Monte Philippines operations are included
in the Statements of Operations:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------
1995 1996
---- ----
<S> <C> <C>
Net sales................................................... $142 $102
Costs and expenses.......................................... 141 97
---- ----
Income from operations before income taxes.................. 1 5
Provision for income taxes.................................. -- 2
---- ----
Income from operations...................................... $ 1 $ 3
==== ====
</TABLE>
All of the net proceeds from the sale of Del Monte Philippines were
temporarily applied to the revolving credit facility. In April 1996, $13 of
Senior Secured Notes were prepaid along with a $1 prepayment premium recorded as
an extraordinary loss. In addition, $30 was placed in the Specific Proceeds
Collateral Account until final agreement was reached with the Term Loan lenders
as to the application of funds. These funds were used in the September 1996
exchange offer.
Pudding Business. On November 27, 1995, the Company sold its pudding
business, including the capital assets and inventory on hand, to Kraft Foods,
Inc. ("Kraft") for $89, net of $4 of related transaction expenses. The sale
resulted in the recognition of a $71 gain, reduced by $2 of taxes.
The following results of the pudding business are included in the
Statements of Operations:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------
1995 1996
---- ----
<S> <C> <C>
Net sales................................................... $47 $15
Costs and expenses.......................................... 33 11
--- ---
Income from operations...................................... $14 $ 4
=== ===
</TABLE>
The net proceeds received from the pudding business sale were used to
prepay $54 of the term debt and $25 of the Senior Secured Notes. In conjunction
with the prepayment, the Company recorded an extraordi-
F-10
<PAGE> 102
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
nary loss for the early retirement of debt. The extraordinary loss consists of a
$4 prepayment premium and a $5 write-off of capitalized debt issue costs related
to the early retirement of debt.
NOTE C -- SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 30,
------------
1996 1997
---- ----
<S> <C> <C>
Trade Accounts Receivable:
Trade..................................................... $ 99 $ 68
Allowance for doubtful accounts........................... (1) (1)
---- ----
Total trade accounts receivable................... $ 98 $ 67
==== ====
Inventories:
Finished product.......................................... $198 $239
Raw materials and supplies................................ 12 13
Other, principally packaging material..................... 94 87
---- ----
Total inventories................................. $304 $339
==== ====
Property, Plant and Equipment:
Land and land improvements................................ $ 44 $ 37
Buildings and leasehold improvements...................... 98 93
Machinery and equipment................................... 240 233
Construction in progress.................................. 9 10
---- ----
391 373
Accumulated depreciation.................................. (144) (151)
---- ----
Property, plant and equipment, net................ $247 $222
==== ====
Other Assets:
Deferred debt issue costs................................. $ 26 $ 19
Other..................................................... 10 4
---- ----
36 23
Accumulated amortization.................................. (6) --
---- ----
Total other assets................................ $ 30 $ 23
==== ====
Accounts Payable and Accrued Expenses:
Accounts payable -- trade................................. $ 76 $ 79
Marketing and advertising................................. 39 59
Payroll and employee benefits............................. 18 17
Current portion of accrued pension liability.............. 13 12
Current portion of other noncurrent liabilities........... 22 19
Other..................................................... 34 36
---- ----
Total accounts payable and accrued expenses....... $202 $222
==== ====
Other Noncurrent Liabilities:
Accrued postretirement benefits........................... $140 $145
Accrued pension liability................................. 48 26
Self-insurance liabilities................................ 12 15
Other..................................................... 50 29
---- ----
Total other noncurrent liabilities................ $250 $215
==== ====
</TABLE>
F-11
<PAGE> 103
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE D -- SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings under revolving credit agreements at June 30, 1996
and 1997 were $43 and $82, respectively. Unused amounts under the revolving
credit agreements at June 30, 1996 and 1997 totaled $328 and $242, respectively.
On April 18, 1997, the Company completed the Recapitalization transaction
in which $301 of proceeds from the transaction were used to repay the
outstanding balances of the then-existing $400 revolving credit facility, term
loan, and Senior Subordinated Guaranteed Pay-in-Kind Notes. Concurrent with the
Recapitalization, the Company entered into a credit agreement with respect to
the Term Loan Facility (the "Term Loan") and the Revolving Credit Facility (the
"Revolver"). The Term Loan provides for term loans in the aggregate amount of
$380, consisting of Term Loan A of $200 and Term Loan B of $180. The Revolver
provides for revolving loans in an aggregate amount of up to $350, including a
$70 Letter of Credit subfacility. The Revolving Credit Facility will expire in
fiscal 2003, Term Loan A will mature in fiscal 2003, and Term Loan B will mature
in fiscal 2005.
The interest rates applicable to amounts outstanding under Term Loan A and
the Revolving Credit Facility are, at the Company's option, either (i) the base
rate (the higher of .50% above the Federal Funds Rate and the bank's reference
rate) plus 1.25% or (ii) the reserve adjusted offshore rate plus 2.25% (8.25% at
June 30, 1997). Interest rates on Term Loan B are, at the Company's option,
either (i) the base rate plus 2.00% or (ii) the offshore rate plus 3.00% (8.875%
at June 30, 1997).
The Company is required to pay the lenders under the Revolving Credit
Facility a commitment fee of 0.50% on the unused portion of such facility. The
Company is also required to pay the lenders under the Revolving Credit Facility
letter of credit fees of 1.75% per year for commercial letters of credit and
2.25% per year for all other letters of credit, as well as an additional fee in
the amount of 0.25% per year to the bank issuing such letters of credit. Upon
attainment of certain leverage ratios, the base rate margin, offshore rate
margin, as well as the commitment fees and letter of credit fees will be
adjusted. At June 30, 1997, a balance of $26 was outstanding on these letters of
credit.
In addition, on April 18, 1997, the Company issued senior subordinated
notes (the "Unregistered Notes") with an aggregate principal amount of $150 and
received gross proceeds of $147. The Unregistered Notes accrue interest at
12.25% per year, payable semiannually in cash on each April 15 and October 15.
These Unregistered Notes are guaranteed by DMFC and mature on April 15, 2007.
The Unregistered Notes are redeemable at the option of the Company on or after
April 15, 2002 at a premium to par that initially is 106.313% and that decreases
to par on April 15, 2006 and thereafter. On or prior to April 15, 2000, the
Company, at its option, may redeem up to 35% of the aggregate principal amount
of notes originally issued with the net cash proceeds of one or more public
equity offerings at a redemption price equal to 112.625% of the principal amount
thereof, plus accrued and unpaid interest to the date of redemption; provided
that at least 65% of the aggregate principal amount of notes originally issued
remains outstanding immediately after any such redemption. The Unregistered
Notes were issued with registration rights requiring the Company to exchange the
Unregistered Notes for new notes (the "Subordinated Notes") registered under the
Securities Act of 1933, as amended. The form and terms of the Subordinated Notes
are substantially the same as the Unregistered Notes, except that there is no
restriction on the transfer thereof. The Company filed a registration statement
on Form S-4 with respect to the Unregistered Notes on June 12, 1997, which
became effective on June 24, 1997. The exchange of the Unregistered Notes for
the Subordinated Notes was completed on July 31, 1997.
In connection with the Recapitalization, the Company incurred expenses
totaling $85 of which $25 were included in selling, advertising, administrative
and general expense, $22 were charged to other expense and $38 were accounted
for as an extraordinary loss. The extraordinary loss consisted of previously
capitalized debt
F-12
<PAGE> 104
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
issue costs of approximately $19 and a 1996 PIK Note premium and a term loan
make-whole aggregating $19. In addition, in conjunction with the Bank Financing,
$19 of debt issue costs were capitalized.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------
1996 1997
---- ----
<S> <C> <C>
Term Loan................................................... $ 68 $380
Subordinated Debt........................................... 243 --
Subordinated Notes.......................................... -- 147
Senior Secured Notes........................................ 13 --
Other....................................................... 6 1
---- ----
330 528
Less Current Portion........................................ 7 2
---- ----
$323 $526
==== ====
</TABLE>
At June 30, 1997, scheduled maturities of long-term debt in each of the
next five fiscal years and thereafter will be as follows:
<TABLE>
<S> <C>
1998........................................................ $ 2
1999........................................................ 32
2000........................................................ 36
2001........................................................ 42
2002........................................................ 47
Thereafter.................................................. 372
----
531
Less discount............................................... 3
----
$528
====
</TABLE>
The Term Loan and Revolver are collateralized by security interests in
certain of the Company's assets. At June 30, 1997, total assets that are not
pledged to secure the Debt are less than 10% of the Company's total consolidated
assets. At June 30, 1997, assets totaling $639 were pledged as collateral for
approximately $462 of short-term borrowings and long-term debt.
The Subordinated Notes, Term Loan and Revolver (collectively the "Debt")
agreements contain restrictive covenants with which the Company must comply.
These restrictive covenants, in some circumstances, limit the incurrence of
additional indebtedness, payment of dividends, transactions with affiliates,
asset sales, mergers, acquisitions, prepayment of other indebtedness, liens and
encumbrances. In addition, the Company is required to meet certain financial
tests, including minimum levels of consolidated EBITDA (as defined in the credit
agreement), minimum fixed charge coverage, minimum adjusted net worth and
maximum leverage ratios. The Company is in compliance with all of the Debt
covenants at June 30, 1997.
In June 1995, the Company refinanced its then-existing revolving credit
agreement, term loan and Senior Secured Floating Rate Notes. In conjunction with
the refinancing, capitalized debt issue costs of $7 were charged to fiscal 1995
income and were accounted for as an extraordinary item.
At June 30, 1996, a balance of $29 was outstanding on letters of credit.
Letter of credit fees were 2.25% per year for commercial letters of credit and
2.75% per year for all other letters of credit with an additional fee of 0.50%
to the bank issuing such letters of credit. The Company paid a commitment fee to
maintain the lines of credit equal to 0.50% of the unused balance.
F-13
<PAGE> 105
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
At June 30, 1996, the then-existing term loan consisted of three
components. A $31 amortizing component was due in quarterly installments with an
interest rate of LIBOR plus 3.25%. The second component of this loan of $30 and
the third component of $7 were non-amortizing with interest fixed at 11.11% and
LIBOR plus 4.75%, respectively. At June 30, 1996, the interest rate on the $31
component was 8.75% and on the $7 component was 10.25%.
The Senior Secured Notes carried an interest rate of 18%, 14% payable in
cash and 4% payable in-kind in Secondary Notes, at the Company's option.
Interest payments were due quarterly.
Subordinated Debt consisted of Subordinated Guaranteed Payment-in-Kind
Notes ("PIK Notes"). Interest accrued at 12.25% per year and was generally
payable through the issuance of additional PIK Notes. The payment of such
interest in additional PIK Notes since issuance resulted in an increase in the
principal amount outstanding of such indebtedness.
In August 1996, the Company offered to redeem (the "Exchange Offer") a
portion of its outstanding PIK Notes for a cash payment and exchange the
remaining PIK Notes for new Senior Subordinated Guaranteed Pay-in-Kind Notes due
2002 (the "1996 PIK Notes"). On September 11, 1996, the Company repurchased PIK
Notes in an aggregate amount of $102 for a cash payment of $100 and,
concurrently, exchanged essentially all remaining PIK Notes for 1996 PIK Notes
in an aggregate amount of $156. In addition, the $13 Senior Secured Notes
outstanding were repaid. Funding for the Exchange Offer was accomplished through
the application of $30 from the Specific Proceeds Collateral Account held by the
then-existing term lenders, additional borrowing in an aggregate amount of $55
under the then-existing term loan, and borrowing of approximately $36 from the
then-existing revolving credit facility. In conjunction with the Exchange Offer,
capitalized debt issue costs of approximately $4, net of a discount on the PIK
Notes, have been charged to net income in fiscal 1997 and accounted for as an
extraordinary loss.
The Company made cash interest payments of $44, $30 and $24 for the years
ended June 30, 1995, 1996 and 1997, respectively.
As required by the Company's Debt agreements, the Company has entered into
interest rate swap agreements which effectively converts $235 notional principal
amount of floating rate debt to a fixed rate basis for a three-year period
beginning May 22, 1997, thus reducing the impact of interest rate changes on
future income. The Company paid a fixed rate of 6.375% and received a weighted
average rate of 5.875%. The incremental effect on interest expense for 1997 was
insignificant. The agreements also include a provision establishing the rate the
Company will pay as 7.50% if the three-month LIBOR rate sets at or above 7.50%
during the term of the agreements. The Company will continue paying 7.50% until
the three-month LIBOR again sets below 7.50% at which time the fixed rate of
6.375% will again become effective. The Company is exposed to credit loss in the
event of nonperformance by the other parties to the interest rate swap
agreements. However, the Company does not anticipate nonperformance by the
counterparties.
NOTE E -- STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK
On February 21, 1997, Del Monte Foods Company entered into a
recapitalization agreement and plan of merger, which was amended and restated as
of April 14, 1997, with affiliates of Texas Pacific Group. Under this agreement,
Shield, a corporation affiliated with TPG, was to be merged with and into DMFC,
with DMFC being the surviving corporation. The Merger became effective on April
18, 1997. By virtue of the Merger, shares of DMFC's outstanding preferred stock
having a value implied by the Merger consideration of approximately $14, held by
certain of DMFC's pre-recapitalization stockholders who remained investors
pursuant to the Recapitalization, were cancelled, and were converted into the
right to receive new DMFC common stock. All other shares of DMFC stock were
cancelled and were converted into the right to receive
F-14
<PAGE> 106
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
cash consideration, as set forth in the Merger Agreement. In the Merger, the
common and preferred stock of Shield were converted into new shares of common
stock and preferred stock, respectively, of DMFC.
Immediately following the consummation of the Recapitalization, the charter
of DMFC authorized DMFC to issue capital stock consisting of new common stock
(the "Common Stock"), $.01 par value, and 1,000,000 shares of new preferred
stock (the "Preferred Stock"), $.01 par value. The Company issued and has
outstanding 26,815,880 shares of Common Stock, and 35,000 shares of Preferred
Stock. TPG and certain of its affiliates or partners hold 20,925,580 shares of
DMFC's Common Stock, continuing shareholders of DMFC hold 2,729,857 shares of
such stock, and other investors hold 3,160,443 shares. TPG and certain of its
affiliates hold 17,500 outstanding shares of Series A Preferred Stock, and TCW
Capital Investment Corporation holds 17,500 outstanding shares of Series B
Preferred Stock.
The Preferred Stock accumulates dividends at the annual rate of 14% of the
liquidation value, payable quarterly. These dividends are payable in cash or
additional shares of Preferred Stock, at the option of the Company, subject to
availability of funds and the terms of its loan agreements, or through a
corresponding increase in the liquidation value of such stock. The Preferred
Stock has a liquidation preference of $1,000 per share and may be redeemed at
the option of the Company at a redemption price equal to the liquidation
preference plus accumulated and unpaid dividends (the "Redemption Price"). The
Company is required to redeem all outstanding shares of Preferred Stock on or
prior to April 17, 2008 at the Redemption Price, or upon a change of control of
the Company at 101% of the Redemption Price. The initial purchasers of Preferred
Stock for consideration of $35 received 35,000 shares of Preferred Stock and
warrants (exercisable after October 17, 1997) to purchase, at a nominal exercise
price, shares of DMFC Common Stock representing 2% of the outstanding shares of
DMFC Common Stock. A value of $3 was placed on the warrants, and such amount is
reflected as paid-in-capital within stockholders' equity. The remaining $32 is
reflected as redeemable preferred stock.
The two series of preferred stock have no voting rights except the right to
elect one director to the Board for each series, resulting in the authorized
number of directors to be increased, in cases where dividends are in arrears for
six quarters or shares have not been redeemed within ten days of a redemption
date.
Stockholders' equity at June 30, 1996 included the following classes of
common stock, $.01 par value per share (not adjusted for the Stock Split -- See
Note M):
<TABLE>
<CAPTION>
SHARES ISSUED AND
CLASS SHARES AUTHORIZED OUTSTANDING
----- ----------------- -----------------
<S> <C> <C>
A.......................................... 1,000,000 198,468
B.......................................... 150,000 --
E.......................................... 550,000 25,000
--------- -------
1,700,000 223,468
========= =======
</TABLE>
Redeemable common and redeemable preferred stock at June 30, 1996 consisted
of the following:
Redeemable non-voting common stock ($.01 par value per share):
<TABLE>
<CAPTION>
SHARES ISSUED AND
CLASS SHARES AUTHORIZED OUTSTANDING
----- ----------------- -----------------
<S> <C> <C>
C.......................................... 550,000 6,903
D.......................................... 550,000 102,483
F.......................................... 550,000 50,000
--------- -------
1,650,000 159,386
========= =======
</TABLE>
F-15
<PAGE> 107
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
Redeemable preferred stock ($.01 par value per share):
<TABLE>
<CAPTION>
SHARES ISSUED AND
SERIES SHARES AUTHORIZED OUTSTANDING
------ ----------------- -----------------
<S> <C> <C>
A Cumulative (issuable in subseries A1 and
A2)........................................ 16,523,000 8,336,795
B Cumulative................................. 3,616,000 1,602,845
C Cumulative................................. 2,900,000 1,522,353
D Cumulative................................. 1,454,000 1,356,955
E Cumulative................................. 5,000,000 3,328,002
F Cumulative................................. 3,000,000 1,153,091
---------- ----------
32,493,000 17,300,041
========== ==========
</TABLE>
The Company declared dividends for the following series of redeemable
preferred stock:
<TABLE>
<CAPTION>
DIVIDEND RATE PER SHARE
YEAR ENDED JUNE 30,
-----------------------
SERIES 1995 1996 1997
------ ----- ----- -----
<S> <C> <C> <C>
A1................................................ $3.80 $3.81 $1.92
B................................................. $3.87 $3.87 $1.95
D................................................. $3.93 $3.94 $1.98
E................................................. $3.93 $3.94 $1.98
</TABLE>
These dividends were paid in like-kind redeemable preferred stock at the
rate of .04 shares for each $.001 dividend declared. Resulting issuance of
additional shares and related par values were:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Additional shares...................... 1,564,117 1,824,999 1,027,406
Total par value........................ $ 0.016 $ 0.018 $ 0.010
</TABLE>
In the Recapitalization, all of the redeemable preferred stock issued prior
to April 18, 1997 was either cancelled and converted into the right to receive
new DMFC common stock or cancelled and converted into the right to receive cash
consideration as set forth in the Merger Agreement.
F-16
<PAGE> 108
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
JUNE 30, PERIOD FROM PERIOD FROM
------------------- JULY 1, 1996 APRIL 18, 1997 JUNE 30,
1995 1996 TO APRIL 18, 1997 TO JUNE 30, 1997 1997
-------- -------- ----------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Numerator:
Income (loss) before
extraordinary item and
cumulative effect of
accounting change......... $ 12 $ 105 $ 25 $ (39) $ (14)
Preferred stock dividends.... (71) (82) (70) -- (70)
-------- -------- -------- ----------- ----------
Numerator for basic and
diluted earning (loss) per
share -- income (loss)
attributable to common
shares before
extraordinary items and
cumulative effect of
accounting change......... $ (59) $ 23 $ (45) $ (39) $ (84)
======== ======== ======== =========== ==========
Denominator for basic and
diluted earnings (loss) per
common
share -- weighted-average
shares....................... 400,285 391,806 382,854 26,815,880 6,991,111
======== ======== ======== =========== ==========
Basic and diluted income (loss)
per common share before
extraordinary item and
cumulative effect of
accounting change............ $(145.35) $ 59.40 $(117.36) $ (1.45) $ (12.06)
======== ======== ======== =========== ==========
Extraordinary loss............. $ 7 $ 10 $ 4 $ 38 $ 42
======== ======== ======== =========== ==========
Extraordinary loss per common
share........................ $ (18.34) $ (26.39) $ (9.77) $ (1.42) $ (5.95)
======== ======== ======== =========== ==========
Cumulative effect of accounting
change....................... -- $ 7 -- -- --
======== ======== ======== =========== ==========
Cumulative effect of accounting
change per common share...... -- $ (18.14) -- -- --
======== ======== ======== =========== ==========
</TABLE>
For the period from April 18, 1997 to June 30, 1997, since the effect of
inclusion of potentially dilutive securities in the denominator of diluted loss
per share was antidilutive, 547,262 warrants were excluded from the computation.
The weighted-average shares for the years ended June 30, 1995 and 1996, and
the period from July 1, 1996 to April 18, 1997, have not been restated to
reflect the proposed stock split, due to the change in the capital structure
resulting from the Recapitalization.
NOTE F -- RETIREMENT BENEFITS
The Company sponsors three non-contributory defined benefit pension plans
covering substantially all full-time employees. Plans covering most hourly
employees provide pension benefits that are based on the employee's length of
service and final average compensation before retirement. Plans covering
salaried employees provide for individual accounts which offer lump sum or
annuity payment options, with benefits based on accumulated compensation and
interest credits made monthly throughout the career of each participant. Assets
of the plans consist primarily of equity securities and corporate and government
bonds.
F-17
<PAGE> 109
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
It has been the Company's policy to fund the Company's retirement plans in
an amount consistent with the funding requirements of federal law and
regulations and not to exceed an amount that would be deductible for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future. Del Monte's defined benefit retirement plans have been determined to be
underfunded under federal ERISA guidelines. In connection with the
Recapitalization, the Company entered into an agreement with the U.S. Pension
Benefit Guaranty Corporation dated April 7, 1997 whereby the Company will
contribute a total of $55 to its defined benefit pension plans through calendar
2001, with $15 contributed within 30 days after the consummation of the
Recapitalization. The contributions to be made in 1999, 2000 and 2001 will be
secured by a $20 letter of credit to be obtained by the Company by August 31,
1998.
The following table sets forth the pension plans' funding status and
amounts recognized on the Company's balance sheet:
<TABLE>
<CAPTION>
JUNE 30,
--------------
1996 1997
----- -----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $(265) $(269)
===== =====
Accumulated benefit obligation.............................. $(270) $(274)
===== =====
Projected benefit obligation for services rendered to
date...................................................... $(277) $(279)
Plan assets at fair value................................... 245 276
----- -----
Projected benefit obligation in excess of plan assets....... (32) (3)
Unrecognized net actuarial gain............................. (27) (34)
Unrecognized prior service income........................... (2) (1)
----- -----
Accrued pension cost recognized in the consolidated balance
sheet..................................................... $ (61) $ (38)
===== =====
</TABLE>
The components of net periodic pension cost for the years ended June 30,
1995, 1996 and 1997 for all defined benefit plans are as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1995 1996 1997
---- -------- ----
<S> <C> <C> <C>
Service cost for benefits earned during period.............. $ 4 $ 4 $ 3
Interest cost on projected benefit obligation............... 22 21 21
Actual return on plan assets................................ (31) (32) (35)
Net amortization and deferral............................... 11 11 13
---- ---- ----
Net periodic pension cost................................... $ 6 $ 4 $ 2
==== ==== ====
</TABLE>
Significant rate assumptions used in determining net periodic pension cost
and related pension obligations are as follows:
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate used in determining projected benefit
obligation................................................ 7.75% 8.0% 7.75%
Rate of increase in compensation levels..................... 5.0 5.0 5.0
Long-term rate of return on assets.......................... 9.0 9.0 9.0
</TABLE>
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees. The
contributions to multi-employer plans for each of the years ended June 30, 1995,
1996 and 1997 were $4. The Company also sponsors defined contribution plans
covering substantially all employees. Company contributions to the plans are
based on employee contributions or compensation. Contributions under such plans
totaled $3, $2, and $1 for the years ended June 30, 1995, 1996, and 1997,
respectively.
F-18
<PAGE> 110
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The Company provided retirement benefits under various arrangements to
substantially all employees in foreign locations who were not covered under the
above plans. Generally, benefits under these arrangements were based on years of
service and levels of salary. The majority of the Company's foreign plans were
commonly referred to as termination indemnities. The plans provided employees
with retirement benefits in accordance with programs mandated by the governments
of the countries in which such employees worked. The expense and related
liabilities associated with these arrangements were recorded by the Company
based on established formulas, with funding generally occurring when employees
ceased active service.
The Company sponsors several unfunded defined benefit postretirement plans
providing certain medical, dental and life insurance benefits to eligible
retired, salaried, non-union hourly and union employees. Benefits, eligibility
and cost-sharing provisions vary by plan and employee group.
Net periodic postretirement benefit cost for the fiscal years 1995, 1996
and 1997 included the following components:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $ 2 $ 2 $ 1
Interest cost............................................... 9 9 9
Amortization of prior service cost.......................... -- -- (1)
Amortization of actuarial losses (gains).................... -- (3) (3)
Curtailment gain............................................ -- (4) --
--- --- ---
Net periodic postretirement benefit cost.................... $11 $ 4 $ 6
=== === ===
</TABLE>
The Company amortizes unrecognized gains and losses at the end of the
fiscal year over the expected remaining service of active employees. The
curtailment gain results from a reduction in personnel in fiscal 1996. The
following table sets forth the plans' combined status reconciled with the amount
included in the consolidated balance sheet:
<TABLE>
<CAPTION>
JUNE 30,
------------
1996 1997
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Current retirees.......................................... $ 85 $ 80
Fully eligible active plan participants................... 16 11
Other active plan participants............................ 18 13
---- ----
119 104
Unrecognized prior service cost........................... -- 10
Unrecognized gain......................................... 30 38
---- ----
Accrued postretirement benefit cost....................... $149 $152
==== ====
</TABLE>
For fiscal years 1996 and 1997, the weighted average annual assumed rate of
increase in the health care cost trend is 13.33% and 12.42%, respectively, and
is assumed to decrease gradually to 6.0% in the year 2004. The health care cost
trend rate assumption has a significant effect on the amounts reported. An
increase in the assumed health care cost trend by 1% in each year would increase
the accumulated postretirement benefit obligation as of June 30, 1997 by $10 and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $1.
F-19
<PAGE> 111
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The discount rate used in determining the accumulated postretirement
benefit obligation as of June 30, 1997 was 7.75%. The weighted-average discount
rate used in determining the accumulated postretirement benefit obligation as of
June 30, 1996 was 8.32%.
NOTE G -- PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income (loss) before minority interest and taxes:
Domestic.................................................. $2 $ 90 $(56)
Foreign................................................... 6 12 1
-- ---- ----
$8 $102 $(55)
== ==== ====
Income tax provision (benefit)
Current:
Federal................................................ $-- $ 5 $ --
Foreign and state...................................... 1 6 --
-- ---- ----
Total Current.......................................... 1 11 --
-- ---- ----
Deferred:
Federal................................................ -- -- --
Foreign and state...................................... 1 -- --
-- ---- ----
Total Deferred......................................... 1 -- --
-- ---- ----
$2 $ 11 $ --
== ==== ====
</TABLE>
Pre-tax income for foreign operations includes income of all operations
located outside the United States, some of which are currently subject to U.S.
taxing jurisdictions.
F-20
<PAGE> 112
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
Significant components of the Company's deferred tax assets and liabilities
as of June 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
-------------
1996 1997
---- -----
<S> <C> <C>
Deferred tax assets:
Post employment benefits.................................. $ 53 $ 53
Pension expense........................................... 24 16
Deferred gain............................................. 6 5
Workers' compensation..................................... 7 8
Leases and patents........................................ 5 4
Other..................................................... 20 38
Net operating loss and tax credit carryforward............ 16 33
---- -----
Gross deferred tax assets.............................. 131 157
Valuation allowance.................................... (98) (127)
---- -----
Net deferred tax assets................................ 33 30
Deferred tax liabilities:
Depreciation.............................................. 30 30
Other..................................................... 3 --
---- -----
Gross deferred liabilities............................. 33 30
---- -----
Net deferred tax asset................................. $ -- $ --
==== =====
</TABLE>
The net change in the valuation allowance for the years ended June 30, 1996
and 1997 was a decrease of $27 and an increase of $29, respectively. The Company
believes that, based on a history of tax losses and the related absence of
recoverable prior taxes through net operating loss carryback, the available
objective evidence creates sufficient uncertainty regarding the recognition of
deferred tax assets. Therefore, a full valuation allowance in the amount of $127
has been recorded.
The differences between the provision for income taxes and income taxes
computed at the statutory U.S. federal income tax rates are explained as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income taxes (benefit) computed at the statutory U.S.
federal income tax rates.................................. $2 $36 $(19)
Taxes on foreign income at rates different than U.S. federal
income tax rates.......................................... -- (1) --
State taxes, net of federal benefit......................... -- 3 --
Net operating losses for which no benefit has been
recognized................................................ -- -- 19
Realization of prior years' net operating losses and tax
credits................................................... -- (27) --
-- --- ----
Provision for income taxes.................................. $2 $11 $ --
== === ====
</TABLE>
As of June 30, 1997, the Company had operating loss carryforwards for tax
purposes available from domestic operations totaling $84 which will expire
between 2008 and 2012.
Extraordinary losses from refinancing of debt and early debt retirement and
the cumulative effect of change in accounting principle did not have any tax
effect due to the Company's current tax position.
F-21
<PAGE> 113
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The Company made income tax payments of $3, $5 and $4 for the years ended
June 30, 1995, 1996 and 1997, respectively.
NOTE H -- COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment and office and plant
facilities. At June 30, 1997, the aggregate minimum rental payments required
under operating leases that have initial or remaining terms in excess of one
year are as follows:
<TABLE>
<S> <C>
1998........................................................ $14
1999........................................................ 13
2000........................................................ 12
2001........................................................ 9
2002........................................................ 6
Thereafter.................................................. 41
---
$95
===
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of $7
due through 2016 under noncancelable subleases.
Rent expense was $32, $28, and $32 for fiscal years ended June 30, 1995,
1996, and 1997, respectively. Rent expense includes contingent rentals on
certain equipment based on usage.
The Company has entered into noncancelable agreements with growers, with
terms ranging from two to ten years, to purchase certain quantities of raw
products. Total purchases under these agreements were $68, $54, and $114 for the
years ended June 30, 1995, 1996, and 1997, respectively. The Company also has
commitments to purchase certain finished goods.
At June 30, 1997, aggregate future payments under such purchase commitments
(priced at the June 30, 1997 estimated cost) are estimated as follows:
<TABLE>
<S> <C>
1998........................................................ $ 68
1999........................................................ 56
2000........................................................ 44
2001........................................................ 33
2002........................................................ 26
Thereafter.................................................. 60
----
$287
====
</TABLE>
In addition, the Company expects to purchase $46 in fiscal 1998 under the
supply agreement for pineapple products entered into in conjunction with the
sale of the Del Monte Philippines operations (see Note B).
Effective August 13, 1993, DMC sold its dried fruit and snack operations to
Yorkshire Dried Fruits and Nuts, Inc., ("YDFNI"). In connection with this asset
sale, DMC entered into certain agreements with YDFNI which, among other things,
grant YDFNI the right to use certain Del Monte trademarks. Under these
agreements, as a service to, and for the benefit of YDFNI, DMC purchased and
resold certain of the former DMC dried fruit and snack products. This resale
agreement was terminated by the Company as of June 30, 1997.
Effective December 21, 1993, DMC sold substantially all of the assets and
certain related liabilities of its can manufacturing operations in the United
States to Silgan Containers Corporation ("Silgan"). In
F-22
<PAGE> 114
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
connection with the sale to Silgan, DMC entered into a ten-year supply agreement
under which Silgan, effective immediately after the sale, began supplying
substantially all of DMC's metal container requirements for foods and beverages
in the United States. Purchases under the agreement in fiscal 1997 amounted to
$134. The Company believes the supply agreement provides it with a long-term
supply of cans at competitive prices that adjust over time for normal
manufacturing cost increases or decreases.
In May 1992, DMC entered into an exclusive supply agreement (the
"Agreement") with Pacific Coast Producers ("PCP"), a canned fruit and tomato
processor, to purchase substantially all of PCP's tomato and fruit production
commencing July 1, 1992. PCP continued to own and operate its production
facilities, as well as purchase raw products via its established grower network.
The Agreement was to expire in June 1998 with optional successive five-year
extensions. Total payments under the Agreement for the twelve months ended June
30, 1995 were $186.
The Federal Trade Commission ("FTC") conducted an investigation to
determine whether the supply arrangement was in violation of certain U.S.
antitrust laws. In January 1995, the Company and PCP agreed to terminate their
supply and purchase option agreements in settlement of the FTC investigation. In
response to the Company's actions, the FTC issued a final consent order on April
18, 1995. A consent agreement does not constitute an admission of any violation
of law. The option and supply agreements were terminated in late fiscal 1995. As
a condition of the termination, the Company was required to make a termination
payment of $4 to PCP.
On November 1, 1992, DMC entered into an agreement with Electronic Data
Systems Corporation ("EDS") to provide services and administration to the
Company in support of its information services functions for all domestic
operations. Payments under the terms of the agreement are based on scheduled
monthly base charges subject to various adjustments such as system usage and
inflation. Total payments for the twelve months ended June 30, 1995, 1996, and
1997 were $16, $16, and $18, respectively. The agreement expires in November
2002 with optional successive one-year extensions.
At June 30, 1997, base charge payments under the agreement are as follows:
<TABLE>
<S> <C>
1998........................................................ $14
1999........................................................ 14
2000........................................................ 13
2001........................................................ 13
2002........................................................ 13
Thereafter.................................................. 6
---
$73
===
</TABLE>
Del Monte has a concentration of labor supply in employees working under
union collective bargaining agreements, which represent approximately 75% of its
hourly and seasonal work force. Of these represented employees, 7% of employees
are under agreements that will expire in 1998.
The Company is defending various claims and legal actions that arise from
its normal course of business, including certain environmental actions. While it
is not feasible to predict or determine the ultimate outcome of these matters,
in the opinion of management none of these actions, individually or in the
aggregate, will have a material effect on the Company's results of operations,
cash flow, liquidity or financial position.
On March 25, 1997, the entities that purchased the Company's Mexican
subsidiary in October 1996 commenced an action in Texas state court alleging,
among other things, that the Company breached the agreement with respect to the
purchase because the financial statements of the Mexican subsidiary did not
fairly present its financial condition and results of operations in accordance
with U.S. generally accepted
F-23
<PAGE> 115
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
accounting principles. The purchasers have claimed damages in excess of $10 as a
result of these alleged breaches. In connection with this action, $8 of the cash
proceeds from the Recapitalization which were payable to shareholders and
certain members of senior management of DMFC have been held in escrow and will
be applied to fund the Company's costs and expenses in defending the action,
with any remaining amounts available to pay up to 80% of any ultimate liability
of the Company to the purchasers. Separately, the purchasers claim that they are
entitled to receive from the Company as a purchase price adjustment an
additional approximately $2 pursuant to provisions of the purchase agreement.
The Company does not believe that these claims, in the aggregate, will have a
material adverse effect on the Company's financial position or results of
operations.
NOTE I -- FOREIGN OPERATIONS AND GEOGRAPHIC DATA
The Company's earnings have historically been derived in part from foreign
operations. As of November 1996, all of these operations had been sold.
Transfers between geographic areas have been accounted for as intercompany
sales, and transfer prices have been based generally on negotiated contracts.
The following table shows certain financial information relating to the
Company's operations in various geographic areas:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Net Sales:
United States.......................................... $1,331 $1,147 $1,203
Philippines............................................ 180 142 --
Latin America.......................................... 65 55 17
Transfer between geographic areas...................... (49) (39) (3)
------ ------ ------
Total net sales................................ $1,527 $1,305 $1,217
====== ====== ======
Operating income (loss):
United States.......................................... $ 64 $ 65 $ 73
Philippines............................................ 11 12 --
Latin America.......................................... 5 5 --
------ ------ ------
Total operating income......................... $ 80 $ 82 $ 73
====== ====== ======
Assets:
United States.......................................... $ 754 $ 701 $ 667
Philippines............................................ 164 -- --
Latin America.......................................... 42 35 --
------ ------ ------
Total assets................................... $ 960 $ 736 $ 667
====== ====== ======
Liabilities of the Company's operations located in
foreign countries...................................... $ 128 $ 7 $ --
====== ====== ======
</TABLE>
NOTE J -- DEL MONTE CORPORATION
DMC is directly-owned and wholly-owned by DMFC. In the fiscal years ended
June 30, 1996 and 1997, DMC and DMC's subsidiaries accounted for 100% of the
consolidated revenues and net earnings of the Company. In the fiscal year ended
June 30, 1995, DMC and DMC's subsidiaries accounted for all of the consolidated
revenues and net earnings of the Company except for proceeds recorded by DMFC
from a $30 letter of credit related to the termination of an Agreement and Plan
of Merger (see Note K). As of June 30,
F-24
<PAGE> 116
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
1996 and 1997, the Company's sole asset, other than intercompany receivables
from DMC, was the stock of DMC. The Company had no subsidiaries other than DMC
and DMC's subsidiaries, and had no direct liabilities other than intercompany
payables to DMC. The Company is separately liable under various guarantees of
indebtedness of DMC, which guarantees of indebtedness are full and
unconditional.
NOTE K -- TERMINATION OF AGREEMENT AND PLAN OF MERGER
On June 27, 1994 the Company entered into an Agreement and Plan of Merger
with Grupo Empacador de Mexico, S.A. de C.V., and CCP Acquisition Company of
Maryland, Inc. (the "Purchasers"). The Purchasers were formed by an investor
group led by Mr. Carlos Cabal Peniche for the purpose of effecting an
acquisition (the "Proposed Acquisition") of the Company. The Agreement and Plan
of Merger provided that the Company was entitled to terminate the Agreement and
Plan of Merger if the effective date of the Proposed Acquisition failed to occur
on or prior to September 19, 1994. The effective date of the Proposed
Acquisition did not occur on or prior to such date and, on September 21, 1994,
the Company terminated the Agreement and Plan of Merger in accordance with its
terms.
Pursuant to the Agreement and Plan of Merger, the Purchasers caused a $30
letter of credit (the "Letter of Credit") to be issued by Banco Union, S.A., a
Mexican bank affiliated with Mr. Cabal, and confirmed by Midland Bank plc, New
York Branch, in favor of the Company. Under the terms of the Agreement and Plan
of Merger, the Company was entitled to draw under the Letter of Credit if the
effective date of the Proposed Acquisition failed to occur on or prior to
September 19, 1994. Because the Proposed Acquisition did not close by September
19, 1994, on September 20, 1994 the Company drew $30 under the Letter of Credit.
This amount, net of $4 of related transaction expenses, is included in "Other
(income) expense". The cash was applied to the repayment of indebtedness then
outstanding under the Company's revolving credit agreement.
NOTE L -- RELATED PARTY TRANSACTIONS
In connection with the Recapitalization, the Company entered into a
ten-year agreement dated April 18, 1997 (the "Management Advisory Agreement")
with TPG pursuant to which TPG is entitled to receive an annual fee from the
Company for management advisory services equal to the greater of $0.5 and 0.05%
of the budgeted consolidated net sales of the Company. In addition, the Company
has agreed to indemnify TPG, its affiliates and shareholders, and their
respective directors, officers, agents, employees and affiliates from and
against fees and expenses, arising out of or in connection with the services
rendered by TPG thereunder. The Management Advisory Agreement makes available
the resources of TPG concerning a variety of financial and operational matters
including advice and assistance in reviewing the Company's business plans and
its results of operations and in evaluating possible strategic acquisitions, as
well as providing investment banking services in identifying and arranging
sources of financing. The services that will be provided by TPG cannot 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 Management Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arm's-length transaction with an unaffiliated third party.
In connection with the Recapitalization, the Company also entered into an
agreement dated April 18, 1997 (the "Transaction Advisory Agreement") with TPG
pursuant to which TPG received a cash financial advisory fee of approximately
$8.4 million upon the closing of the Recapitalization as compensation for its
services as financial advisor for the Recapitalization. TPG also is entitled to
receive fees up to 1.5% of the "transaction value" for each subsequent
transaction in which the Company is involved, which may include acquisitions,
refinancings and recapitalizations. The term "transaction value" means the total
value of any subsequent transaction, including, without limitation, the
aggregate amount of the funds required to complete the subsequent transaction
(excluding any fees payable pursuant to the Transaction Advisory Agreement and
F-25
<PAGE> 117
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
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 transaction) including the amount of indebtedness,
preferred stock or similar items assumed (or remaining outstanding). In
management's opinion, the fees provided for under the Transaction Advisory
Agreement reasonably reflect the benefits to be received by the Company and are
comparable to those obtainable in an arm's-length transaction with an
unaffiliated third party.
NOTE M -- SUBSEQUENT EVENT
In connection with the Company's proposed public offering of shares of its
Common Stock, the Company plans to declare a 191.542-for-one stock split of all
of the Company's outstanding shares of Common Stock (the "Stock Split") prior to
the Offering. Accordingly, all share and per share amounts for the period
subsequent to the Recapitalization have been retroactively adjusted to give
effect to the Stock Split. Periods prior to the Recapitalization have not been
restated to reflect the Stock Split as it was not deemed appropriate to effect
the split on an entirely different capital structure.
F-26
<PAGE> 118
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Del Monte Foods Company
We have audited the accompanying consolidated balance sheet of Del Monte
Foods Company and subsidiaries as of June 30, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended June 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Del Monte Foods Company and subsidiaries at June 30, 1996, and the consolidated
results of their operations and their cash flows for the years ended June 30,
1996 and 1995 in conformity with generally accepted accounting principles.
In the fiscal year ended June 30, 1996, Del Monte Foods Company changed its
method of accounting for impairment of long-lived assets and for long-lived
assets to be disposed of.
ERNST & YOUNG LLP
August 29, 1996
San Francisco, California
F-27
<PAGE> 119
The consolidated financial statements included herein have been adjusted to
give effect to the anticipated 191.542-for-one stock split of all the Company's
post-Recapitalization outstanding shares of Common Stock (the "Stock Split")
prior to effectiveness of the Company's proposed public offering of shares of
its Common Stock as described in Note M to the Company's consolidated financial
statements. We expect to be in a position to render the following audit report
upon the effectiveness of the Stock Split assuming that through the effective
date of the Stock Split, no other events will have occurred that would affect
the consolidated financial statements.
KPMG PEAT MARWICK LLP
May 1, 1998
San Francisco, California
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Del Monte Foods Company
We have audited the accompanying consolidated balance sheet of Del Monte
Foods Company and subsidiaries as of March 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the nine-month period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Del Monte Foods Company and subsidiaries as of March 31, 1998 and the
consolidated results of their operations and their cash flows for the nine-month
period then ended in conformity with generally accepted accounting principles.
F-28
<PAGE> 120
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1997 1998
----------- ------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6 $ 4
Restricted cash........................................... 2 --
Trade accounts receivable, net of allowance............... 84 104
Other receivables......................................... 3 5
Inventories............................................... 381 467
Prepaid expenses and other current assets................. 4 10
----- ------
Total current assets.............................. 480 590
Property, plant and equipment, net.......................... 229 298
Intangibles................................................. 16
Other assets................................................ 30 24
----- ------
Total assets...................................... $ 739 $ 928
===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 238 $ 280
Short-term borrowings..................................... 42 68
Current portion of long-term debt......................... 16 24
----- ------
Total current liabilities......................... 296 372
Long-term debt.............................................. 252 678
Other noncurrent liabilities................................ 233 212
Redeemable common stock ($.01 par value per share, 1,650,000
shares authorized; issued and outstanding: 159,386 at
March 31, 1997)........................................... 2 --
Redeemable preferred stock ($.01 par value per share,
32,493,000 shares authorized; issued and outstanding:
18,327,449 at March 31, 1997; aggregate liquidation
preference: $649)......................................... 213 --
Redeemable preferred stock ($.01 par value per share,
1,000,000 shares authorized; issued and outstanding 37,253
at March 31, 1998; aggregate liquidation preference
$40)...................................................... -- 32
Stockholders' equity (deficit):
Common stock ($.01 par value per share, 1,700,000 shares
authorized;
issued and outstanding: 223,468 at March 31, 1997)..... -- --
Common stock ($.01 par value per share, 500,000,000 shares
authorized;
issued and outstanding: 34,943,199 at March 31,
1998).................................................. -- --
Paid-in capital........................................... 3 173
Retained earnings (deficit)............................... (260) (539)
----- ------
Total stockholders' equity (deficit).............. (257) (366)
----- ------
Total liabilities and stockholders' equity........ $ 739 $ 928
===== ======
</TABLE>
See Notes to Consolidated Financial Statements.
F-29
<PAGE> 121
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
---------------------------
1997 1998
------------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $ 936 $ 968
Cost of products sold....................................... 632 653
---------- ----------
Gross profit........................................... 304 315
Selling, advertising, administrative and general expense.... 235 249
---------- ----------
Operating income....................................... 69 66
Interest expense............................................ 37 58
Loss on sale of divested assets............................. 5 --
Other expense............................................... -- 6
---------- ----------
Income before income taxes and extraordinary item...... 27 2
Provision for income taxes.................................. 2 --
---------- ----------
Income before extraordinary item....................... 25 2
Extraordinary loss from early debt retirement............... 4 --
---------- ----------
Net income ............................................ $ 21 $ 2
========== ==========
Net loss attributable to common shares...................... $ (49) $ (2)
========== ==========
Weighted average number of shares outstanding............... 382,854 30,389,671
========== ==========
Loss per common share:
Loss before extraordinary item......................... $ (117.36) $ (0.05)
Extraordinary loss from early debt retirement.......... (9.77) --
---------- ----------
Net loss per common share......................... $ (127.13) $ (0.05)
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-30
<PAGE> 122
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES TOTAL
RECEIVABLE RETAINED STOCKHOLDERS'
COMMON COMMON PAID-IN FROM EARNINGS EQUITY
SHARES STOCK CAPITAL STOCKHOLDERS (DEFICIT) (DEFICIT)
---------- ------ ------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997..... 26,815,880 -- 129 -- (541) (412)
Issuance of shares........... 8,127,319 44 44
Net income................... 2 2
---------- ---- ---- ---- ----- -----
Balance at March 31, 1998.... 34,943,199 $ -- $173 $ -- $(539) $(366)
========== ==== ==== ==== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
F-31
<PAGE> 123
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
--------------------
1997 1998
----------- -----
(unaudited)
<S> <C> <C>
Operating activities:
Net income................................................ $ 21 $ 2
Adjustments to reconcile net income to net cash flows:
Extraordinary loss from early debt retirement.......... 4 --
Loss on sale of divested assets........................ 5 --
Loss (gain) on sales of assets......................... -- 1
Depreciation and amortization.......................... 22 23
Other.................................................. -- 2
Changes in operating assets and liabilities net of
effect of acquisition:
Accounts receivable.................................. 7 (40)
Inventories.......................................... (90) (24)
Prepaid expenses and other current assets............ 7 3
Other assets......................................... -- (1)
Accounts payable and accrued expenses................ 44 46
Other non-current liabilities........................ 6 (3)
----- -----
Net cash provided by operating activities............ 26 9
Investing activities:
Capital expenditures................................... (12) (15)
Proceeds from sales of assets.......................... 1 5
Proceeds from sales of divested assets................. 50 --
Acquisition of business................................ -- (195)
----- -----
Net cash provided by (used in) investing
activities.......................................... 39 (205)
Financing activities:
Short-term borrowings.................................. 929 261
Payment on short-term borrowings....................... (930) (275)
Proceeds from long-term borrowings..................... 55 176
Principal payments on long-term debt................... (140) (2)
Deferred debt issuance costs........................... (7) (7)
Issuance of common and preferred stock................. -- 42
Specific Proceeds Collateral Account................... 28 --
----- -----
Net cash provided by (used in) financing
activities.......................................... (65) 195
Net change in cash and cash equivalents.............. -- (1)
Cash and cash equivalents at beginning of period............ 6 5
----- -----
Cash and cash equivalents at end of period........... $ 6 $ 4
===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
F-32
<PAGE> 124
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Business: Del Monte Foods Company ("DMFC") and its wholly owned
subsidiary, Del Monte Corporation ("DMC"), (DMFC together with DMC, the
"Company") operates in one business segment: the manufacturing and marketing of
processed foods, primarily canned vegetables, fruits and tomato products. The
Company primarily sells its products under the Del Monte brand to a variety of
food retailers, supermarkets and mass merchandising stores. The Company holds
the rights to the Del Monte brand in the United States. The Company reports its
financial results on a July 1 to June 30 fiscal year basis.
During fiscal 1998, the Company acquired certain of Contadina's canned
processed tomato product lines from Nestle USA, Inc. and Contadina Services,
Inc. (see Note B). Contadina operates in one business segment which manufactures
and markets branded, private label, industrial and foodservice processed tomato
products from manufacturing facilities in Hanford, California and Woodland,
California. Contadina's products are distributed throughout the United States.
The acquisition was accounted for using the purchase method of accounting.
Basis of Accounting: Pursuant to the Agreement and Plan of Merger, dated
February 21, 1997, and amended and restated as of April 14, 1997 (the "Merger
Agreement"), entered into among TPG Partners, L.P., a Delaware partnership
("TPG"), TPG Shield Acquisition Corporation, a Maryland corporation ("Shield"),
and DMFC, Shield merged with and into DMFC (the "Merger"), with DMFC being the
surviving corporation. By virtue of the Merger, shares of DMFC's preferred stock
having an implied value of approximately $14 held by certain of DMFC's
stockholders, who remained investors, were canceled and were converted into the
right to receive common stock of the surviving corporation. All other shares of
DMFC stock were canceled and were converted into the right to receive cash
consideration as set forth in the Merger Agreement. In the Merger, the common
stock and preferred stock of Shield was converted into shares of new DMFC common
stock and preferred stock, respectively. The Merger was accounted for as a
leveraged recapitalization for accounting purposes (the "Recapitalization");
accordingly, all assets and liabilities continue to be stated at historical
cost.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates: Certain amounts reported in the consolidated financial
statements are based on management estimates. The ultimate resolution of these
items may differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. The
carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
Inventories: Inventories are stated at the lower of cost or market. The
cost of substantially all inventories is determined using the LIFO method. The
Company has established various LIFO pools that have measurement dates
coinciding with the natural business cycles of the Company's major inventory
items.
Inflation has had a minimal impact on production costs since the Company
adopted the LIFO method as of July 1, 1991. Accordingly, there is no significant
difference between LIFO inventory costs and current costs.
Property, Plant and Equipment and Depreciation: Property, plant and
equipment are stated at cost and depreciated over their estimated useful lives,
principally by the straight-line method. Maintenance and repairs are expensed as
incurred. Significant expenditures that increase useful lives are capitalized.
F-33
<PAGE> 125
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The principal estimated useful lives are: land improvements -- 10 to 30
years; building and leasehold improvements -- 10 to 30 years; machinery and
equipment -- 7 to 15 years. Depreciation of plant and equipment and leasehold
amortization was $20 for the nine-month period ended March 31, 1998.
Intangibles: Intangibles consists of tradenames and trademarks, and are
carried at cost less accumulated amortization which is calculated on a
straight-line basis over the estimated useful life of the asset, not to exceed
40 years.
Revenue Recognition: Revenue from sales of products is recognized upon
shipment of product, at which time title passes to the customer. Customers
generally do not have the right to return product unless damaged or defective.
Cost of Products Sold: Cost of products sold includes raw material, labor
and overhead.
Advertising Expenses. The Company expenses all costs associated with
advertising as incurred or when the advertising takes place. Advertising expense
was $1 for the nine months ended March 31, 1998.
Research and Development: Research and development costs are included as a
component of "Selling, advertising, administrative and general expense."
Research and development costs charged to operations were $4 for the nine-month
period ended March 31, 1998.
Interest Rate Contracts: To manage interest rate exposure, the Company
uses interest-rate swap agreements. These agreements involve the receipt of
fixed rate amounts in exchange for floating rate interest payments over the life
of the agreement without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.
Fair Value of Financial Instruments: The carrying amount of certain of the
Company's financial instruments, including accounts receivable, accounts
payable, and accrued expenses, approximates fair value due to the relatively
short maturity of such instruments.
The carrying amounts of the Company's borrowings under its short-term
revolving credit agreement and long-term debt instruments, excluding the Senior
Subordinated Notes and the Senior Discount Notes, approximate their fair value.
At March 31, 1998, the fair value of the Senior Subordinated Notes was $170 and
of the Senior Discount Notes was $153, as estimated based on quoted market
prices from dealers.
The fair value of the interest rate swap agreements at March 31, 1998 was
$(3). The fair value of interest rate swap agreements are the estimated amounts
that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
credit worthiness of the counterparties.
Net Income (Loss) per Common Share: The Company has adopted the provisions
of Statement of Financial Accounting Standards No. 128. Net income (loss) per
common share is computed by dividing net income (loss) attributable to common
shares by the weighted average number of common and redeemable common shares
outstanding during the period. Net income (loss) attributable to common shares
is computed as net income (loss) reduced by the cash and in-kind dividends for
the period on redeemable preferred stock. The nine-month period ended March 31,
1997 has not been adjusted to give effect to the Stock Split, as the capital
structure changed entirely with the Recapitalization.
Stock Option Plan: The Company accounts for its stock-based employee
compensation for stock options using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost is
measured as the
F-34
<PAGE> 126
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
excess, if any, of the fair value of the Company's stock at the date of the
grant over the price the employee must pay to acquire the stock.
NOTE B -- ACQUISITION
On December 19, 1997, the Company acquired the Contadina canned tomato
business, including the Contadina trademark worldwide, capital assets and
inventory (the "Contadina Acquisition") from Nestle USA, Inc. ("Nestle") and
Contadina Services, Inc. for a total purchase price of $197, comprised of a base
price of $177 and an estimated net working capital adjustment of $20. The
consideration was paid solely in cash. The purchase price was subject to
adjustment based on the final calculation of net working capital as of the
closing date. Nestle provided its calculation of the net working capital which
resulted in a payment to the Company of $2, and therefore a reduction in the
purchase price to a total of $195. The Contadina Acquisition also included the
assumption of certain liabilities of approximately $2 consisting primarily of
liabilities in respect of reusable packaging materials and accrued vacation. In
connection with the Contadina Acquisition, approximately $7 of indirect expenses
were incurred.
The Contadina Acquisition was accounted for using the purchase method of
accounting. The allocation of purchase price to the assets acquired and
liabilities assumed has been made using estimated fair values which include
values based on independent appraisals and management estimates. These estimates
may be subject to adjustment to actual amounts, primarily in the area of accrued
liabilities. Any subsequent adjustments are expected to occur by fiscal year end
and are not expected to be material. Allocation of the $195 purchase price is as
follows: inventory $104, prepaid expenses $5, property, plant and equipment $84,
intangibles $16 and accrued liabilities $14 (assumed of $2 and other of $12).
Results of operations of the Contadina Acquisition are included in the
Consolidated Statement of Operations for March 31, 1998 since the acquisition
date. The following unaudited pro forma information has been prepared assuming
the Contadina Acquisition had taken place on July 1, 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------
1997 1998
-------- ------
<S> <C> <C>
Net sales.......................................... $ 1,064 $1,060
Operating income................................... 66 62
Net income (loss) before extraordinary item........ 6 (14)
Net income (loss).................................. $ 2 $ (14)
======== ======
Net loss attributable to common shares............. $ (68) $ (18)
======== ======
Loss per share..................................... $(177.23) $(0.63)
======== ======
</TABLE>
These pro forma results have been prepared for comparative purposes only
and do not purport to represent what the Company's results of operations
actually would have been if the Contadina Acquisition had occurred as of the
date indicated.
F-35
<PAGE> 127
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE C -- SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1997 1998
----------- ----
(UNAUDITED)
<S> <C> <C>
Trade Accounts Receivable:
Trade..................................................... $ 85 $105
Allowance for doubtful accounts........................... (1) (1)
---- ----
Total trade accounts receivable................... $ 84 $104
==== ====
Inventories:
Finished product.......................................... $317 $390
Raw materials and supplies................................ 6 12
Other, principally packaging material..................... 58 65
---- ----
Total inventories................................. $381 $467
==== ====
Property, Plant and Equipment:
Land and land improvements................................ $ 43 $ 41
Buildings and leasehold improvements...................... 94 106
Machinery and equipment................................... 230 304
Construction in progress.................................. 11 15
---- ----
378 466
Accumulated depreciation.................................. (149) (168)
---- ----
Property, plant and equipment, net................ $229 $298
==== ====
Intangible Assets:
Trademark................................................. $ -- $ 16
Accumulated amortization.................................. -- --
---- ----
Intangible assets, net............................ $ -- $ 16
==== ====
Other Assets:
Deferred debt issue costs................................. $ 26 $ 26
Other..................................................... 11 --
---- ----
37 26
Accumulated amortization.................................. 7 2
---- ----
Total other assets................................ $ 30 $ 24
==== ====
Accounts Payable and Accrued Expenses:
Accounts payable--trade................................... $ 58 $ 67
Marketing and advertising................................. 71 84
Payroll and employee benefits............................. 17 18
Current portion of accrued pension liability.............. 13 12
Current portion of other noncurrent liabilities........... 22 15
Accrued production costs.................................. 31 34
Other..................................................... 26 50
---- ----
Total accounts payable and accrued expenses....... $238 $280
==== ====
Other Noncurrent Liabilities:
Accrued postretirement benefits........................... $142 $144
Accrued pension liability................................. 40 18
Self-insurance liabilities................................ 16 8
Other..................................................... 35 42
---- ----
Total other noncurrent liabilities................ $233 $212
==== ====
</TABLE>
F-36
<PAGE> 128
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE D -- SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings under the revolving credit agreement at March 31,
1998 were $68. Unused amounts under the revolving credit agreement at March 31,
1998 totaled $282.
In conjunction with the Contadina Acquisition, the Company issued $230 of
12 1/2% senior discount notes ("DMFC Notes") and received proceeds of $126. The
DMFC Notes accrue interest on each June 15 and December 15, which will be
accreted through December 15, 2002, after which time interest is to be paid in
cash until maturity. The DMFC Notes mature on December 15, 2007. These DMFC
Notes are redeemable in whole or in part at the option of the Company on or
after December 15, 2002 at a price that initially is 106.250% of par and that
decreases to par, if redeemed on December 15, 2005 or thereafter. On or prior to
December 15, 2000, the Company may, at its option, redeem up to 35% of the
aggregate principal amount at maturity of the DMFC Notes with the net cash
proceeds of one or more public equity offerings, at a redemption price of
112.50% of the accreted value to the date of redemption. The DMFC Notes were
issued with registration rights requiring the Company (i) to file, within 75
days of the consummation of the Contadina Acquisition, a registration statement
under the Securities Act of 1933, as amended, to exchange the DMFC Notes for new
registered notes with terms substantially identical to the initial notes and,
(ii) to use its best efforts to effect that registration within 150 days after
the consummation of the Contadina Acquisition. A registration statement was
filed to this effect on March 4, 1998. If the Company does not comply with its
obligations under the Registration Rights Agreement, the Company will be
required to pay an additional 0.5% interest on the accreted value of the DMFC
Notes. In connection with the financing related to the Contadina Acquisition, $7
of deferred debt issuance costs were capitalized.
On April 18, 1997, the Company completed the Recapitalization transaction
in which $301 of proceeds from the transaction were used to repay the
outstanding balances of the then-existing $400 revolving credit facility, term
loan, and Senior Subordinated Guaranteed Pay-in-Kind Notes. Concurrent with the
Recapitalization, the Company entered into a credit agreement with respect to
the Term Loan Facility (the "Term Loan") and the Revolving Credit Facility (the
"Revolver"). The Term Loan provides for term loans in the aggregate amount of
$380, consisting of Term Loan A of $200 and Term Loan B of $180. The Revolver
provides for revolving loans in an aggregate amount of up to $350, including a
$70 Letter of Credit subfacility. The Revolving Credit Facility will expire in
fiscal 2003, Term Loan A will mature in fiscal 2003, and Term Loan B will mature
in fiscal 2005. In connection with the Contadina Acquisition, the Company
amended its bank financing agreements and related debt covenants to permit
additional funding under the existing Term B loan which was drawn in an amount
of $50. Amortization of the additional Term B loan amount is incremental to the
scheduled amortization of the existing Term B loan. Such additional amortization
will begin on a quarterly basis in the second quarter of fiscal 1999. In
conjunction with the Recapitalization, $19 of debt issue costs were capitalized.
Deferred debt issuance costs are amortized on a straight-line basis over the
life of the related debt issuance.
The interest rates applicable to amounts outstanding under Term Loan A and
the Revolving Credit Facility are, at the Company's option, either (i) the base
rate (the higher of 0.50% above the Federal Funds Rate or the bank's reference
rate) plus 1.00% or (ii) the reserve adjusted offshore rate plus 2.00% (7.8750%
at March 31, 1998). Interest rates on Term Loan B are, at the Company's option,
either (i) the base rate plus 2.00% or (ii) the offshore rate plus 3.00%
(8.6875% at March 31, 1998).
The Company is required to pay the lenders under the Revolving Credit
Facility a commitment fee of 0.425% on the unused portion of such facility. The
Company is also required to pay the lenders under the Revolving Credit Facility
letter of credit fees of 1.50% per year for commercial letters of credit and
2.00% per year for all other letters of credit, as well as an additional fee in
the amount of 0.25% per year to the bank issuing such letters of credit. At
March 31, 1998, a balance of $26 was outstanding on these letters of credit.
F-37
<PAGE> 129
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
In addition, on April 18, 1997, the Company issued senior subordinated
notes (the "DMC Notes") with an aggregate principal amount of $150 and received
gross proceeds of $147. The DMC Notes accrue interest at 12.25% per year,
payable semiannually in cash on each April 15 and October 15. The DMC Notes are
guaranteed by DMFC and mature on April 15, 2007. The DMC Notes are redeemable at
the option of the Company on or after April 15, 2002 at a premium to par that
initially is 106.313% and that decreases to par on April 15, 2006 and
thereafter. On or prior to April 15, 2000, the Company, at its option, may
redeem up to 35% of the aggregate principal amount of notes originally issued
with the net cash proceeds of one or more public equity offerings at a
redemption price equal to 112.625% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption; provided that at least 65% of the
aggregate principal amount of notes originally issued remains outstanding
immediately after any such redemption.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1997 1998
----------- ----
(UNAUDITED)
<S> <C> <C>
Term Loan........................................... $112 $429
Subordinated Debt................................... 155 --
Senior Subordinated Notes........................... -- 147
Senior Discount Notes............................... -- 126
Other............................................... 1 --
---- ----
268 702
Less current portion................................ 16 24
---- ----
$252 $678
==== ====
</TABLE>
At March 31, 1998, scheduled maturities of long-term debt in each of the
next five fiscal years and thereafter will be as follows:
<TABLE>
<S> <C>
4(th) Quarter 1998.......................................... $ 1
1999........................................................ 32
2000........................................................ 37
2001........................................................ 42
2002........................................................ 47
2003........................................................ 52
Thereafter.................................................. 598
----
809
Less discount on notes...................................... 107
----
$702
====
</TABLE>
The Term Loan and Revolver are collateralized by security interests in
certain of the Company's assets. At March 31, 1998, total assets that are not
pledged to secure debt are less than 10% of the Company's total consolidated
assets. At March 31, 1998, assets totaling $875 were pledged as collateral for
approximately $497 of short-term borrowings and long-term debt.
The DMC Notes, DMFC Notes, Term Loan and Revolver (collectively the "Debt")
agreements contain restrictive covenants with which the Company must comply.
These restrictive covenants, in some circumstances, limit the incurrence of
additional indebtedness, payment of dividends, transactions with affiliates,
asset sales, mergers, acquisitions, prepayment of other indebtedness, liens and
encumbrances. In addition, the
F-38
<PAGE> 130
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
Company is required to meet certain financial tests, including minimum levels of
consolidated EBITDA (as defined in the credit agreement), minimum fixed charge
coverage, minimum adjusted net worth and maximum leverage ratios. The Company is
in compliance with all of the Debt covenants at March 31, 1998.
The Company made cash interest payments of $48 for the nine months ended
March 31, 1998.
As required by the Company's Debt agreements, the Company has entered into
interest rate swap agreements which effectively converts $235 notional principal
amount of floating rate debt to a fixed rate basis for a three-year period
beginning May 22, 1997, thus reducing the impact of interest rate changes on
future income. The Company paid a fixed rate of 6.3750% and received a weighted
average rate of 5.6875%. The incremental effect on interest expense for the nine
months ended March 31, 1998 was approximately $1. The agreements also include a
provision establishing the rate the Company will pay as 7.50% if the three-month
LIBOR rate sets at or above 7.50% during the term of the agreements. The Company
will continue paying 7.50% until the three-month LIBOR again sets below 7.50% at
which time the fixed rate of 6.375% will again become effective. The Company is
exposed to credit loss in the event of nonperformance by the other parties to
the interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.
NOTE E -- STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK
On February 21, 1997, Del Monte Foods Company entered into a
recapitalization agreement and plan of merger, which was amended and restated as
of April 14, 1997, with affiliates of Texas Pacific Group. Under this agreement,
Shield, a corporation affiliated with TPG, was to be merged with and into DMFC,
with DMFC being the surviving corporation. The Merger became effective on April
18, 1997. By virtue of the Merger, shares of DMFC's outstanding preferred stock
having a value implied by the Merger consideration of approximately $14, held by
certain of DMFC's pre-recapitalization stockholders who remained investors
pursuant to the Recapitalization, were canceled, and were converted into the
right to receive new DMFC common stock. All other shares of DMFC stock were
canceled and were converted into the right to receive cash consideration, as set
forth in the Merger Agreement. In the Merger, the common and preferred stock of
Shield were converted into new shares of common stock and preferred stock,
respectively, of DMFC.
Immediately following the consummation of the Recapitalization, the charter
of DMFC authorized DMFC to issue capital stock consisting of new common stock
(the "Common Stock"), $.01 par value, and 1,000,000 shares of new preferred
stock (the "Preferred Stock"), $.01 par value. The Company issued and had
outstanding 26,815,880 shares of Common Stock, and 35,000 shares of Preferred
Stock. TPG and certain of its affiliates or partners held 20,925,580 shares of
DMFC's Common Stock, continuing shareholders of DMFC held 2,729,857 shares of
such stock, and other investors held 3,160,443 shares. TPG and certain of its
affiliates held 17,500 outstanding shares of Series A Preferred Stock, and TCW
Capital Investment Corporation held 17,500 outstanding shares of Series B
Preferred Stock.
The Preferred Stock accumulates dividends at the annual rate of 14% of the
liquidation value, payable quarterly. These dividends are payable in cash or
additional shares of Preferred Stock, at the option of the Company, subject to
availability of funds and the terms of its loan agreements, or through a
corresponding increase in the liquidation value of such stock. The Preferred
Stock had an initial liquidation preference of $1,000 per share and may be
redeemed at the option of the Company at a redemption price equal to the
liquidation preference plus accumulated and unpaid dividends (the "Redemption
Price"). The Company is required to redeem all outstanding shares of Preferred
Stock on or prior to April 17, 2008 at the Redemption Price, or upon a change of
control of the Company at 101% of the Redemption Price. The initial purchasers
of Preferred Stock for consideration of $35 received 35,000 shares of Preferred
Stock and warrants to purchase, at a nominal exercise price, shares of DMFC
Common Stock representing 2% of the then-outstanding shares
F-39
<PAGE> 131
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
of DMFC Common Stock. A value of $3 was placed on the warrants, and such amount
is reflected as paid-in-capital within stockholders' equity. The remaining $32
is reflected as redeemable preferred stock.
The two series of preferred stock had no voting rights except the right to
elect one director to the Board for each series, resulting in the authorized
number of directors to be increased, in cases where dividends are in arrears for
six quarters or shares have not been redeemed within ten days of a redemption
date.
On October 13, 1997, the Company authorized a new series of cumulative
redeemable preferred stock, Series C, and authorized issuance of shares of such
new series of preferred stock in exchange for all of the issued and outstanding
shares of cumulative redeemable preferred stock, Series A and B, held by
preferred stock shareholders. The Series A and Series B preferred stock were
retired upon completion of this exchange.
The terms of the Series C preferred stock are substantially identical to
those of the Series A and B stock with the exception of a call premium and right
of holders to require redemption upon a change in control. The Series C
preferred stock will be redeemable at the option of the Company at a redemption
price ranging from 103% of the liquidation preference, if redeemed prior to
October 1998, to 100% of the liquidation preference, if redeemed after October
2000. The Series A and B preferred stock was redeemable by the Company at par.
In the event of a change of control of the Company, the holders of the Series C
preferred stock will have the right to require the Company to repurchase shares
of such stock at 101% of the liquidation preference. Under the terms of the
Series A and B preferred stock, shares of such stock were mandatorily redeemable
(i.e., the holder did not have the option of continuing to hold such shares) at
101% of the liquidation preference.
On January 16, 1998, TPG and certain of its affiliates sold approximately
93% of their preferred stock holdings to unaffiliated investors.
Dividends paid on redeemable preferred stock were $4 for the nine months
ended March 31, 1998 consisting of $1 of additional shares issued and $3 of
accretion of liquidation value.
NOTE F -- EARNINGS PER SHARE
The following table set forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1997 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Numerator:
Income before extraordinary item............ $ 25 $ 2
Preferred stock dividends................... (70) (4)
-------- -----------
Numerator for basic and diluted earnings per
share -- loss attributable to common
stock before extraordinary item.......... $ (45) $ (2)
======== ===========
Denominator:
Denominator for basic and diluted earnings
per share -- weighted-average shares..... 382,854 30,389,671
======== ===========
Basic and diluted loss per common share before
extraordinary item.......................... $(117.36) $ (0.05)
======== ===========
</TABLE>
Since the effect of inclusion of potentially dilutive securities in the
denominator of the diluted loss per share was antidilutive, 547,262 warrants and
774,979 weighted average options were excluded from the computation for the
period ended March 31, 1998.
F-40
<PAGE> 132
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE G -- STOCK PLANS
STOCK OPTION INCENTIVE PLAN
On August 4, 1997, the Company adopted the 1997 Stock Incentive Plan
(amended November 4, 1997) which allows the granting of options to certain key
employees. Options may be granted to participants for up to 1,784,980 shares of
the Company's common stock. Options may be granted as incentive stock options or
as non-qualified options for purposes of the Internal Revenue Code. Options
terminate ten years from the date of grant. Two different vesting schedules have
been approved under the 1997 Stock Incentive plan. The first provides for annual
vesting on a proportionate basis over five years and the second provides for
monthly vesting on a proportionate basis over four years. In addition, on
February 24, 1998, the Company adopted the Del Monte Foods Company Non-Employee
Director and Independent Contractor 1997 Stock Option Plan. Under the plan,
148,828 options were granted. These options terminate 10 years from the date of
grant and vest monthly on a proportionate basis over four years.
<TABLE>
<CAPTION>
OPTION SHARES OPTION PRICE PER SHARE NUMBER OF SHARES
- ------------- ---------------------- ----------------
<S> <C> <C>
Outstanding at July 1, 1997............................ -- --
Granted................................................ $5.22 1,885,348
Canceled............................................... $5.22 46,353
Exercised.............................................. -- --
Outstanding at March 31, 1998.......................... $5.22 1,838,995
Exercisable at March 31, 1998.......................... $5.22 298,806
Available for grant at March 31, 1998.................. $5.22 94,813
</TABLE>
The weighted-average remaining contractual life for the above options is
9.1 years.
The Company accounts for its stock option plans using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations, under which no
compensation cost for stock options is recognized for stock option awards
granted with an exercise price at or above fair market value.
Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock Issued to Employees"
("SFAS 123"), and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted average assumptions: dividend
yield of 0%, expected volatility of 0; risk-free interest rates of 5.74%; and
expected lives of 7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The weighted
average fair value per share of options granted during the year was $2.78.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information as calculated in accordance with SFAS 123, results in a
pro forma net income of $2 and pro forma loss per share allocable to common
shares of $(0.07) for the nine months ended March 31, 1998.
F-41
<PAGE> 133
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The Del Monte Foods Company 1998 Stock Option Plan (the "1998 Stock Option
Plan") was approved on April 24, 1998. Under the 1998 Stock Option Plan, grants
of incentive and nonqualified stock options ("Options"), stock appreciation
rights ("SARs") and stock bonuses (together with Options and SARs, "Awards")
representing 3,064,672 shares of Common Stock may be made to key employees of
the Company. The term of any Option or SAR is not to be more than ten years from
the date of its grant. No Awards have been made under the 1998 Stock Option
Plan.
STOCK PURCHASE PLAN
Effective August 4, 1997, the Del Monte Foods Company Employee Stock
Purchase Plan was established under which certain key employees are eligible to
participate. A total of 957,710 shares of common stock of the Company are
reserved for issuance under the Employee Stock Purchase Plan. At March 31, 1998,
454,146 shares of the Company's common stock were purchased by and issued to
eligible employees. It is anticipated that no future shares will be issued
pursuant to this plan.
Total compensation expense recognized in connection with all stock plans
for the nine months ended March 31, 1998 was $2.
NOTE H -- RETIREMENT BENEFITS
The Company sponsors three non-contributory defined benefit pension plans
covering substantially all full-time employees. Plans covering most hourly
employees provide pension benefits that are based on the employee's length of
service and final average compensation before retirement. Plans covering
salaried employees provide for individual accounts which offer lump sum or
annuity payment options, with benefits based on accumulated compensation and
interest credits made monthly throughout the career of each participant. Assets
of the plans consist primarily of equity securities and corporate and government
bonds.
It has been the Company's policy to fund the Company's retirement plans in
an amount consistent with the funding requirements of federal law and
regulations and not to exceed an amount that would be deductible for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those benefits expected to be earned
in the future. Del Monte's defined benefit retirement plans were determined to
be underfunded under federal ERISA guidelines. In connection with the
Recapitalization, the Company entered into an agreement with the U.S. Pension
Benefit Guaranty Corporation dated April 7, 1997 whereby the Company will
contribute a total of $55 to its defined benefit pension plans through calendar
2001, with $15 contributed within 30 days after the consummation of the
Recapitalization. The contributions to be made in 1999, 2000 and 2001 will be
secured by a $20 letter of credit to be obtained by the Company by August 31,
1998.
The following table sets forth the pension plans' funding status and
amounts recognized on the Company's balance sheet at March 31, 1998:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $(279)
=====
Accumulated benefit obligation.............................. $(287)
=====
Projected benefit obligation for services rendered to
date...................................................... $(294)
Plan assets at fair value................................... 298
-----
Projected benefit obligation in excess of plan assets....... 4
Unrecognized net actuarial gain............................. (33)
Unrecognized prior service income........................... (1)
-----
Accrued pension cost recognized in the consolidated balance
sheet..................................................... $ (30)
=====
</TABLE>
F-42
<PAGE> 134
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
The components of net periodic pension cost for the nine months ended March
31, 1998 for all defined benefit plans are as follows:
<TABLE>
<S> <C>
Service cost for benefits earned during period.............. $ 2
Interest cost on projected benefit obligation............... 16
Actual return on plan assets................................ (32)
Net amortization and deferral............................... 13
----
Net periodic pension cost................................... $ (1)
====
</TABLE>
Significant rate assumptions used in determining net periodic pension cost
and related pension obligations at March 31, 1998 are as follows:
<TABLE>
<S> <C>
Discount rate used in determining projected benefit
obligation................................................ 7.0%
Rate of increase in compensation levels..................... 5.0
Long-term rate of return on assets.......................... 9.0
</TABLE>
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees. The
contributions to multi-employer plans for the nine-month period ended March 31,
1998 was $5. The Company also sponsors defined contribution plans covering
substantially all employees. Company contributions to the plans are based on
employee contributions or compensation. Contributions under such plans totaled
$1 for the nine-month period ended March 31, 1998.
The Company sponsors several unfunded defined benefit postretirement plans
providing certain medical, dental and life insurance benefits to eligible
retired, salaried, non-union hourly and union employees. Benefits, eligibility
and cost-sharing provisions vary by plan and employee group.
Net periodic postretirement benefit cost for the nine months ended March
31, 1998 included the following components:
<TABLE>
<S> <C>
Service cost................................................ $ 1
Interest cost............................................... 6
Amortization of prior service cost.......................... (1)
Amortization of actuarial losses (gains).................... (2)
---
Net periodic postretirement benefit cost.................... $ 4
===
</TABLE>
The Company amortizes unrecognized gains and losses at the end of the
fiscal year over the expected remaining service of active employees. The
following table sets forth the plans' combined status reconciled with the amount
included in the consolidated balance sheet at March 31, 1998:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Current retirees.......................................... $ 86
Fully eligible active plan participants................... 11
Other active plan participants............................ 15
----
112
Unrecognized prior service cost........................... 9
Unrecognized gain......................................... 31
----
Accrued postretirement benefit cost....................... $152
====
</TABLE>
F-43
<PAGE> 135
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
For the nine months ended March 31, 1998, the weighted average annual
assumed rate of increase in the health care cost trend is 12.42%, and is assumed
to decrease gradually to 6.0% in the year 2004. The health care cost trend rate
assumption has a significant effect on the amounts reported. An increase in the
assumed health care cost trend by 1% in each year would increase the accumulated
postretirement benefit obligation as of March 31, 1998 by $11 and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for the period then ended by $1.
The discount rate used in determining the accumulated postretirement
benefit obligation as of March 31, 1998 was 7.00%.
NOTE I -- PROVISION FOR INCOME TAXES
The provision for income taxes at March 31, 1998 consists of the following:
<TABLE>
<S> <C>
Income before taxes......................................... $ 2
=====
Income tax provision(benefit)
Current:
Federal................................................ $ --
State.................................................. --
-----
Total current............................................. --
-----
Deferred:
Federal................................................ --
State.................................................. --
-----
Total deferred............................................ --
-----
$ --
=====
</TABLE>
F-44
<PAGE> 136
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
Significant components of the Company's deferred tax assets and liabilities
as of March 31, 1998 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Post employment benefits.................................. $ 53
Pension expense........................................... 14
Purchase accounting....................................... 7
Deferred gain............................................. 4
Inventory valuation....................................... 8
Workers' compensation..................................... 4
Interest expense.......................................... 2
Intangibles............................................... 7
Other..................................................... 33
Net operating loss and tax credit carry forward........... 29
-----
Gross deferred tax assets.............................. 161
Valuation allowance.................................... (126)
-----
Net deferred tax assets................................ 35
Deferred tax liabilities:
Depreciation.............................................. 30
Other..................................................... 5
-----
Gross deferred liabilities............................. 35
-----
Net deferred tax asset................................. $ --
=====
</TABLE>
The net change in the valuation allowance for the nine months ended March
31, 1998 was a decrease of $1. The Company believes that, based on a history of
tax losses and related absence of recoverable prior taxes through net operating
loss carryback, the available objective evidence creates sufficient uncertainty
regarding the recognition of deferred tax assets. Therefore, a full valuation
allowance in the amount of $126 has been recorded.
The differences between the provision for income taxes and income taxes
computed at the statutory U.S. federal income tax rates for the nine months
ended March 31, 1998 are explained as follows:
<TABLE>
<S> <C>
Income taxes (benefit) computed at the statutory U.S.
federal income tax rates.................................. $ 1
State taxes, net of federal benefit......................... --
Realization of prior years' net operating losses and tax
credits................................................... (1)
----
Provision for income taxes.................................. $ --
====
</TABLE>
As of March 31, 1998, the Company had operating loss carryforwards for tax
purposes available from domestic operations totaling $72 which will expire
between 2008 and 2012.
The Company made no income tax payments for the nine months ended March 31,
1998.
F-45
<PAGE> 137
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE J -- COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment and office and plant
facilities. At March 31, 1998, the aggregate minimum rental payments required
under operating leases that have initial or remaining terms in excess of one
year are as follows:
<TABLE>
<S> <C>
4th Quarter 1998............................................ $ 3
1999........................................................ 14
2000........................................................ 13
2001........................................................ 11
2002........................................................ 6
2003........................................................ 5
Thereafter.................................................. 37
----
$ 89
====
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of $6
due through 2016 under noncancelable subleases. Rent expense was $28 for the
nine months ended March 31, 1998. Rent expense includes contingent rentals on
certain equipment based on usage.
The Company has entered into noncancelable agreements with growers, with
terms ranging from two to ten years, to purchase certain quantities of raw
products. Total purchases under these agreements were $68 for the nine months
ended March 31, 1998. The Company also has commitments to purchase certain
finished goods.
At March 31, 1998, aggregate future payments under such purchase
commitments (priced at the March 31, 1998 estimated cost) are estimated as
follows:
<TABLE>
<S> <C>
4th Quarter 1998............................................ $ 6
1999........................................................ 63
2000........................................................ 51
2001........................................................ 40
2002........................................................ 38
2003........................................................ 34
Thereafter.................................................. 78
----
$310
====
</TABLE>
In connection with the sale of the Company's 50.1% interest in Del Monte
Philippines, a joint venture operating primarily in the Philippines, on March
29, 1996, the Company signed an eight-year supply agreement whereby the Company
must source substantially all of its pineapple requirements from Del Monte
Philippines over the agreement term. The Company expects to purchase $11 during
the fourth quarter of fiscal 1998 and $44 in fiscal 1999 under the supply
agreement for pineapple products entered into in conjunction with the sale of
the Del Monte Philippines operations. During the nine months ended March 31,
1998, the Company purchased $33 under the supply agreement.
Effective December 21, 1993, DMC sold substantially all of the assets and
certain related liabilities of its can manufacturing operations in the United
States to Silgan Containers Corporation ("Silgan"). In connection with the sale
to Silgan, DMC entered into a ten-year supply agreement under which Silgan,
effective immediately after the sale, began supplying substantially all of DMC's
metal container requirements
F-46
<PAGE> 138
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
for foods and beverages in the United States. Purchases under the agreement
during the nine-month period ended March 31, 1998 amounted to $100. The Company
believes the supply agreement provides it with a long-term supply of cans at
competitive prices that adjust over time for normal manufacturing cost increases
or decreases.
On November 1, 1992, DMC entered into an agreement with Electronic Data
Systems Corporation ("EDS") to provide services and administration to the
Company in support of its information services functions for all domestic
operations. Payments under the terms of the agreement are based on scheduled
monthly base charges subject to various adjustments such as system usage and
inflation. Total payments for the nine months ended March 31, 1998 were $13. The
agreement expires in November 2002 with optional successive one year extensions.
At March 31, 1998, base charge payments under the agreement are as follows:
<TABLE>
<S> <C>
4th Quarter 1998............................................ $ 3
1999........................................................ 14
2000........................................................ 14
2001........................................................ 13
2002........................................................ 14
2003........................................................ 5
----
$ 63
====
</TABLE>
Del Monte has a concentration of labor supply in employees working under
union collective bargaining agreements, which represent approximately 84% of its
hourly and seasonal work force. Of these represented employees, 1% of employees
are under agreements that will expire during the remainder of calendar 1998, and
4% of employees are under agreements that will expire in calendar 1999.
The Company accrues for losses associated with environmental remediation
obligations when such losses are probable, and the amounts of such losses are
reasonably estimable. Accruals for estimated losses from environmental
remediation obligations generally are recognized no later than completion of the
remedial feasibility study. Such accruals are adjusted as further information
develops or circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.
The Company is defending various claims and legal actions that arise from
its normal course of business, including certain environmental actions. While it
is not feasible to predict or determine the ultimate outcome of these matters,
in the opinion of management none of these actions, individually or in the
aggregate, will have a material effect on the Company's results of operations,
cash flow, liquidity or financial position.
On March 25, 1997, the entities that purchased the Company's Mexican
subsidiary in October 1996 commenced an action in Texas state court alleging,
among other things, that the Company breached the agreement with respect to the
purchase because the financial statements of the Mexican subsidiary did not
fairly present its financial condition and results of operations in accordance
with U.S. generally accepted accounting principles. In connection with this
action, $8 of the cash proceeds from the Recapitalization which were payable to
shareholders and certain members of senior management of DMFC were held in
escrow to be applied to fund the Company's costs and expenses in defending the
action, with any remaining amounts available to pay up to 80% of any ultimate
liability of the Company to the purchasers. In January 1998, the Company reached
a settlement of this litigation. The settlement resolves all claims and disputes
relating to the sale of the Company's Mexican subsidiary, including the purchase
price adjustment contemplated at the time of the sale. The Company's portion of
the settlement was within the amount reserved and thus did not adversely impact
net income of the Company.
F-47
<PAGE> 139
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
NOTE K -- DEL MONTE CORPORATION
DMC is directly-owned and wholly-owned by DMFC. For the nine months ended
March 31, 1998, DMC and DMC's subsidiaries accounted for 100% of the
consolidated revenues and net earnings of the Company, except for those expenses
incidental to the DMFC Notes. As of March 31, 1998, the Company's sole asset,
other than intercompany receivables from DMC, was the stock of DMC. The Company
had no subsidiaries other than DMC and DMC's subsidiaries, and had no direct
liabilities other than intercompany payables to DMC and the DMFC Notes. The
Company is separately liable under various guarantees of indebtedness of DMC,
which guarantees of indebtedness are full and unconditional.
NOTE L -- RELATED PARTY TRANSACTIONS
In connection with the Recapitalization, the Company entered into a
ten-year agreement dated April 18, 1997 (the "Management Advisory Agreement")
with TPG pursuant to which TPG is entitled to receive an annual fee from the
Company for management advisory services equal to the greater of $.5 or 0.05% of
the budgeted consolidated net sales of the Company. For the nine month period
ended March 31, 1998, TPG received fees of less than $1. In addition, the
Company has agreed to indemnify TPG, its affiliates and shareholders, and their
respective directors, officers, agents, employees and affiliates from and
against fees and expenses, arising out of or in connection with the services
rendered by TPG thereunder. The Management Advisory Agreement makes available
the resources of TPG concerning a variety of financial and operational matters
including advice and assistance in reviewing the Company's business plans and
its results of operations and in evaluating possible strategic acquisitions, as
well as providing investment banking services in identifying and arranging
sources of financing. The services that will be provided by TPG cannot 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 Management Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arm's-length transaction with an unaffiliated third party.
In connection with the Recapitalization, the Company also entered into an
agreement dated April 18, 1997 (the "Transaction Advisory Agreement") with TPG
pursuant to which TPG is entitled to receive fees up to 1.5% of the "transaction
value" for each transaction in which the Company is involved, which may include
acquisitions, refinancings and recapitalizations. The term "transaction value"
means the total value of any subsequent transaction, including, without
limitation, the aggregate amount of the funds required to complete the
subsequent transaction (excluding any fees payable pursuant to the Transaction
Advisory Agreement and 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 transaction) including the amount of
indebtedness, preferred stock or similar items assumed (or remaining
outstanding). In connection with the Contadina Acquisition, TPG received $3 upon
the closing of the acquisition as compensation for its services as financial
advisor for the acquisition. In management's opinion, the fees provided for
under the Transaction Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arm's-length transaction with an unaffiliated third party.
NOTE M -- PUBLIC OFFERING
The Company has filed a registration statement on Form S-1 with the SEC for
the purpose of making a public offering of shares of its Common Stock (the
"Offering") which is expected to occur during the fourth quarter of fiscal 1998.
The Company intends to use the net proceeds of the Offering to (i) repay a
portion of its borrowings outstanding under its Term Loan Facility; (ii) repay a
portion of its senior discount notes; (iii) redeem a portion of its senior
subordinated notes; and (iv) redeem all of its outstanding redeemable preferred
stock, including accreted dividends. In connection with the Offering, the
Company intends to amend
F-48
<PAGE> 140
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)
its bank financing agreements and related debt covenants, among other things, to
increase the available revolving loans from an aggregate amount of $350 to $400,
to decrease the term loans from an aggregate amount of $429 to $300 and to
change certain provisions and definitions to reflect changes resulting from the
consummation of the Offering. In connection with the Offering, TPG expects to
receive approximately $4 as compensation for its services as financial advisor
in the Offering.
On May 1, 1998, in contemplation of the Offering, Del Monte Foods Company
merged with and into a newly created, wholly-owned subsidiary incorporated under
the laws of the State of Delaware to change Del Monte Foods Company's state of
incorporation from Maryland to Delaware. The Certificate of Incorporation
authorizes the issuance of an aggregate of 500,000,000 shares of Common Stock
and an aggregate of 2,000,000 shares of preferred stock.
In connection with the Company's proposed public offering of shares of its
Common Stock, the Company plans to declare a 191.542-for-one stock split of all
of the Company's outstanding shares of Common Stock (the "Stock Split") prior to
the Offering. Accordingly, all share and per share amounts for the period
subsequent to the Recapitalization have been retroactively adjusted to give
effect to the Stock Split. Periods prior to the Recapitalization have not been
restated to reflect the Stock Split as it was not deemed appropriate to effect
the split on an entirely different capital structure.
F-49
<PAGE> 141
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Del Monte Foods Company
We have audited the accompanying combined balance sheets of Contadina (a
division of Nestle USA, Inc.) as of December 18, 1997 and December 31, 1996, and
the related statements of operations, divisional equity, and cash flows for the
period January 1, 1997 through December 18, 1997 and for the year ended December
31, 1996. These financial statements are the responsibility of Del Monte Foods
Company management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Contadina (a division of
Nestle USA, Inc.) as of December 18, 1997 and December 31, 1996, and the results
of its operations and its cash flows for the period January 1, 1997 through
December 18, 1997 and for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
March 16, 1998
Los Angeles, California
F-50
<PAGE> 142
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED BALANCE SHEETS
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 18,
1996 1997
------------ ------------
<S> <C> <C>
Current assets:
Trade accounts receivable................................. $ 10 $ 17
Other receivables......................................... 3 --
Inventories............................................... 92 98
---- ----
TOTAL CURRENT ASSETS.............................. 105 115
Property, plant and equipment............................... 94 90
Goodwill.................................................... 32 31
---- ----
TOTAL ASSETS...................................... $231 $236
==== ====
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 10 $ 13
Payable to Nestle USA, Inc................................ 17 52
---- ----
TOTAL CURRENT LIABILITIES......................... 27 65
Divisional equity........................................... 204 171
---- ----
TOTAL LIABILITIES AND DIVISIONAL EQUITY........... $231 $236
==== ====
</TABLE>
See Notes to Combined Financial Statements.
F-51
<PAGE> 143
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED STATEMENTS OF OPERATIONS AND
DIVISIONAL EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 18,
1996 1997
------------ ------------
<S> <C> <C>
Net sales................................................... $160 $162
Cost of products sold....................................... 151 163
---- ----
Gross profit (loss).................................... 9 (1)
Selling, advertising, administrative and general expense.... 20 26
---- ----
OPERATING LOSS.................................... (11) (27)
Interest expense............................................ 6 6
---- ----
NET LOSS BEFORE INCOME TAXES...................... (17) (33)
DIVISIONAL EQUITY, BEGINNING OF PERIOD...................... 221 204
---- ----
DIVISIONAL EQUITY, END OF PERIOD............................ $204 $171
==== ====
</TABLE>
See Notes to Combined Financial Statements.
F-52
<PAGE> 144
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 THROUGH
DECEMBER 31, DECEMBER 18,
1996 1997
------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $(17) $(33)
Adjustments to reconcile net loss to net cash flows used
in operating activities:
Depreciation and amortization.......................... 12 13
Changes in operating assets and liabilities:
Accounts receivable.................................... 9 (4)
Inventories............................................ (16) (6)
Accounts payable and accrued expenses.................. 4 3
---- ----
NET CASH USED IN OPERATING ACTIVITIES............. (8) (27)
INVESTING ACTIVITIES:
Capital expenditures...................................... (10) (8)
Proceeds from sale of assets.............................. 1 --
---- ----
NET CASH USED IN INVESTING ACTIVITIES............. (9) (8)
FINANCING ACTIVITIES: Net borrowings from Nestle USA,
Inc....................................................... 17 35
---- ----
NET CHANGE IN CASH AND CASH EQUIVALENTS........... -- --
Cash and cash equivalents at beginning of period............ -- --
---- ----
CASH AND CASH EQUIVALENTS
AT END OF PERIOD................................ $ -- $ --
==== ====
</TABLE>
See Notes to Combined Financial Statements.
F-53
<PAGE> 145
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 18, 1997
(IN MILLIONS)
NOTE A -- ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
General: The accompanying combined financial statements include the
accounts of Contadina Services, Inc., a wholly-owned subsidiary of Nestle USA,
Inc. ("Nestle") and other divisional accounts related to the Contadina canned
business within the culinary division of Nestle ("Contadina") on a carve-out
basis, excluding the effects of product lines not acquired (see Note E).
Contadina operates in one business segment which manufactures and markets
branded, private label, industrial and foodservice processed tomato products
from manufacturing facilities in Hanford, California and Woodland, California.
Contadina's products are distributed throughout the United States.
Contadina does not maintain stand-alone corporate treasury, legal, tax and
other similar corporate support functions. Therefore, corporate general and
administrative expense and interest expense, as well as certain other expenses
(see Note D), are allocated to Contadina from Nestle generally on a proportional
basis. Allocations and estimates, as described in Note D, are based on
assumptions that Del Monte Foods Company management believes are reasonable. It
is impracticable to determine whether such costs are comparable to those which
would have been incurred on a stand-alone basis. Long-term debt and income taxes
are not allocated by Nestle.
All purchases of inventory, payroll, capital and other expenditures are
funded through Contadina's intercompany account with Nestle. Remittances from
sales to customers are collected by Nestle and are accounted for through the
intercompany account. Accordingly, Contadina has no cash on a stand-alone basis.
Trade receivables and payables do represent the amounts due from/to
customers/suppliers at the dates presented.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories: Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, plant and equipment and depreciation: Property, plant and
equipment are stated at cost and depreciated over their estimated useful lives,
principally by the straight-line method. Maintenance and repairs are expensed as
incurred. Significant expenditures that increase useful lives are capitalized.
The ranges of estimated useful lives for computing depreciation are:
buildings -- 30 years; leasehold improvements -- the shorter of useful life or
life of lease; and machinery and equipment -- 5 to 17 years. Depreciation of
plant and equipment and building and leasehold improvements amortization was $11
for the year ended December 31, 1996 and $12 for the period ended December 18,
1997.
Goodwill: Goodwill represents the excess purchase price over fair value of
acquired assets and liabilities. Goodwill is amortized on a straight-line basis
over 40 years.
Fair Value of Financial Instruments: The carrying amount of the Company's
financial instruments, which include trade accounts receivable, accounts
payable, and accrued expenses, approximates fair value due to the relatively
short maturity of such instruments. The carrying amount of the payable to Nestle
USA, Inc. approximates fair value due to the regular settlement of this account.
Cost of Products Sold: Cost of products sold includes raw material, labor,
and overhead.
Royalties: Under a royalty agreement with Nestle S.A. (parent of Nestle
and legal entity which owns the Contadina trademarks), royalties are charged for
the license of the Contadina trademarks at a rate of 3% of net sales. Royalty
expense under this agreement was $5 for both the year ended December 31, 1996
and the period ended December 18, 1997.
F-54
<PAGE> 146
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
Divisional Equity: Divisional equity includes the combined historical
legal capital of Contadina Services, Inc. and profit and losses of Contadina
subsequent to December 31, 1995 on a carve-out basis. Pre-1996 results of
operations for the acquired product line are not available. Transactions with
Nestle for all other intercompany transactions are included in and settled
through the intercompany account payable to Nestle.
Use of Estimates: Certain amounts reported in the financial statements are
based on management estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities as of December 31, 1996 and December 18, 1997, and the reported
amounts of income and expenses for the year ended December 31, 1996 and the
period ended December 18, 1997. The ultimate resolution of these items may
differ from those estimates.
Change in Accounting Principle: Effective January 1, 1996, Contadina
adopted the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The statement requires that
assets held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Contadina evaluates impairment based upon undiscounted future cash
flows. If such cash flows indicate that long-lived assets may not be
recoverable, the loss is measured by discounting cash flows to present value.
The statement also requires that all long-lived assets, for which management has
committed to a plan to dispose, be reported at the lower of carrying amount or
fair value. Contadina does not depreciate long-lived assets held for sale. There
was no material effect upon the adoption of this statement.
F-55
<PAGE> 147
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
NOTE C -- SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 18,
1996 1997
------------ ------------
<S> <C> <C>
Trade Accounts Receivable:
Trade..................................................... $ 10 $ 17
Allowance for doubtful accounts........................... -- --
---- ----
TOTAL TRADE ACCOUNTS RECEIVABLE................... $ 10 $ 17
==== ====
Inventories:
Finished product.......................................... $ 60 $ 69
Raw materials and supplies................................ 35 32
Other, principally packaging material..................... 2 2
Reserves.................................................. (5) (5)
---- ----
TOTAL INVENTORIES................................. $ 92 $ 98
==== ====
Property, Plant and Equipment:
Land and land improvements................................ $ 8 $ 4
Buildings................................................. 36 40
Machinery and equipment................................... 110 125
Construction in progress.................................. 10 3
---- ----
164 172
Accumulated amortization.................................. (70) (82)
---- ----
PROPERTY, PLANT AND EQUIPMENT, NET................ $ 94 $ 90
==== ====
Goodwill:
Goodwill.................................................. $ 44 $ 44
Accumulated amortization.................................. (12) (13)
---- ----
GOODWILL, NET..................................... $ 32 $ 31
==== ====
Accounts payable and accrued expenses:
Accounts payable.......................................... $ 6 $ 2
Payroll................................................... 1 1
Marketing................................................. 1 8
Other..................................................... 2 2
---- ----
TOTAL ACCOUNTS PAYABLE AND ACCRUED EXPENSES....... $ 10 $ 13
==== ====
</TABLE>
NOTE D -- CORPORATE ALLOCATIONS AND RELATED PARTY INFORMATION
Goodwill is associated with the acquisition of Carnation Foods in 1985, the
then-parent of Contadina, and was not recorded in the individual business units'
accounts. As such, goodwill relating to Contadina has been allocated based on a
percentage derived from the tax basis goodwill specifically identified to
Contadina in relation to total tax basis goodwill. This relative percentage was
then applied to aggregate goodwill to determine book basis goodwill attributable
to Contadina. This allocation basis was determined to be reasonable by Del Monte
Foods Company management.
Since invoicing is centralized at Nestle for all business units, customer
discounts and unapplied cash related to trade receivables are allocated based on
Contadina relative sales dollars on a customer invoice as a percentage of the
total sales dollars on the customer invoice. Cash discounts are allocated to
Contadina based
F-56
<PAGE> 148
CONTADINA
(A DIVISION OF NESTLE USA, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS)
on Contadina receivables as a percent of total consolidated Nestle receivables.
A specific reserve for doubtful accounts is not maintained on a business unit
basis. Therefore, a reserve for doubtful accounts was established for Contadina
through an allocation of the corporate reserve based on the percentage of
Contadina's outstanding receivables to the total Nestle outstanding accounts
receivable balance.
Variable distribution costs are allocated based on the applied usage rate
for the respective products. Fixed distribution costs are allocated on an
historical average cost per case basis. Allocated distribution costs included in
cost of products sold for the year ended December 31, 1996 were $5 and for the
period ended December 18, 1997 were $7. Marketing and sales force expense is
allocated based on relative Contadina sales dollars to total Nestle sales
dollars. The majority of warehousing costs reported are actual costs related to
Contadina's two facilities; however, a component of warehousing cost also
includes costs allocated from Nestle based on historical average inventory
stored at the distribution center.
General and administrative expenses are, for the most part, allocated by
function. Allocated selling, marketing, general and administrative expenses
amounted to $12 for the year ended December 31, 1996 and to $20 for the period
ended December 18, 1997. Benefit costs are allocated at a rate of 40% of gross
wages which is representative of total benefit costs (including pension,
postretirement benefits, bonus, 401(k) matching contribution and vacation) to
total compensation. Interest expense is charged to Contadina based on the end-
of-month working capital balance at an intercompany rate equal to 7% for all
periods.
Contadina's sales of product to Nestle were $6 for both the year ended
December 31, 1996 and the period ended December 18, 1997.
NOTE E -- SALE OF CONTADINA
On December 19, 1997, Del Monte Foods Company acquired the Contadina canned
tomato businesses, including the Contadina trademark worldwide, capital assets
and inventory from Nestle and Contadina Services, Inc., for a total purchase
price of $197, comprised of a base price of $177 and an estimated net working
capital adjustment of $20. The purchase price is subject to adjustment based on
the final calculation of net working capital as of the closing date. In
accordance with the asset purchase agreement, dated November 12, 1997, by and
among Del Monte Foods Company, Del Monte Corporation ("DMC") and Nestle USA,
Inc., Nestle has provided its calculation of the net working capital which would
result in a payment to DMC of approximately $2. DMC has until April 18, 1998 to
review this calculation and determine if it has an objection to the calculation.
F-57
<PAGE> 149
[DEL MONTE LOGO]
<PAGE> 150
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 18, 1998
17,567,567 SHARES
DEL MONTE FOODS COMPANY
COMMON STOCK
[DEL MONTE LOGO]
------------------------
OF THE 17,567,567 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 3,513,513 SHARES
ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 14,054,054 SHARES ARE BEING OFFERED INITIALLY IN
THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." OF
THE 17,567,567 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 13,513,513 SHARES
ARE BEING SOLD BY THE COMPANY AND 4,054,054 SHARES ARE BEING SOLD BY CERTAIN
STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS"). THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE BY THE SELLING STOCKHOLDERS. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." AT THE REQUEST OF THE COMPANY, THE
UNDERWRITERS HAVE RESERVED FOR SALE, AT THE INITIAL PUBLIC OFFERING PRICE, UP TO
878,378 SHARES OF COMMON STOCK, WHICH MAY BE OFFERED TO DIRECTORS, OFFICERS,
EMPLOYEES, RETIREES AND RELATED PERSONS OF THE COMPANY. ANY RESERVED SHARES THAT
ARE NOT SO PURCHASED WILL BE OFFERED BY THE UNDERWRITERS TO THE GENERAL PUBLIC
ON THE SAME BASIS AS THE OTHER SHARES OF COMMON STOCK OFFERED HEREBY. PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE SHARES OF COMMON STOCK OF
THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
PER SHARE WILL BE BETWEEN $17 AND $20. SEE "UNDERWRITERS" FOR A DISCUSSION OF
THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "DLM."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR
RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Per Share................................ $ $ $ $
Total(3)................................. $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses of the offering payable by the Company
estimated at $5,600,000.
(3) The Company and the Selling Stockholders have granted the U.S.
Underwriters an option, exercisable within 30 days of the date hereof,
to purchase up to an aggregate of 2,635,135 additional shares of Common
Stock at the price to public, less underwriting discounts and
commissions, solely for the purpose of covering overallotments, if any.
If the U.S. Underwriters exercise such option in full, the total price
to public, underwriting discounts and commissions, proceeds to Company
and proceeds to Selling Stockholders will be $ , $ ,
$ and $ , respectively. See "Underwriters."
------------------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to the approval of
certain legal matters by Brown & Wood LLP, counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1998 at the office of Morgan Stanley & Co. Incorporated, New York,
N.Y. against payment therefor in immediately available funds.
MORGAN STANLEY DEAN WITTER
BA ROBERTSON STEPHENS INTERNATIONAL LIMITED
BEAR, STEARNS INTERNATIONAL LIMITED
BT ALEXS BROWN INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
, 1998
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be paid by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock being registered, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 110,256
NASD filing fee............................................. 30,500
New York Stock Exchange listing fee......................... 148,858
Legal fees and expenses..................................... 500,000
Transaction advisory expense................................ 3,750,000
Accounting fees and expenses................................ 350,000
Blue Sky fees and expenses.................................. 2,000
Printing and engraving expenses............................. 450,000
Registrar and transfer agent's fee.......................... 30,000
Miscellaneous............................................... 250,000
----------
Total............................................. $5,621,614
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Registrant provides that the
Registrant will indemnify each of its directors and officers to the fullest
extent permitted by the General Corporation Law of the State of Delaware (the
"DGCL") and may indemnify certain other persons as authorized by the DGCL.
Section 145 of the DGCL provides as follows:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE. --
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect
II-1
<PAGE> 152
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person in any such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
II-2
<PAGE> 153
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
The Registrant also carries liability insurance covering officers and
directors.
Pursuant to the proposed form of Underwriting Agreement, the Underwriters
have agreed to indemnify the directors and officers of the Registrant in certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the recapitalization of the Company on April 18, 1997,
the predecessor of the Company issued and sold an aggregate of (i) 140,000
shares of its common stock; (ii) warrants to purchase an additional 2,857.14
shares of such common stock; and (iii) 35,000 shares of its preferred stock,
series A and B, each series par value $.01 per share, in each case directly to
affiliates of Texas Pacific Group and a limited group of private institutional
and individual investors in a private placement in accordance with Section 4(2)
under the Securities Act of 1933, as amended (the "Securities Act"). The
consideration received for such shares of common stock was $140 million. The
consideration received for such preferred stock and such warrants was $35
million. Such common stock and preferred stock were converted by operation of
law into shares of the common stock, par value $.01 per share, and preferred
stock, series A and B, respectively, of the Company upon the merger of such
predecessor with and into the Company. The Company expressly assumed its
predecessor's obligations under such warrants, which thereupon became
convertible into shares of common stock of the Company.
On April 18, 1997, Del Monte Corporation, a wholly owned subsidiary of the
Company, issued and sold at par $150 million of its 12 1/4% Senior Subordinated
Notes due 2007, which are unconditionally guaranteed by the Company. The Notes
were sold in a private placement in accordance with Section 4(2) of the
Securities Act made to BT Securities Corporation, BancAmerica Securities, Inc.
and Bear, Stearns & Co. Inc., which acted as initial purchasers, for resale to
"qualified institutional buyers" within the meaning of Rule 144A under the
Securities Act and in offshore transactions to non-U.S. persons in compliance
with Regulation S under the Securities Act. The Company received none of the
proceeds from such sale.
On October 15, 1997, the Company issued 37,253.388 shares of its preferred
stock, series C, par value $.01 per share, in exchange for all outstanding
shares of its preferred stock, series A and B, which shares of preferred stock,
series A and B, were then canceled and returned to authorized but unissued
shares of the Company's preferred stock. Such exchange was effected in
accordance with Section 3(a)(9) of the Securities Act.
On December 17, 1997, the Company issued and sold at a discount $230
million of its 12 1/2% Senior Discount Notes Due 2007 in a private placement in
accordance with Section 4(2) under the Securities Act made to Bear, Stearns &
Co. Inc., BancAmerica Robertson Stephens and BT Alex. Brown Incorporated, which
acted as initial purchasers, for resale to "qualified institutional buyers"
within the meaning of Rule 144A under the Securities Act and in offshore
transactions to non-U.S. persons in compliance with Regulation S under the
Securities Act. The consideration received by the Company upon the sale of such
Notes was approximately $125 million.
II-3
<PAGE> 154
On December 19, 1997, the Company issued 40,000 shares of common stock
directly to affiliates of Texas Pacific Group and a limited number of
institutional investors in a private placement in accordance with Section 4(2)
under the Securities Act. The consideration received by the Company for such
common stock was $40 million.
On May 1, 1998, to change its state of incorporation from Maryland to
Delaware, the predecessor of the Company merged with and into a newly created,
wholly-owned subsidiary incorporated under the laws of the State of Delaware and
such subsidiary was the surviving corporation. In connection with the
reincorporation, each issued and outstanding share of common stock of the
predecessor of the Company was converted into one share of common stock of the
surviving corporation. Also in connection with the reincorporation, each issued
and outstanding share of preferred stock of the predecessor of the Company was
converted into one share of preferred stock of the surviving corporation
containing substantially the same preferences, rights and powers.
ITEM 16. EXHIBITS.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Underwriting Agreement among Del Monte Foods Company and the
several underwriters and stockholders listed therein
2.1 Asset Purchase Agreement, dated as of November 12, 1997,
among Nestle USA, Inc., Contadina Services, Inc., Del Monte
Corporation and Del Monte Foods Company (the "Asset Purchase
Agreement") (incorporated by reference to Exhibit 10.1 to
Report on Form 8-K No. 33-36374-01 filed January 5, 1998)
2.2 Agreement and Plan of Merger, dated as of February 21, 1997,
amended and restated as of April 14, 1997, among TPG
Partners, L.P., TPG Shield Acquisition Corporation and Del
Monte Foods Company (the "Agreement and Plan of Merger")
(incorporated by reference to Exhibit 2.1 to Registration
Statement on Form S-4 No. 333-29079, filed June 12, 1997
(the "DMC Registration Statement"))
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Agreement and Plan of Merger.
3.1 Certificate of Incorporation of Del Monte Foods Company
3.2 Bylaws of Del Monte Foods Company
3.3 Certificate of Designations filed May 4, 1998
3.4 Certificate of Merger between Del Monte Foods Company, a
Maryland corporation, and Del Monte Foods Company, a
Delaware corporation, filed May 1, 1998
3.5 Articles of Merger between Del Monte Foods Company, a
Maryland corporation, and Del Monte Foods Company, a
Delaware corporation, filed May 1, 1998
4.1 Specimen Certificate of Common Stock of Del Monte Foods
Company
4.2 Stockholders' Agreement, dated as of April 18, 1997, among
Del Monte Foods Company and its Stockholders (incorporated
by reference to Exhibit 3.6 to the DMC Registration
Statement)
NOTE: Pursuant to the provisions of paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, the Registrant hereby undertakes
to furnish to the Commission upon request copies of the
instruments pursuant to which various entities hold
long-term debt of the Company or its parent or subsidiaries,
none of which instruments govern indebtedness exceeding 10%
of the total assets of the Company and its parent or
subsidiaries on a consolidated basis
</TABLE>
II-4
<PAGE> 155
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.3 Form of Stockholders' Agreement among Del Monte Foods
Company and its employee stockholders (incorporated by
reference to Exhibit 4.1 to Registration Statement on Form
S-8 filed November 24, 1997 File No. 333-40867 (the
"Registration Statement on Form S-8"))
4.4 Form of Stockholders' Agreement between Del Monte Foods
Company and its Employee Directors
4.5 Form of Stockholders' Agreement between Del Monte Foods
Company and its Employee Directors -- Directors' Fee
Arrangement
4.6* Registration Rights Agreement, dated as of May , 1998,
by and among TPG Partners, L.P., TPG Parallel I, L.P. and
Del Monte Foods Company
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton
10.1 Indenture, dated as of December 17, 1997, among Del Monte
Foods Company, as issuer, and Marine Midland Bank, as
trustee, relating to the Notes (the "Indenture")
(incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 No. 333-47289, filed
March 4, 1998 (the "Exchange Offer Registration Statement"))
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Indenture.
10.2 Registration Rights Agreement, dated as of December 17,
1997, by and among Del Monte Foods Company and the Initial
Purchasers listed therein, relating to the Notes (the
"Registration Rights Agreement") (incorporated by reference
to Exhibit 4.3 to the Exchange Offer Registration Statement)
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Registration Rights Agreement.
10.3 Amended and Restated Credit Agreement, dated as of December
17, 1997, among Del Monte Corporation, ("BofA") Bank of
America National Trust and Savings Association, as
Administrative Agent, and the other financial institutions
parties thereto (the "Amended Credit Agreement")
(incorporated by reference to Exhibit 4.4 to the Exchange
Offer Registration Statement)
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Amended Credit Agreement.
10.4 Amended and Restated Parent Guaranty, dated December 17,
1997, executed by Del Monte Foods Company, with respect to
the obligations under the Amended Credit Agreement (the
"Restated Parent Guaranty") (incorporated by reference to
Exhibit 4.5 to the Exchange Offer Registration Statement)
10.5 Security Agreement, dated April 18, 1997, between Del Monte
Corporation and Del Monte Foods Company and Bank of America
National Trust and Savings Association (incorporated by
reference to Exhibit 4.6 to the DMC Registration Statement)
10.6 Pledge Agreement, dated April 18, 1997, between Del Monte
Corporation and Bank of America National Trust and Savings
Association (incorporated by reference to Exhibit 4.7 to the
DMC Registration Statement)
10.7 Parent Pledge Agreement, dated April 18, 1997, between Del
Monte Foods Company and Bank of America National Trust and
Savings Association (incorporated by reference to Exhibit
4.8 to the DMC Registration Statement)
</TABLE>
II-5
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.8 Indenture, dated as of April 18, 1997, among Del Monte
Corporation, as issuer, Del Monte Foods Company, as
guarantor, and Marine Midland Bank, as trustee, relating to
the 12 1/4% Senior Subordinated Notes Due 2007 (incorporated
by reference to Exhibit 4.2 to the DMC Registration
Statement)
10.9 Registration Rights Agreement, dated as of April 18, 1997,
by and among Del Monte Corporation and the Purchasers listed
therein, relating to the 12 1/4% Senior Subordinated Notes
Due 2007 (incorporated by reference to Exhibit 4.9 to the
DMC Registration Statement)
10.10 Transaction Advisory Agreement, dated as of April 18, 1997,
between Del Monte Corporation and TPG Partners, L.P.
(incorporated by reference to Exhibit 10.1 to the DMC
Registration Statement)
10.11 Management Advisory Agreement, dated as of April 18, 1997,
between Del Monte Corporation and TPG Partners, L.P.
(incorporated by reference to Exhibit 10.2 to the DMC
Registration Statement)
10.12 Retention Agreement between Del Monte Corporation and David
L. Meyers, dated November 1, 1991 (incorporated by reference
to Exhibit 10.3 to the DMC Registration Statement)
10.13 Retention Agreement between Del Monte Corporation and Glynn
M. Phillips, dated October 5, 1994 (incorporated by
reference to Exhibit 10.4 to the DMC Registration Statement)
10.14 Retention Agreement between Del Monte Corporation and Thomas
E. Gibbons, dated January 1, 1992 (incorporated by reference
to Exhibit 10.5 to the DMC Registration Statement)
10.15 Del Monte Foods Annual Incentive Award Plan and 1997 Plan
Year Amendments (incorporated by reference to Exhibit 10.8
to the DMC Registration Statement)
10.16 Additional Benefits Plan of Del Monte Corporation, as
amended and restated effective January 1, 1996 (incorporated
by reference to Exhibit 10.9 to the DMC Registration
Statement)
10.17 Supplemental Benefits Plan of Del Monte Corporation,
effective as of January 1, 1990, as amended as of January 1,
1992 and May 30, 1996 (incorporated by reference to Exhibit
10.10 to the DMC Registration Statement)
10.18 Del Monte Foods Company Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-8)
10.19 Del Monte Foods Company 1997 Stock Incentive Plan
(incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-8)
10.20 Agreement for Information Technology Services between Del
Monte Corporation and Electronic Data Systems Corporation,
dated November 1, 1992, as amended as of September 1, 1993
and as of September 15, 1993 (incorporated by reference to
Exhibit 10.11 to the DMC Registration Statement)
10.21 Supply Agreement between Del Monte Corporation and Silgan
Containers Corporation, dated as of September 3, 1993, as
amended as of December 21, 1993 (incorporated by reference
to Exhibit 10.12 to the DMC Registration Statement)
10.22 Retention Agreement between Del Monte Corporation and
William J. Spain, dated January 1, 1992
10.23 Del Monte Foods Company Non-Employee Directors and
Independent Contractors 1997 Stock Incentive Plan
10.24* Del Monte Foods Company 1998 Stock Option Plan
</TABLE>
II-6
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.25 Supplemental Indenture, dated as of April 24, 1998, among
Del Monte Corporation, as Issuer, Del Monte Foods Company,
as Guarantor, and Marine Midland Bank, as Trustee
10.26 Supplemental Indenture, dated as of April 24, 1998, between
Del Monte Foods Company, as Guarantor, and Marine Midland
Bank, as Trustee
10.27 Amendment and Waiver, dated as of April 16, 1998, to the
Amended Credit Agreement and the Restated Parent Guaranty,
by Del Monte Corporation and the financial institutions
party thereto
10.28 Commitment Letter dated April 15, 1998 to Del Monte
Corporation from BofA and Bankers Trust Company
10.29 Promissory Note of Richard Wolford
10.30 Promissory Note of Wesley Smith
10.31 Supplemental Indenture, dated as of December 19, 1997, among
Del Monte Corporation, as Issuer, Del Monte Foods Company,
as Guarantor, and Marine Midland Bank, as Trustee
11.1 Statement re Computation of Earnings Per Share
12.1 Statement re Computation of Ratios
21.1 Subsidiaries of Del Monte Foods Company
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.3 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.4 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
its opinion filed as Exhibit 5.1)
23.5 Consent of A. C. Nielsen Company
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(b)(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
II-7
<PAGE> 158
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-8
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused Amendment No. 1 to this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on May 18, 1998.
DEL MONTE FOODS COMPANY
By: /s/ RICHARD G. WOLFORD
------------------------------------
Richard G. Wolford
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Richard G. Wolford, David L. Meyers and Wesley
J. Smith, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (unless revoked in writing) to sign any and all amendments (including
post-effective amendments thereto) to this Registration Statement to which this
power of attorney is attached, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to this registration statement has been signed by the following persons in the
capacities indicated on May 18, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ RICHARD G. WOLFORD* Chief Executive Officer (Principal Executive
- ----------------------------------------------------- Officer) and Director
Richard G. Wolford
/s/ DAVID L. MEYERS Executive Vice President, Administration and
- ----------------------------------------------------- Chief Financial Officer (Principal Financial
David L. Meyers Officer)
/s/ RICHARD L. FRENCH* Vice President and Chief Accounting Officer
- ----------------------------------------------------- (Principal Accounting Officer)
Richard L. French
/s/ RICHARD W. BOYCE* Chairman of the Board and Director
- -----------------------------------------------------
Richard W. Boyce
/s/ TIMOTHY G. BRUER* Director
- -----------------------------------------------------
Timothy G. Bruer
/s/ AL CAREY* Director
- -----------------------------------------------------
Al Carey
/s/ PATRICK FOLEY* Director
- -----------------------------------------------------
Patrick Foley
</TABLE>
S-1
<PAGE> 160
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ BRIAN E. HAYCOX* Director
- -----------------------------------------------------
Brian E. Haycox
/s/ JEFFREY A. SHAW* Director
- -----------------------------------------------------
Jeffrey A. Shaw
/s/ WESLEY J. SMITH* Chief Operating Officer and Director
- -----------------------------------------------------
Wesley J. Smith
/s/ DENISE M. O'LEARY* Director
- -----------------------------------------------------
Denise M. O'Leary
/s/ WILLIAM S. PRICE, III* Director
- -----------------------------------------------------
William S. Price, III
</TABLE>
- --------------------------------------
By: /s/ DAVID L. MEYERS
----------------------------------
David L. Meyers
S-2
<PAGE> 161
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Underwriting Agreement among Del Monte Foods Company and the
several underwriters and stockholders listed therein
2.1 Asset Purchase Agreement, dated as of November 12, 1997,
among Nestle USA, Inc., Contadina Services, Inc., Del Monte
Corporation and Del Monte Foods Company (the "Asset Purchase
Agreement") (incorporated by reference to Exhibit 10.1 to
Report on Form 8-K No. 33-36374-01 filed January 5, 1998)
2.2 Agreement and Plan of Merger, dated as of February 21, 1997,
amended and restated as of April 14, 1997, among TPG
Partners, L.P., TPG Shield Acquisition Corporation and Del
Monte Foods Company (the "Agreement and Plan of Merger")
(incorporated by reference to Exhibit 2.1 to Registration
Statement on Form S-4 No. 333-29079, filed June 12, 1997
(the "DMC Registration Statement"))
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Agreement and Plan of Merger.
3.1 Certificate of Incorporation of Del Monte Foods Company
3.2 Bylaws of Del Monte Foods Company
3.3 Certificate of Designations filed May 4, 1998
3.4 Certificate of Merger between Del Monte Foods Company, a
Maryland corporation, and Del Monte Foods Company, a
Delaware corporation, filed May 1, 1998
3.5 Articles of Merger between Del Monte Foods Company, a
Maryland corporation, and Del Monte Foods Company, a
Delaware corporation, filed May 1, 1998
4.1 Specimen Certificate of Common Stock of Del Monte Foods
Company
4.2 Stockholders' Agreement, dated as of April 18, 1997, among
Del Monte Foods Company and its Stockholders (incorporated
by reference to Exhibit 3.6 to the DMC Registration
Statement)
NOTE: Pursuant to the provisions of paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, the Registrant hereby undertakes
to furnish to the Commission upon request copies of the
instruments pursuant to which various entities hold
long-term debt of the Company or its parent or subsidiaries,
none of which instruments govern indebtedness exceeding 10%
of the total assets of the Company and its parent or
subsidiaries on a consolidated basis
4.3 Form of Stockholders' Agreement among Del Monte Foods
Company and its employee stockholders (incorporated by
reference to Exhibit 4.1 to Registration Statement on Form
S-8 filed November 24, 1997 File No. 333-40867 (the
"Registration Statement on Form S-8"))
4.4 Form of Stockholders' Agreement between Del Monte Foods
Company and its Employee Directors
4.5 Form of Stockholders' Agreement between Del Monte Foods
Company and its Employee Directors -- Directors' Fee
Arrangement
4.6* Registration Rights Agreement, dated as of May , 1998, by
and between TPG Partners, L.P., TPG Parallel I, L.P. and Del
Monte Foods Company
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton
10.1 Indenture, dated as of December 17, 1997, among Del Monte
Foods Company, as issuer, and Marine Midland Bank, as
trustee, relating to the Notes (the "Indenture")
(incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 No. 333-47289, filed
March 4, 1998 (the "Exchange Offer Registration Statement"))
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Indenture.
10.2 Registration Rights Agreement, dated as of December 17,
1997, by and among Del Monte Foods Company and the Initial
Purchasers listed therein, relating to the Notes (the
"Registration Rights Agreement") (incorporated by reference
to Exhibit 4.3 to the Exchange Offer Registration Statement)
</TABLE>
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Registration Rights Agreement.
10.3 Amended and Restated Credit Agreement, dated as of December
17, 1997, among Del Monte Corporation, Bank of America
National Trust and Savings Association, as Administrative
Agent ("BofA"), and the other financial institutions parties
thereto (the "Amended Credit Agreement") (incorporated by
reference to Exhibit 4.4 to the Exchange Offer Registration
Statement)
NOTE: Pursuant to the provisions of paragraph (b)(2) of Item
601 of Regulation S-K, the Registrant hereby undertakes to
furnish to the Commission upon request copies of any
schedule to the Amended Credit Agreement.
10.4 Amended and Restated Parent Guaranty, dated December 17,
1997, executed by Del Monte Foods Company, with respect to
the obligations under the Amended Credit Agreement (the
"Restated Parent Guaranty") (incorporated by reference to
Exhibit 4.5 to the Exchange Offer Registration Statement)
10.5 Security Agreement, dated April 18, 1997, between Del Monte
Corporation and Del Monte Foods Company and Bank of America
National Trust and Savings Association (incorporated by
reference to Exhibit 4.6 to the DMC Registration Statement)
10.6 Pledge Agreement, dated April 18, 1997, between Del Monte
Corporation and Bank of America National Trust and Savings
Association (incorporated by reference to Exhibit 4.7 to the
DMC Registration Statement)
10.7 Parent Pledge Agreement, dated April 18, 1997, between Del
Monte Foods Company and Bank of America National Trust and
Savings Association (incorporated by reference to Exhibit
4.8 to the DMC Registration Statement)
10.8 Indenture, dated as of April 18, 1997, among Del Monte
Corporation, as issuer, Del Monte Foods Company, as
guarantor, and Marine Midland Bank, as trustee, relating to
the 12 1/4 Senior Subordinated Notes Due 2007 (incorporated
by reference to Exhibit 4.2 to the DMC Registration
Statement)
10.9 Registration Rights Agreement, dated as of April 18, 1997,
by and among Del Monte Corporation and the Purchasers listed
therein, relating to the 12 1/4 Senior Subordinated Notes
Due 2007 (incorporated by reference to Exhibit 4.9 to the
DMC Registration Statement)
10.10 Transaction Advisory Agreement, dated as of April 18, 1997,
between Del Monte Corporation and TPG Partners, L.P.
(incorporated by reference to Exhibit 10.1 to the DMC
Registration Statement)
10.11 Management Advisory Agreement, dated as of April 18, 1997,
between Del Monte Corporation and TPG Partners, L.P.
(incorporated by reference to Exhibit 10.2 to the DMC
Registration Statement)
10.12 Retention Agreement between Del Monte Corporation and David
L. Meyers, dated November 1, 1991 (incorporated by reference
to Exhibit 10.3 to the DMC Registration Statement)
10.13 Retention Agreement between Del Monte Corporation and Glynn
M. Phillips, dated October 5, 1994 (incorporated by
reference to Exhibit 10.4 to the DMC Registration Statement)
10.14 Retention Agreement between Del Monte Corporation and Thomas
E. Gibbons, dated January 1, 1992 (incorporated by reference
to Exhibit 10.5 to the DMC Registration Statement)
10.15 Del Monte Foods Annual Incentive Award Plan and 1997 Plan
Year Amendments (incorporated by reference to Exhibit 10.8
to the DMC Registration Statement)
10.16 Additional Benefits Plan of Del Monte Corporation, as
amended and restated effective January 1, 1996 (incorporated
by reference to Exhibit 10.9 to the DMC Registration
Statement)
</TABLE>
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.17 Supplemental Benefits Plan of Del Monte Corporation,
effective as of January 1, 1990, as amended as of January 1,
1992 and May 30, 1996 (incorporated by reference to Exhibit
10.10 to the DMC Registration Statement)
10.18 Del Monte Foods Company Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8)
10.19 Del Monte Foods Company 1997 Stock Incentive Plan
(incorporated by reference to Exhibit 4.2 to Registration
Statement on Form S-8)
10.20 Agreement for Information Technology Services between Del
Monte Corporation and Electronic Data Systems Corporation,
dated November 1, 1992, as amended as of September 1, 1993
and as of September 15, 1993 (incorporated by reference to
Exhibit 10.11 to the DMC Registration Statement)
10.21 Supply Agreement between Del Monte Corporation and Silgan
Containers Corporation, dated as of September 3, 1993, as
amended as of December 21, 1993 (incorporated by reference
to Exhibit 10.12 to the DMC Registration Statement)
10.22 Retention Agreement between Del Monte Corporation and
William J. Spain, dated January 1, 1992
10.23 Del Monte Foods Company Non-Employee Director and
Independent Contractor 1997 Stock Incentive Plan
10.24* Del Monte Foods Company 1998 Stock Incentive Plan
10.25 Supplemental Indenture, dated as of April 24, 1998, among
Del Monte Corporation, as Issuer, Del Monte Foods Company,
as Guarantor, and Marine Midland Bank, as Trustee
10.26 Supplemental Indenture, dated as of April 24, 1998, between
Del Monte Foods Company and Marine Midland Bank, as Trustee
10.27 Amendment and Waiver, dated as of April 16, 1998, to the
Amended Credit Agreement and the Restated Parent Guaranty,
by Del Monte Corporation and the Financial institutions
party thereto
10.28 Commitment Letter dated April 15, 1998 to Del Monte
Corporation from BofA and Bankers Trust Company
10.29 Promissory Note of Richard Wolford
10.30 Promissory Note of Wesley Smith
10.31 Supplemental Indenture, dated as of December 19, 1997, among
Del Monte Corporation, as Issuer, Del Monte Foods Company,
as Guarantor, and Marine Midland Bank, as Trustee
11.1 Statement re Computation of Earnings Per Share
12.1 Statement re Computation of Ratios
21.1 Subsidiaries of Del Monte Foods Company
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.3 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.4 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
its opinion filed as Exhibit 5.1)
23.5 Consent of A. C. Nielsen Company
</TABLE>
- ---------------
* to be filed by amendment
<PAGE> 1
EXHIBIT 3.1
CONFORMED COPY
CERTIFICATE OF INCORPORATION OF
DEL MONTE FOODS COMPANY
ARTICLE I -NAME
The name of the company is Del Monte Foods Company (the "Corporation").
ARTICLE II - AGENT
The registered office of the Corporation is located at 1209 Orange Street,
in the City of Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is The Corporation
Trust Company.
ARTICLE III - PURPOSE
The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
ARTICLE IV - STOCK
Section 1. Authorized Stock. The aggregate number of shares which the
Corporation shall have authority to issue is 502,000,000 of which 2,000,000 of
said shares shall be par value $0.01, and shall be designated Preferred Stock,
and 500,000,000 of said shares shall be par value $0.01 per share, and shall be
designated Common Stock.
Section 2. Preferred Stock. Subject to the limitations and in the manner
provided by law, shares of the Preferred Stock may be issued from time to time
in series and the Board of Directors of the Corporation is hereby authorized to
establish and designate series of the Stock, to fix the number of shares
constituting each series, and to fix the designations and the relative rights,
preferences and limitations of the shares of each series and the variations in
the relative rights, preferences and limitations as between series, and to
increase and to decrease the number of shares constituting each series.
Subject to the limitations and in the manner provided by law, the authority of
the Board of Directors of the Corporation with respect to each series shall
include but shall not be limited to the authority to determine the following:
(a) The designation of such series.
(b) The number of shares initially constituting such series.
(c) The increase, and the decrease to a number not less than the
number of the outstanding shares of such series, of the number of shares
constituting such series theretofore fixed.
<PAGE> 2
(d) The rate or rates and the times at which dividends on the shares
of such series shall be paid, the form in which such dividends shall be
paid or payable (which may include additional shares of capital stock of
the Company) and whether or not such dividends shall be cumulative and,
if such dividends shall be cumulative, the date or dates from and after
which they shall accumulate; provided, however, that, if the stated
dividends are not paid in full, the shares of all series of the Preferred
Stock ranking pari passu shall share ratably in the payment of dividends,
including accumulations, if any, in accordance with the sums which would
be payable on such shares if all dividends were declared and paid in
full.
(e) Whether or not the shares of such series shall be redeemable
and, if such shares shall be redeemable, the terms and conditions of such
redemption, including but not limited to the date or dates upon or after
which such shares shall be redeemable and the amount per share which
shall be payable upon such redemption, which amount may vary under
different conditions and at different redemption dates.
(f) The amount payable on the shares of such series in the event of
the voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; provided, however, that the holders of such shares shall
be entitled to be paid, or to have set apart for payment, not less than
$.01 per share before the holders of shares of the Common Stock or the
holders of any other class or series of stock ranking junior to the
Preferred Stock as to rights on liquidation shall be entitled to be paid
any amount or to have any amount set apart for payment; and provided
further, that, if the amounts payable on liquidation are not paid in
full, the shares of all series of the Preferred Stock ranking pari passu
shall share ratably in any distribution of assets other than by way of
dividends in accordance with the sums which would be payable in such
distribution if all sums payable were discharged in full. A liquidation,
dissolution or winding up of the Corporation, as such terms are used in
this paragraph (f), shall not be deemed to be occasioned by or to include
any consolidation or merger of the Corporation with or into any other
corporation or other entity or corporations or other entities or a sale,
lease or conveyance of all or a part of its assets.
(g) Whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law and, if such
shares shall have such voting rights, the terms and conditions thereof,
including but not limited to the right of the holders of such shares to
vote as a separate class either alone or with the holders of shares of
one or more other series of Preferred Stock and the right to have more
than one vote per share.
(h) Whether or not a sinking fund shall be provided for the
redemption of the shares of such series and, if such a sinking fund shall
be provided, the terms and conditions thereof.
(i) Whether or not a purchase fund shall be provided for the shares
of such series, and, if such a purchase fund shall be provided, the terms
and conditions thereof.
2
<PAGE> 3
(j) Whether or not the shares of such series shall have conversion
or exchange privileges, and, if such shares shall have conversion or
exchange privileges, the terms and conditions of conversion or exchange,
including but not limited to any provision for the adjustment of the
conversion rate or the conversion price and whether conversion or
exchange can be effected solely by the Company or the holder.
(k) Any other relative rights, preferences and limitations.
Section 3. Voting Rights. Except as otherwise provided by law or by the
resolution or resolutions providing for the issue of any series of Preferred
Stock, the holders of outstanding shares of Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, each holder of record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in such holder's name on the books
of the Corporation.
ARTICLE V - SOLE INCORPORATOR
The name and address of the sole incorporator of the Corporation is David
J. Wermuth, and his address is c/o Cleary, Gottlieb, Steen & Hamilton, One
Liberty Plaza, New York, New York 10006.
ARTICLE VI - AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors of the Corporation (the "Board") is expressly authorized and
empowered to adopt, amend and repeal the Bylaws of the Corporation by a
majority vote at any regular or special meeting of the Board or by written
consent. The stockholders of the Corporation may not adopt, amend or repeal
any By-law unless such action is approved by the affirmative vote of the
holders of not less than eighty percent (80%) of the voting power of all of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for purposes of this Article
SIXTH as a single class.
ARTICLE VII - AMENDMENT OF CHARTER
The Corporation reserves the right at any time from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE VIII - BOARD OF DIRECTORS
Section 1. Number. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors consisting of not
fewer than seven nor more than fourteen directors (exclusive of directors
referred to in the following paragraph), the exact
3
<PAGE> 4
number to be determined from time to time by resolution adopted by affirmative
vote of a majority of such directors then in office. From and after the date
of the first annual meeting of the stockholders of the Corporation, the
directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors determined by the Board pursuant to
this Section 1. Class I directors shall serve for an initial term ending at
the annual meeting of stockholders held in 1999, Class II directors for an
initial term ending at the annual meeting of stockholders held in 2000 and
Class III directors for an initial term ending at the annual meeting of
stockholders held in 2001. At each annual meeting of stockholders beginning in
1999, successors to the directors in the class whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for the remaining
term of that class, but in no case will a decrease in the number of directors
shorten the term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his or her term expires and until his
or her successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the number of such directors and the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the provisions of Article IV of this Certificate of
Incorporation and any resolution or resolutions adopted by the Board pursuant
thereto, and such directors shall not be divided into classes unless expressly
so provided therein.
Unless and except to the extent that the Bylaws of the Corporation shall
so require, the election of directors of the Corporation need not be by written
ballot.
Section 2. Removal. Subject to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the Corporation, any
director, or the entire Board, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of not less than
eighty percent (80%) of the voting power of all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes of this sentence as a single class. Any
vacancy in the Board that results from an increase in the number of directors
may be filled by a majority of the directors then in office, provided that a
quorum is present, and any other vacancy may be filled only by a majority of
the directors then in office, even if less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy not resulting from
an increase in the number of directors shall hold office for the remaining term
of his or her predecessor.
ARTICLE IX - STOCKHOLDER ACTION
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting.
4
<PAGE> 5
ARTICLE X - LIABILITY OF DIRECTORS & OFFICERS, ETC.
Section 1. Elimination of Certain Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 2. Indemnification and Insurance.
(a) Right to indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, to the fullest extent permitted by law, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, amounts paid or to be paid in
settlement, and excise taxes or penalties arising under the Employee Retirement
Income Security Act of 1974) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Section shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
General Corporation Law of the State of Delaware requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of the Board, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
5
<PAGE> 6
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the Corporation (including its Board, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability
or loss under the General Corporation Law of the State of Delaware.
ARTICLE XI - ISSUANCE OF STOCK AND RIGHTS
The Board shall have authority to authorize the issuance, from time to
time without any vote or other action by the stockholders, of any or all shares
of stock of the Corporation of any class at any time authorized, any securities
convertible into or exchangeable for any such shares so authorized, and any
warrant, option or right to purchase, subscribe for or otherwise acquire,
shares of stock of the Corporation for any such consideration and on such terms
as the Board from time to time in its discretion lawfully may determine, which
terms and conditions may include, without limitation, restrictions or
conditions that preclude or limit the exercise, transfer or receipt thereof or
that invalidate or void any such securities, warrants, options or rights;
provided, however, that the consideration for the issuance of shares of stock
of the Corporation having par value shall not be less than such par value.
Stock so issued, for which the consideration has been paid to the Corporation,
shall be fully paid stock, and the holders of such stock shall not be liable to
any further call or assessments thereon.
6
<PAGE> 7
ARTICLE XII - CONSIDERATION OF OTHER CONSTITUENCIES
In addition to any other considerations which the Board may lawfully take
into account in determining whether to take or to refrain from taking corporate
action on any matter, including proposing any matter to the stockholders of the
Corporation, the Board may, but shall not be obligated to, take into account
the interests of clients or other customers, creditors, current and retired
employees and other constituencies of the Corporation and its subsidiaries and
the effect upon communities in which the Corporation and its subsidiaries do
business.
ARTICLE XIII - SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES
The Bylaws of the Corporation may establish procedures regulating the
submission by stockholders of nominations and proposals for consideration at
meetings of stockholders of the Corporation.
ARTICLE XIV - BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
The provisions of Section 203 of the Delaware General Corporation Law
shall not apply to the Company.
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned hereby signs this Certificate of
Incorporation on this 20th day of April, 1998.
By /s/ David J. Wermuth
David J. Wermuth
Sole Incorporator
S-1
<PAGE> 1
EXHIBIT 3.2
DEL MONTE FOODS COMPANY
BYLAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of Del Monte Foods
Company, a Delaware corporation (the "Company"), shall be located at 1209
Orange Street, in the City of Wilmington, in the County of New Castle, in the
State of Delaware. The name of its registered agent at that address is The
Corporation Trust Company.
Section 2. OTHER OFFICES. The Company may have other offices, either
within or without the State of Delaware, at such place or places as the Board
of Directors may from time to time select or the business of the Company may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETINGS. The first annual meeting of stockholders for
the election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held on 10 a.m. local time on Friday, April 24,
1998. Each subsequent annual meeting of stockholders for the election of
directors, and for such other business as may be stated in the notice of the
meeting, shall be held on a date and at the time set by the Board of Directors
during the month of February in each such year. At each annual meeting, the
stockholders entitled to vote shall elect directors by a plurality vote, in
accordance with Article VIII of the Certificate of Incorporation, and
stockholders may transact such other corporate business as shall be stated in
the notice of the meeting.
Section 2. SPECIAL MEETINGS. Except as provided in the Certificate of
Incorporation, special meetings of the stockholders may be called only on the
order of the Chairman of the Board or the Board of Directors and shall be held
at such date and time as may be specified by such order. The business
permitted to be conducted at any special meeting of the stockholders is limited
to the purpose or purposes specified by such order.
Section 3. PLACE. All meetings of stockholders shall be held at the
principal office of the Company, One Market, San Francisco, California or at
such other place within or without the State of Delaware as shall be stated in
the notice of the meeting.
1
<PAGE> 2
Section 4. NOTICE OF MEETINGS. Written notice of each meeting of the
stockholders shall be mailed or delivered to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the meeting.
The notice shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Other business may be transacted at the annual meeting (but not at any
special meeting), only if the Secretary of the Company has received from the
sponsoring stockholder (a) not less than sixty nor more than ninety days before
the date designated for the annual meeting or, if such date has not been
publicly disclosed at least seventy-five days in advance, then not less than
fifteen days after such initial public disclosure, a written notice setting
forth (i) as to each matter the stockholder proposes to bring before the annual
meeting, a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Company's books, of
the stockholder proposing such business, (iii) the class and number of shares
which are beneficially owned by the stockholder on the date of such
stockholder's notice and (iv) any material interest of the stockholder in such
proposal, and (b) not more than ten days after receipt by the sponsoring
stockholder of a written request from the Secretary, such additional
information as the Secretary may reasonably require. Notwithstanding anything
in these Bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of this
Section 4 of Article II. The officer of the Company or other person presiding
over the annual meeting shall, if the facts so warrant, determine and declare
to the meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 4 of Article II and, if he or
she should so determine, such officer shall so declare to the meeting and any
business so determined to be not properly brought before the meeting shall not
be transacted.
Candidates for election to the Board of Directors of the Company (other
than nominees proposed by the Board of Directors) may be nominated at the
annual meeting (but not at any special meeting), only if the Secretary of the
Company has received from the nominating stockholder (a) not less than sixty
nor more than ninety days before the date designated for the annual meeting or,
if such date has not been publicly disclosed at least seventy-five days in
advance, then not less than fifteen days after such initial public disclosure,
a written notice setting forth (i) with respect to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
information relating to such person that would be required to be disclosed in
solicitations of proxies for election of directors, or would otherwise be
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, if such Regulation 14A were applicable (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected) or any successor regulation or statute,
(ii) the name and address, as they appear on the Company's books, of the
stockholder proposing such business and (iii) the class and number of shares
which are beneficially owned by the stockholder on the date of such
stockholder's notice, and (b) not more than ten
2
<PAGE> 3
days after receipt by the nominating stockholder of a written request from the
Secretary, such additional information as the Secretary may reasonably require.
Notwithstanding anything in these Bylaws to the contrary, no person shall be
eligible for election as a director except in accordance with the provisions of
this Section 4 of Article II. The officer of the Company or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 4 of Article II and, if he or she should so
determine, such officer shall so declare to the meeting and any such defective
nomination shall be disregarded.
Section 5. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation of the Company or by these Bylaws, the presence,
in person or by proxy, of stockholders holding shares of capital stock
constituting a majority of the shares of capital stock of the Company issued
and outstanding and entitled to vote thereat, shall constitute a quorum at all
meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders present in person or by
proxy and entitled to vote thereat, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote shall
be represented, any business may be transacted that might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
Section 6. VOTING. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation of the Company and these Bylaws
may vote in person or by proxy executed in writing by the stockholder or by his
or her duly authorized attorney-in-fact. Any such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. If a quorum
is present, the affirmative vote of a majority of the votes cast at a meeting
of the stockholders by the holders of shares entitled to vote thereon shall be
the act of the stockholders, unless the vote of a greater or lesser number of
shares of stock is required by law, the Certificate of Incorporation of the
Company or these Bylaws.
A complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, with the address of each, and the number of
shares held by each, shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is entitled to be present.
Section 7. ORGANIZATION. At every meeting of stockholders, the Chairman
of the Board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the Chairman of the Board, one of the following
officers present shall
3
<PAGE> 4
conduct the meeting in the order stated: the Vice Chairman of the Board, the
Chief Executive Officer, the Chief Operating Officer, the President, any Vice
President, or a Chairman chosen by the stockholders entitled to cast, shall act
as Chairman, and the Secretary, or in his or her absence, an Assistant
Secretary, or in the absence of both the Secretary and Assistant Secretaries, a
person appointed by the Chairman, shall act as Secretary.
ARTICLE III
DIRECTORS
Section 1. NUMBER. Subject to the provisions of the Certificate of
Incorporation, the number of directors of the Company shall initially be fixed
at ten and thereafter shall be determined from time to time by resolution
adopted by affirmative vote of a majority of such directors then in office.
Section 2. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the entire Board of Directors, designate
one or more committees, each committee to consist of one or more directors of
the Company.
Section 3. MEETINGS. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the first annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent of
all the directors.
Regular meetings of the Board of Directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman
of the Board, the Chief Executive Officer or the President, and shall be called
by the Secretary on the written request of a majority of the directors then in
office, on at least one hour's notice to each director (except that notice to
any director may be waived in writing by such director) and shall be held at
such place or places as may be determined by the Board of Directors, or as
shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of Incorporation of the
Company or these Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in any meeting of the
Board of Directors or any committee thereof by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 4. QUORUM. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors
4
<PAGE> 5
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no
further notice thereof need be given other than by announcement at the meeting
which shall be so adjourned. The vote of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors unless the Certificate of Incorporation of the Company or these
Bylaws shall require the vote of a greater number.
Section 5. COMPENSATION. The directors shall receive such compensation
for their services as may be prescribed by the Board of Directors. Expenses
for attendance at meetings of the Board of Directors and committees of the
Board of Directors may be reimbursed for all members of the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Company in any other capacity as an officer, agent or otherwise,
and receiving compensation therefor.
Section 6. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or such committee.
ARTICLE IV
OFFICERS
Section 1. ELECTION; QUALIFICATIONS. As soon as practicable after each
annual meeting of stockholders, the Board of Directors shall elect or appoint a
Chairman of the Board, one or more Vice Chairmen, a President, one or more
Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers, including
assistant officers, as the Board of Directors may from time to time deem
advisable. No officer need be a director of the Company. Any two or more
offices may be held by the same person, except the offices of President and
Secretary.
Section 2. TERM OF OFFICE; VACANCIES. All officers shall be elected or
appointed to hold office until the meeting of the Board of Directors following
the next annual meeting of stockholders. Each officer shall hold office for
such term, and until his or her successor has been elected or appointed and
qualified unless he or she shall earlier resign, die, or be removed. Any
vacancy occurring in any office, whether because of death, resignation or
removal, with or without cause, or any other reason, shall be filled by the
Board of Directors.
Section 3. REMOVAL; RESIGNATION. Any officer may be removed by the Board
of Directors with or without cause. Any officer may resign his or her office
at any time, such resignation to be made in writing and to take effect
immediately or on any future date stated in such writing, without acceptance by
the Company.
5
<PAGE> 6
Section 4. POWERS AND DUTIES OF OFFICERS. Officers of the Company shall,
unless otherwise provided by the Board of Directors, each have such powers and
duties as generally pertain to their respective offices as well as such powers
and duties as may be set forth in these Bylaws or may from time to time be
specifically conferred or imposed by the Board of Directors.
Section 5. SHARES OF OTHER CORPORATIONS. Whenever the Company is the
holder of shares of any other corporation, any right or power of the Company as
such stockholder (including the attendance, acting and voting at stockholders'
meetings and execution of waivers, consents, proxies or other instruments) may
be exercised on behalf of the Company by the Chairman, any Vice Chairman, the
President, any Executive Vice President, any Senior Vice President, Secretary
or such other person as the Board of Directors may authorize from time to time.
Section 6. DELEGATION. In the event of the absence of any officer of the
Company or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may at any time and from time to time
delegate all or any part of the powers or duties of any officer to any other
officer or officers or to any director or directors.
ARTICLE V
TRANSFER RESTRICTIONS
Any direct or indirect sale, transfer, assignment, pledge, hypothecation
or other encumbrance or disposition (a "Transfer") of legal or beneficial
ownership of any stock heretofore or hereafter issued and sold by the Company
pursuant to Rule 144A or Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), may be made only (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to a
transaction that is exempt from, or not subject to, the registration
requirements of the Securities Act. Neither the Company nor any employee or
agent of the Company shall record any Transfer prohibited by the preceding
sentence, and the purported transferee of such a prohibited Transfer (the
"Purported Transferee") shall not be recognized as a securityholder of the
Company for any purpose whatsoever in respect of the security or securities
that are the subject of the prohibited Transfer. The Purported Transferee
shall not be entitled, with respect to such securities, to any rights of a
securityholder of the Company, including without limitation, in the case of
securities that are Common Stock, the right to vote such Common Stock or to
receive dividends or distributions in respect thereof, if any. All
certificates representing securities subject to the transfer restrictions set
forth in this Article V shall bear a legend to the effect that the securities
represented by such certificates are subject to such restrictions, unless and
until the Company determines in its sole discretion that such legend may be
removed consistent with applicable law.
ARTICLE VI
6
<PAGE> 7
MISCELLANEOUS
Section 1. CERTIFICATES OF STOCK. A certificate of stock shall be issued
to each stockholder certifying the number of shares owned by such stockholder
in the Company. Certificates of stock of the Company shall be of such form and
device as the Board of Directors may from time to time determine.
Section 2. LOST CERTIFICATES. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the Company, alleged to have
been lost or destroyed, and the Board of Directors may, in its discretion,
require the owner of the lost or destroyed certificate, or such owner's legal
representatives, to give the Company a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Company against
any claim that may be made against it on account of the alleged loss of any
such certificate, or the issuance of any such new certificate.
Section 3. TRANSFER OF SHARES. The shares of stock of the Company shall
be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the Company by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be canceled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
Section 4. STOCKHOLDERS RECORD DATE. In order that the Company may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and
which record date: (1) in the case of determination of stockholders entitled to
vote at any meeting of stockholders or adjournment thereof, shall, unless
otherwise required by law, not be more than sixty nor less than ten days before
the date of such meeting; (2) in the case of determination of stockholders
entitled to express consent to corporate action in writing without a meeting,
shall not be more than ten days from the date upon which the resolution fixing
the record date is adopted by the Board of Directors; and (3) in the case of
any other action, shall not be more than sixty days prior to such other action.
If no record date is fixed: (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held; (2) the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting when no prior action of the Board of
7
<PAGE> 8
Directors is required by law, shall be the first day on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Company in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day
on which the Board of Directors adopts the resolution taking such prior action;
and (3) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation of the Company, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends upon
stock of the Company as and when they deem appropriate. Before declaring any
dividend there may be set apart out of any funds of the Company available for
dividends, such sum or sums as the Board of Directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Company.
Section 6. SEAL. The corporate seal of the Company shall be in such form
as shall be determined by resolution of the Board of Directors. Said seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise imprinted upon the subject document or paper.
Section 7. FISCAL YEAR. The fiscal year of the Company shall end on June
30 of each year unless otherwise determined by resolution of the Board of
Directors.
Section 8. CHECKS. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Company shall be signed by such officer or officers, or agent or agents, of the
Company, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
to be given under these Bylaws, personal notice is not required (except in the
case of notices pursuant to Article III, Section 3), and any notice so required
shall be deemed to be sufficient if given by depositing the same in the United
States mail, postage prepaid, addressed to the person entitled thereto at his
or her address as it appears on the records of the Company, and such notice
shall be deemed to have been given on the day of such mailing. Stockholders
not entitled to vote shall not be entitled to receive notice of any meetings
except as otherwise provided by law. Whenever any notice is required to be
given under the provisions of any law, or under the provisions of the
Certificate of Incorporation of the Company or of these Bylaws, a waiver
thereof, in writing and signed by the person or persons entitled to said
notice, whether before or after the time stated thereon, shall be deemed
equivalent to such required notice.
8
<PAGE> 9
ARTICLE VII
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors of the Company is expressly authorized and empowered to
adopt, amend and repeal the Bylaws of the Company by a majority vote at any
regular or special meeting of the Board of Directors or by written consent,
subject to the power of the stockholders of the Company to amend or repeal any
Bylaws made by the Board of Directors.
9
<PAGE> 1
EXHIBIT 3.3
CONFORMED COPY
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE PREFERRED STOCK
OF DEL MONTE FOODS COMPANY
-----------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-----------------------
Del Monte Foods Company (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 151(g) thereof, hereby
certifies on May 4, 1998 as follows:
FIRST: The Certificate of Incorporation of the Corporation authorizes the
issuance of up to 2,000,000 shares of Preferred Stock (the "Preferred Stock"),
par value $.01 per share, in one or more classes and/or series, pursuant to a
resolution providing for such issue adopted by the Board of Directors of the
Corporation (the "Board"), and further authorizes the Board to determine the
powers, designations, preferences, rights and qualifications, limitations or
restrictions granted to or imposed upon any such class and/or series of
Preferred Stock.
SECOND: On April 24, 1998, the Board adopted the following resolution
authorizing the creation and issuance of a series of said Preferred Stock to be
known as Series A Redeemable Preferred Stock:
FURTHER RESOLVED, that pursuant to the authority vested in the Board of
Directors in accordance with the provisions of its Certificate of
Incorporation, a series of preferred stock of the Corporation, designated as
Series A Redeemable Preferred Stock, par value $.01 per share, be, and it
hereby is, created, and that the powers, designations, preferences, rights
and qualifications, limitations or restrictions granted to or imposed upon
such series of preferred stock are as set forth below:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A
Redeemable Preferred Stock" ("Series A Preferred Stock") and the
number of shares constituting such series shall be one hundred fifty
thousand (150,000), which number may be decreased and, only for
purposes of Section 2(b) below, increased by the Board of Directors
without a vote of stockholders; provided,
however, that such number may not be decreased below the number of
then currently outstanding shares of Series A Preferred Stock.
Section 2. Dividends and Distributions.
<PAGE> 2
(a) The holders of shares of Series A Preferred Stock, in
preference to the holders of shares of the Corporation's Common
Stock, par value $.01 per share (the "Common Stock"), and to any
other capital stock of the Corporation ranking junior to Series A
Preferred Stock as to payment of dividends, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds of the Corporation legally available for the payment of
dividends, cumulative dividends at the annual rate of 14% of the
Liquidation Value, as defined in Section 7, per share, and, subject
to the provisions of Section 4(d)(ii), no more. Dividends payable in
respect of the outstanding shares of Series A Preferred Stock shall
begin to accrue and be cumulative from the respective dates of
original issue of such shares (which dates shall be reflected on the
certificates evidencing the same), and shall be payable in quarterly
payments on April 15, July 15, October 15 and January 15 (or, if any
such day is not a Business Day, as defined in Section 7, the Business
Day next preceding such day) in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date") for each
of the fiscal quarters ended March 31, June 30, September 30 and
December 31, respectively, commencing in respect of each share of
Series A Preferred Stock on the first Quarterly Dividend Payment Date
which is at least seven days after the date of original issue
thereof; provided, however, that dividends payable in respect of
outstanding shares of Series A Preferred Stock issued pursuant to
Section 1.4(a)(ii) of the Agreement of Merger and Plan of
Reorganization, dated as of April 24, 1998, by and between Del Monte
Foods Company, a Maryland corporation, and the Corporation, shall be
deemed to accrue and be cumulative from October 1, 1997.
(b) Any dividend payable in respect of shares of Series A Preferred
Stock may, at the election of the Board of Directors, be declared and paid
in additional shares of Series A Preferred Stock, to the extent legally
permissible, in lieu of declaration and payment therefor in cash. The
number of shares of Series A Preferred Stock to be issued in lieu of cash
dividends shall be calculated based on the Liquidation Value of each share
of Series A Preferred Stock. The shares of Series A Preferred Stock so
issued shall be duly authorized, validly issued, fully paid and
nonassessable. To the extent not declared and paid in cash or in
additional shares of Series A Preferred Stock, or declared and funds
necessary therefor shall have been Set Aside for Payment, as defined in
Section 7, on each Quarterly Dividend Payment Date, an amount equal to all
dividends which have accumulated on each share of Series A Preferred Stock
then outstanding during the period from the immediately preceding
Quarterly Dividend Payment Date (or from the date of issuance in the case
of the initial Quarterly Dividend Payment Date) to such Quarterly Dividend
Payment Date will be added to the Liquidation Value of such shares of
Series A Preferred Stock and will remain a part thereof until such
dividends are paid in cash or additional shares of Series A Preferred
Stock, at which time such Liquidation Value will be reduced by the amount
of dividends so paid.
(c) The amount of dividends payable shall be determined on the
basis of twelve 30-day months and a 360-day year. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the
total amount of such dividends at the time accumulated and payable on
such shares shall be allocated pro rata on a share-
2
<PAGE> 3
by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date (a "Regular Record Date")
for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than 60 days nor less than ten
days prior to the date fixed for the payment thereof. Any dividend
declared by the Board of Directors as payable and punctually paid or
Set Apart for Payment on a Quarterly Dividend Payment Date will be
paid to the Persons, as defined in Section 7, in whose names Series A
Preferred Stock is registered at the close of business on the Regular
Record Date set with respect to that Quarterly Dividend Payment Date
(the "Registered Holders"). Any dividend not so paid or Set Apart
for Payment shall forthwith cease to be payable to such Registered
Holders and may be paid to the Registered Holder at the close of
business on the record date for the payment of such defaulted
dividends and interest to be fixed by the Board of Directors (a
"Special Record Date"). The Board of Directors shall provide
Registered Holders of Series A Preferred Stock not less than 10 days'
prior notice of a Special Record Date. All cash payments shall be
made in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private
debts.
(d) The Registered Holder of any shares of Series A Preferred
Stock, upon the Corporation's written request therefor containing a
reasonably complete description of the basis for such request, shall
indemnify the Corporation for any and all withholding tax liabilities
incurred by the Corporation in connection with any dividends paid or
distributions made (including, without limitation, in connection with
any redemption of Series A Preferred Stock, but excluding any
penalties other than penalties resulting from the failure of the
Registered Holder to provide any required information) to such holder
in respect of Series A Preferred Stock. Each Registered Holder, by
acceptance of the certificate evidencing such holder's shares of
Series A Preferred Stock, shall be deemed to have agreed to the terms
of this Section 2(d).
(e) The holders of shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions in
respect of such shares of Series A Preferred Stock except as provided
for in this Certificate of Designations.
Section 3. Restrictive Covenants; Voting Rights.
(a) So long as any shares of Series A Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of
shares shall then be required by law, without first obtaining the
consent or approval of the holders of at least a majority of the
number of then-outstanding shares of Series A Preferred Stock, voting
as a single class, given in person or by proxy at a meeting at which
the holders of such shares shall be entitled to vote separately as a
class, or by written consent, the Corporation shall not:
(i) authorize or create any class or series, or any shares
of any class or series, of stock having any preference or
priority as to dividends or
3
<PAGE> 4
upon redemption, liquidation, dissolution, or winding up over
Series A Preferred Stock ("Senior Stock"); provided, however,
that no such vote shall be required with respect to the
authorization or creation by the Corporation of one or more
series of Senior Stock if the proceeds of the Corporation's
issuance of such Senior Stock are sufficient, and are used, to
redeem all outstanding shares of Series A Preferred Stock
concurrently with the issuance of such Senior Stock;
(ii) authorize or create any class or series, or any
shares of any class or series, of stock ranking on a parity
(either as to dividends or upon redemption, liquidation,
dissolution or winding up) with Series A Preferred Stock
("Parity Stock"); provided, however, that no such vote shall be
required with respect to the authorization or creation by the
Corporation of one or more new series of Parity Stock if the
proceeds of the Corporation's issuance of such Parity Stock are
sufficient, and are used, to redeem all outstanding shares of
Series A Preferred Stock concurrently with the issuance of such
Parity Stock;
(iii) reclassify, convert or exchange any shares of stock
of the Corporation into shares of Senior Stock or Parity Stock;
(iv) authorize any security exchangeable for, convertible
into, or evidencing the right to purchase any shares of Senior
Stock or Parity Stock;
(v) amend, alter or repeal the Corporation's Certificate
of Incorporation, as it may be amended from time to time (the
"Certificate of Incorporation") or the Corporation's Bylaws, as
they may be amended from time to time (the "Bylaws"), to alter
or change the preferences, rights or powers of Series A
Preferred Stock so as to affect Series A Preferred Stock
adversely or, except for purposes of Section 2(b) above, to
increase the authorized number of shares of Series A Preferred
Stock;
(vi) declare or pay dividends or make any other
distributions on, or redeem or repurchase any, shares of Common
Stock or other capital stock of the Corporation ranking junior
(either as to dividends or upon redemption, liquidation,
dissolution or winding up) to the Series A Preferred
Stock ("Junior Stock"), other than (A) dividends, redemptions,
repurchases or distributions made in the form of, or
exchangeable for, shares of Junior Stock, or warrants, rights
or options to acquire shares of Junior Stock, (B) provided that
dividends on shares of Series A Preferred Stock payable
pursuant to the terms of Section 2(a) on the four most recent
Quarterly Dividend Payment Dates shall have been paid in full
in cash (or shares of Series A Preferred Stock issued in
respect of such dividends pursuant to Section 2(b) shall have
been redeemed or repurchased for cash) dividends, redemptions,
repurchases and distributions in an amount which, when taken
together with the amount of cash
4
<PAGE> 5
dividends and redemption or repurchase proceeds previously paid
in respect of the Corporation's stock (other than in accordance
with the proviso to clause (ix) of this Section 3(a)), does not
exceed the amount of dividends, redemptions, repurchases or
distributions permitted to be made by Del Monte Corporation, a
wholly owned subsidiary of the Corporation ("DMC"), under the
Indenture with respect to the Senior Subordinated Notes dated
April 18, 1997, among the Corporation, as guarantor, DMC, as
issuer, and Marine Midland Bank, as trustee, as in effect on
the date hereof; (C) from time to time during the period in
which shares of Series A Preferred Stock are outstanding, up to
an aggregate of $10,000,000 in redemptions or repurchases of
Junior Stock held by management of the Corporation in
connection with termination of employment, retirement and
similar circumstances; and (D) dividends, redemptions,
repurchases and distributions permitted by the proviso to
clause (ix) of this Section 3(a);
(vii) declare or pay dividends or make any other
distributions on, or redeem or repurchase any, shares of Parity
Stock, other than (A) dividends or distributions made in the
form of, or exchangeable for, shares of Junior Stock, or
warrants, rights or options to acquire shares of Junior Stock,
(B) other dividends or distributions paid ratably on Series A
Preferred Stock and all Parity Stock on which dividends are
payable or in arrears, in proportion to the total amounts to
which the holders of all such shares are then entitled, (C)
redemptions or repurchases in exchange for shares of Junior
Stock, or warrants, rights or options to acquire shares of
Junior Stock, and (D) other redemptions or repurchases effected
ratably on Series A Preferred Stock and all Parity Stock, in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(viii) merge or consolidate with, or sell all or
substantially all of the Corporation's assets to, another
entity unless shares of Series A Preferred Stock outstanding
immediately prior to such transaction (A) remain outstanding
after such transaction without change to the preferences,
rights or powers thereof, (B) are exchanged for securities
containing substantially the same preferences, rights and
powers or (C) are redeemed concurrently with the effectiveness
of such transaction;
(ix) use cash proceeds of any recapitalization or
refinancing transaction to redeem or repurchase any shares of
Junior Stock without also redeeming or repurchasing each
outstanding share of Series A Preferred Stock at the Redemption
Price therefor; provided, however, that the Corporation shall
be permitted to use the proceeds of the issuance of Junior
Stock (other than pursuant to an underwritten public offering)
to redeem or repurchase shares of Junior Stock to the extent
that, after giving effect to such transaction, TPG Partners,
L.P. ("TPG") and its Affiliates would hold at least 55% of the
common equity interest in the Corporation that TPG and its
Affiliates held immediately following the consummation of the
merger effected pursuant to
5
<PAGE> 6
the Agreement and Plan of Merger, dated as of February 21,
1997, as amended, among TPG, TPG Shield Acquisition Corporation
and Del Monte Foods Company, a Maryland corporation; or
(x) permit DMC to issue shares of preferred stock other
than to the Corporation or another wholly owned subsidiary of
the Corporation.
(b) Whenever (i) there shall have occurred six consecutive
Quarterly Dividend Payment Dates on which dividends payable on shares
of Series A Preferred Stock pursuant to the terms of Section 2(a)
shall not have been paid, in cash or in additional shares of Series A
Preferred Stock or by increasing the Liquidation Value of the shares
of Series A Preferred Stock pursuant to Section 2(b), at the annual
rate of 14% of Liquidation Value per share (a "Dividend Default"),
(ii) the Corporation shall not have redeemed shares of Series A
Preferred Stock within ten days of the date (a "Redemption Date") of
any redemption of which it has given, or is required to give, notice
pursuant to Section 4(c), regardless of whether there shall be funds
legally available to effect such redemption (a "Redemption Default"),
or (iii) the Corporation shall not have repurchased shares of Series
A Preferred Stock required to be repurchased pursuant to Section 4(e)
within ten days of the Change of Control Payment Date, regardless of
whether there shall be funds legally available to effect such
repurchase (a "Repurchase Default"), thereafter and until such time
as all dividends on Series A Preferred Stock shall have been paid, in
cash or in additional shares of Series A Preferred Stock or by
increasing the Liquidation Value of the shares of Series A Preferred
Stock pursuant to Section 2(b), in full (and no dividend arrearages
shall exist on the Series A Preferred Stock) (hereafter a cure of
such Dividend Default), or such repurchase shall have been effected
by the Corporation (hereafter a cure of such Repurchase default), as
the case may be, the holders of shares of Series A Preferred Stock
shall have the right, notwithstanding anything to the contrary
contained in the Certificate of Incorporation or Bylaws of the
Corporation, voting together as a single class, to elect two
directors. This right to elect two directors may be exercised at any
annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournments thereof, or by the
unanimous written consent delivered to the Secretary of the
Corporation of the holders of all of the outstanding shares of Series
A Preferred Stock as of the record date of such written consent,
until any Dividend Default, Redemption Default or Repurchase
Default shall have been cured, at which time the term of office of
the directors so elected shall terminate automatically. So long as
such right to vote continues (and unless such right has been
exercised by the unanimous written consent of the holders of all of
the outstanding shares of Series A Preferred Stock as hereinbefore
authorized), the Secretary of the Corporation may call, and upon the
written request of the holders of record of a majority of the
outstanding shares of Series A Preferred Stock addressed to him or
her at the principal office of the Corporation shall call, a special
meeting of the holders of Series A Preferred Stock for the election
of two directors as provided herein. Such meeting shall be held
within 10 days after delivery of such notice to the Secretary, at the
place and upon the notice
6
<PAGE> 7
provided by law and in the Bylaws or in the notice of meeting. No
such special meeting or adjournment thereof shall be held on a date
less than 10 days before any annual meeting of stockholders or any
special meeting in lieu thereof. If at any such annual or special
meeting or any adjournment thereof the holders of a majority of the
then outstanding shares of Series A Preferred Stock entitled to vote
in such election shall be present or represented by proxy, or if the
holders of all of the outstanding shares of Series A Preferred Stock
shall have acted by unanimous written consent in lieu of a meeting
with respect thereto, then the authorized number of directors shall
be increased by two and the holders of Series A Preferred Stock,
voting as a class, shall be entitled to elect the additional two
directors. The absence of a quorum of the holders of any class or
series of capital stock of the Corporation at any such annual or
special meeting shall not affect the exercise by the holders of
Series A Preferred Stock of its voting rights. Any director so
elected shall serve until the next annual meeting or until his or her
successor shall be elected and shall qualify, unless the director's
term of office shall have terminated under the circumstances set
forth in the second sentence of this Section 3(b). If any director
elected by the holders of Series A Preferred Stock as a class dies or
becomes incapacitated, the holders of Series A Preferred Stock then
outstanding are entitled to vote for such director by written consent
as hereinabove provided, or at a special meeting of such holders
called as provided above, may elect his or her successor to hold
office for the unexpired term. Holders of Series A Preferred Stock
shall have the right to remove, with or without cause, any director
originally elected by such holders, upon the affirmative vote of a
majority of such holders at a special meeting of such holders called
as provided above or by unanimous written consent as hereinabove
provided. The rights of the holders of Series A Preferred Stock to
elect two directors pursuant to the terms of this Section 3(b) shall
not be affected adversely by the voting or other rights applicable to
any other security of the Corporation.
(c) Except as otherwise provided in this Certificate of
Designations or in the Certificate of Incorporation, or as required
by law, the holders of shares of Series A Preferred Stock shall have
no voting rights and their consent shall not be required for the
taking of any corporate action.
Section 4. Redemption and Repurchase.
(a) The Corporation may redeem, in whole or in part, any
outstanding shares of Series A Preferred Stock at any time, but only
out of funds legally available therefor, by paying for each share of
Series A Preferred Stock an amount in cash equal to the sum of (i)
the applicable percentage of the Liquidation Value (as of the
redemption date) as set forth in the table below and (ii) the amount,
if any, of Accrued Dividends, as defined in Section 7, thereon to the
date of redemption (the "Redemption Price"). If less than all
outstanding shares of Series A Preferred Stock are to be redeemed,
the Corporation shall redeem shares pro rata among the holders
thereof in accordance with the respective numbers of shares of Series
A Preferred Stock held by each of them.
7
<PAGE> 8
<TABLE>
<CAPTION>
Applicable
Redemption Date Percentage
--------------- ----------
<S> <C>
April 24, 1998 through and including October 14, 1998 103.0%
October 15, 1998 through and including October 14, 1999 101.5%
October 15, 1999 through and including October 14, 2000 100.5%
October 15, 2000 and thereafter 100.0%
</TABLE>
(b) On or before April 17, 2008, the Corporation shall redeem
all outstanding shares of Series A Preferred Stock, if any, but only
out of funds legally available therefor, by paying the Redemption
Price therefor.
(c) Notice of any redemption of shares of Series A Preferred
Stock pursuant to Section 4(a) or 4(b) shall specify a date for such
redemption and shall be mailed not less than 10, but not more than
60, days prior to such date fixed for redemption to each holder of
shares of Series A Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series A Preferred
Stock, the Board of Directors may fix a record date for the
determination of the holders of shares of Series A Preferred Stock to
be redeemed, not more than 60 days or less than 10 days prior to the
date fixed for such redemption.
(d) Notice having been given pursuant to Section 4(c), from and
after the date specified therein as the date of redemption, unless
default shall be made by the Corporation in providing for the payment
of the applicable Redemption Price, all dividends on shares of Series
A Preferred Stock thereby called for redemption shall cease to
accrue, and from and after the earlier of (x) the date of redemption
so specified, unless default shall be made by the Corporation as
aforesaid, and (y) the date (prior to the date of redemption so
specified) on which funds of the Corporation sufficient for the
payment of the Redemption Price shall have been Set Apart for Payment
thereof if the notice of redemption shall state the intention of the
Corporation so to deposit such funds on a date specified in such
notice, all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the applicable Redemption
Price (but without interest), shall cease and terminate. Any
interest allowed on moneys so deposited shall be paid to the
Corporation. Any moneys so deposited which shall remain unclaimed by
the holders of such Series A Preferred Stock at the end of six years
after the redemption date shall to the fullest extent permitted by law
become the property of, and be paid by such bank or trust company to, the
Corporation. If the Corporation shall default in providing for the
payment of the Redemption Price as required pursuant to this Section
4, dividends on such Series A Preferred Stock shall accrue at the
rate of 16% per annum and be added to the required redemption
payments as provided in Section 2(a).
(e) Upon the occurrence of (i) a Change of Control, as defined
in Section 7, or (ii) a merger or consolidation of the Corporation
with another entity in
8
<PAGE> 9
which holders of the common equity of the Corporation immediately
prior to the consummation of the transaction hold, directly or
indirectly, immediately following the consummation of the
transaction, 50% or less of the common equity interest in the
surviving corporation in such transaction (a "Merger Transaction"),
if the Corporation does not redeem the outstanding shares of Series A
Preferred Stock pursuant to Section 4(a) or 4(b), each holder of
Series A Preferred Stock shall have the right to require the
Corporation to repurchase each outstanding share of its Series A
Preferred Stock, if any, but only out of funds legally available
therefor, by paying in cash, in respect of each share of Series A
Preferred Stock, an amount equal to the sum of (A) the product of
101% and the Liquidation Value of such share as of the repurchase
date plus (B) Accrued Dividends to the repurchase date. Within 30
days following any Change of Control or Merger Transaction, unless
the Corporation shall have mailed the notice with respect to a
redemption pursuant to Section 4(a) or 4(b), the Corporation shall
mail a notice (a "Change of Control Notice") to each holder of Series
A Preferred Stock describing the transaction or transactions that
constitute the Change of Control or Merger Transaction and offering
to repurchase each share of Series A Preferred Stock on the date
specified in such notice, which date shall be no earlier than 30 days
(or such shorter time period as may be permitted under applicable
law, rules and regulations) and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"). The
Corporation shall comply with the requirements of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with
the repurchase of the shares of Series A Preferred Stock as a result
of a Change of Control or Merger Transaction.
Section 5. Reacquired Shares.
Any shares of Series A Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or any Subsidiary of the
Corporation in any manner whatsoever shall become authorized but
unissued shares of Preferred Stock, $.01 par value per share, of the
Corporation and may be reissued as part of another series of
Preferred Stock, $.01 par value per share, of the Corporation,
subject to the conditions or restrictions on authorizing or creating
any class or series, or any shares of any class or series, set forth
in Section 3(a).
9
<PAGE> 10
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall liquidate, dissolve or wind up,
whether pursuant to federal bankruptcy laws, state laws or otherwise,
no distribution shall be made (i) to the holders of shares of Junior
Stock, unless prior thereto the holders of shares of Series A
Preferred Stock shall have received the Liquidation Value for each
share plus an amount equal to all Accrued Dividends thereon to the
date of such payment or (ii) to the holders of shares of Parity
Stock, except distributions made ratably on Series A Preferred Stock
and all such Parity Stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation,
dissolution or winding up of the Corporation.
(b) Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or
Persons, nor the sale, lease, exchange or conveyance of all or any
part of the property, assets or business of the Corporation to a
Person or Persons other than the holders of Junior Stock shall be
deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 6.
Section 7. Definitions.
As used herein, the following terms shall have the meanings
indicated.
"Accrued Dividends" to a particular date (the "Applicable Date")
means all unpaid dividends payable pursuant to Section 2(a), whether
or not declared, accumulated to the Applicable Date.
"Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with, the Person specified.
"Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Change in Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation or DMC to any
Person or group of related persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this
Series A Preferred Stock) other than to TPG or any of its Affiliates;
(ii) the approval by the holders of capital stock of the Corporation
or DMC of any plan or proposal for the liquidation or dissolution of
the Corporation or DMC, as the case may be (whether or not otherwise
in compliance with the provisions of this Series A Preferred Stock);
(iii) (A) any Person or Group (other than TPG or any of its
Affiliates) shall become the owner,
10
<PAGE> 11
directly or indirectly, beneficially or of record, of shares
representing more than 40% of the aggregate voting power of the
issued and outstanding stock entitled to vote in the election of
directors, managers or trustees (the "Voting Stock") of the
Corporation or DMC and (B) TPG and any of its Affiliates beneficially
own, directly or indirectly, in the aggregate a lesser percentage of
the Voting Stock of the Corporation than such other Person or Group;
or (iv) the replacement of a majority of the Board of Directors of
the Corporation or DMC over a two-year period from the directors who
constituted the Board of Directors of the Corporation or DMC, as the
case may be, at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the
Board of Directors of the Corporation or DMC, as the case may be,
then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a
member of such Board of Directors was previously so approved or who
were nominated by, or designees of, either of TPG or any of its
Affiliates.
"Liquidation Value" with respect to any share of Series A
Preferred Stock as of any particular date means an amount equal to
the sum of $1,000 plus (A) an amount equal to any accumulated and
unpaid dividends on such share of Series A Preferred Stock added to
the Liquidation Value of such share pursuant to Section 2, as such
amount may be reduced in accordance with the provisions of Section 2,
and (B) in any liquidation, dissolution or winding up of the
Corporation or any redemption, as the case may be, an amount equal to
dividends accumulating from and including the next preceding
Quarterly Dividend Payment Date to but excluding the Quarterly
Dividend Payment Date.
"Person" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a
corporation, a partnership, a trust or other entity.
"Set Apart for Payment" means, when used with respect to funds of the
Corporation to be used to pay dividends or effect redemptions of shares of
Series A Preferred Stock, that the funds of the Corporation to be used to
pay dividends on or effect redemptions of any shares of Series A Preferred
Stock to the Corporation shall have irrevocably deposited with a bank or
trust company doing business in the Borough of Manhattan in the City of
New York, and having a capital and surplus of at least $50 million, in
trust for the exclusive benefit of the holders of shares of Series A
Preferred Stock, funds sufficient to satisfy such payment of redemption
obligation.
"Subsidiary" of any Person means any corporation or other entity
of which all the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
11
<PAGE> 12
Section 8. Rank.
Series A Preferred Stock will rank, with respect to dividends
and upon distribution of assets in liquidation, dissolution or
winding up, prior to the Common Stock.
[SIGNATURE ON NEXT PAGE]
12
<PAGE> 13
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed in its name and on its behalf and affirmed, under penalties of perjury,
on the date first written above by a duly authorized officer of the
Corporation.
DEL MONTE FOODS COMPANY
By: /s/ William R. Sawyers
______________________________
Name: William R. Sawyers
Title: Vice President, General
Counsel and Secretary
S-1
<PAGE> 1
EXHIBIT 3.4
CONFORMED COPY
CERTIFICATE OF MERGER
of
DEL MONTE FOODS COMPANY,
a Maryland corporation
into
DEL MONTE FOODS COMPANY,
a Delaware corporation
Pursuant to Section 252 of the General
Corporation Law of the State of Delaware
Del Monte Foods Company (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
----------------------- ----------------------
<S> <C>
DEL MONTE FOODS COMPANY Delaware
DEL MONTE FOODS COMPANY Maryland
</TABLE>
SECOND: An Agreement of Merger and Plan of Reorganization, dated as of
April 24, 1998, by and between Del Monte Foods Company, a Maryland corporation
("DMFC"), and the Company (the "Merger Agreement"), was approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the requirements of Section 252(c) of the DGCL.
THIRD: The Company shall be the surviving corporation of the merger and
shall at the effective time of the merger be named Del Monte Foods Company
(sometimes hereinafter referred to as the "Surviving Corporation").
1
<PAGE> 2
FOURTH: The certificate of incorporation of the Company (the
"Certificate") shall be the certificate of incorporation of the Surviving
Corporation.
FIFTH: The executed Merger Agreement is on file at the offices of the
Surviving Corporation at One Market, San Francisco, California 94105.
SIXTH: A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of DMFC or the
Company.
SEVENTH: The authorized capital stock of DMFC, a Maryland corporation, is
2,000,000 shares, consisting of 1,000,000 shares of Common Stock, par value
$0.01 per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per
share, of which 150,000 shares have been designated and classified as Series C
Redeemable Preferred Stock
* * *
2
<PAGE> 3
IN WITNESS WHEREOF, Del Monte Foods Company, as the Surviving Corporation,
has caused this Certificate of Merger to be signed under penalties of perjury
by William R. Sawyers, its Vice President and Secretary, on the 24th day of
April, 1998.
DEL MONTE FOODS COMPANY,
a Delaware corporation
By: /s/ William R. Sawyers
Name: William R. Sawyers
Title: Vice President and Secretary
S-1
<PAGE> 1
EXHIBIT 3.5
CONFORMED COPY
ARTICLES OF MERGER
between
DEL MONTE FOODS COMPANY,
a Maryland corporation
and
DEL MONTE FOODS COMPANY,
a Delaware corporation
THIS IS TO CERTIFY THAT:
FIRST: Del Monte Foods Company is a Maryland corporation (the "Company").
SECOND: Del Monte Foods Company is a Delaware corporation ("Del Monte").
THIRD: The Company and Del Monte agree to merge (the "Merger") in the
manner hereinafter set forth.
FOURTH: Del Monte is the corporation to survive the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"). The Surviving
Corporation is a Delaware corporation.
FIFTH: Del Monte was incorporated under the General Corporation Law of
the State of Delaware on April 20, 1998.
SIXTH: Del Monte is not registered or qualified to do business in the
State of Maryland.
SEVENTH: The principal office of the Company in the State of Maryland is
located in the County of Baltimore. Del Monte does not have a principal office
located in the State of Maryland.
EIGHTH: The Company owns no interest in land in the State of Maryland.
NINTH: The principal office of the Surviving Corporation is located at
1209 Orange Street, in the City of Wilmington, in the County of New Castle, in
the State of Delaware. The registered agent of the Surviving Corporation in the
State of Maryland is James J. Hanks, Jr., c/o Ballard, Spahr, Andrews &
Ingersoll, LLP, 300 East Hombard Street, Baltimore, Maryland 21202.
1
<PAGE> 2
TENTH: The terms and conditions of the Merger were duly advised,
authorized and approved by the Company in the manner and by the vote required
by the laws of the State of Maryland and the charter of the Company, as
follows:
(a) the Board of Directors of the Company, at a special meeting duly
called and held, adopted resolutions filed with the minutes of the proceedings
of the Board declaring that the terms and conditions of the Merger were
advisable and directing that the proposed transaction be submitted for
consideration by the stockholders of the Company; and
(b) the stockholders of the Company, at a special meeting of stockholders
duly called and held, approved the terms and conditions of the Merger as so
proposed by the requisite vote of the stockholders of the Company entitled to
vote thereon.
ELEVENTH: The terms and conditions of the Merger were duly advised,
authorized and approved by Del Monte in the manner and by the vote required by
the laws of the State of Delaware and the charter of Del Monte, as follows:
(a) the Board of Directors of Del Monte, at a special meeting duly called
and held, adopted resolutions filed with the minutes of the proceedings of the
Board declaring that the terms and conditions of the Merger were advisable and
directing that the proposed transaction be submitted for consideration by the
stockholders of Del Monte; and
(b) the sole stockholder of Del Monte, at its first annual meeting of
stockholders, adopted resolutions approving the terms and conditions of the
Merger as so proposed, by the requisite vote of the stockholders of Del Monte
entitled to vote thereon, and such resolutions are filed with the records of
stockholder meetings of Del Monte.
TWELFTH: The certificate of incorporation of Del Monte, as set forth in
Exhibit A attached hereto (the "Surviving Charter"), will be the certificate of
incorporation of the Surviving Corporation.
THIRTEENTH: The total number of shares of all classes of stock which each
corporation party to these Articles has the authority to issue and the number
of shares of each class are as follows:
(a) The total number of shares of all classes of stock which the Company
has authority to issue is 2,000,000 shares, consisting of 1,000,000 shares of
Common Stock, par value $0.01 per share ("Company Common Stock"), and 1,000,000
shares of Preferred Stock, par value $0.01 per share ("Company Preferred
Stock"), of which 150,000 shares have been designated and classified as Series
C Redeemable Preferred Stock ("Series C Preferred Stock"). The aggregate par
value of all the shares of stock of all classes having a par value is $20,000.
(b) The total number of shares of stock which Del Monte has authority to
issue is 502,000,000 shares, consisting of 500,000,000 shares of Common Stock,
par value $0.01 per share ("Surviving Corporation Common Stock"), and 2,000,000
shares of Preferred Stock, par value $0.01 per share ("Surviving Corporation
Preferred Stock"). The aggregate par value of all the shares of stock of all
classes having a par value is $5,020,000.
<PAGE> 3
FOURTEENTH: Upon the effective time of the Merger (the "Effective Time"),
the Company shall be merged into Del Monte and Del Monte shall be the Surviving
Corporation; and, thereupon, the Surviving Corporation shall possess any and
all purposes and powers of the Company; and all the property, rights,
privileges, immunities, powers and purposes of whatever nature and description
of the Company shall be transferred to, vested in, and devolved upon the
Surviving Corporation, without further act or deed, subject to all of the debts
and obligations of the Company.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof:
(a) each share of Company Common Stock (other than Dissenting Shares (as
defined below)) outstanding immediately prior to the Effective Time shall be
converted into one share of Surviving Corporation Common Stock;
(b) each share of Series C Preferred Stock (other than Dissenting Shares)
outstanding immediately prior to the Effective Time shall be converted into one
share of a newly created series of Surviving Corporation Preferred Stock having
terms which are substantially the same as the terms of the Series C Preferred
Stock;
(c) each share of Surviving Corporation Common Stock outstanding
immediately prior to the Effective Time shall be canceled without any
consideration being payable therefor and shall resume the status of authorized
but unissued share of Surviving Corporation Common Stock;
(d) the holders of shares of Company Common Stock and Company Preferred
Stock shall cease to have any rights as stockholders of the Company, including
any right to receive dividends, whether or not previously declared and unpaid
(except such rights, if any, as they may have pursuant to Section 3-202 et seq.
of the Maryland General Corporation Law (the "MGCL")) and their sole right
shall be the right to receive Surviving Corporation Common Stock and Surviving
Corporation Preferred Stock into which such shares of Company Common Stock and
Series C Preferred Stock, respectively, shall been converted in the Merger
pursuant to paragraphs (a) and (b), respectively, of this Article Fourteenth.
(e) The term "Dissenting Shares" with respect to a class or series of
stock shall mean all shares of such stock issued and outstanding immediately
prior to the Effective Time and held by persons who have taken all necessary
steps to perfect their rights to an appraisal of the fair value of such shares
under the MGCL. Notwithstanding the foregoing, if any holder of shares of
stock who demands appraisal of such shares under the appropriate appraisal
statute shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to such appraisal, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, such holder's shares of stock
shall automatically be converted into and represent only the shares specified
in paragraph (a) or (b) of this Article Fourteenth.
FIFTEENTH: Each of the undersigned acknowledges these Articles of Merger
to be the corporate act of the respective corporate party on whose behalf he
has signed, and further,
<PAGE> 4
as to all matters or facts required to be verified under oath, each of the
undersigned acknowledges that to the best of his knowledge, information and
belief, these matters and facts relating to the corporation on whose behalf he
has signed are true in all material respects and that this statement is made
under the penalties for perjury.
<PAGE> 5
IN WITNESS WHEREOF, these Articles of Merger have been duly executed by
the parties hereto this 24th day of April, 1998.
<TABLE>
<S> <C>
DEL MONTE FOODS COMPANY
ATTEST: a Maryland corporation
/s/ William R. Sawyers By /s/ Thomas E. Gibbons (SEAL)
- ---------------------- ---------------------------------
William R. Sawyers Thomas E. Gibbons
Secretary Senior Vice President
ATTEST: DEL MONTE FOODS COMPANY,
a Delaware corporation
/s/ William R. Sawyers By /s/ Thomas E. Gibbons (SEAL)
- ---------------------- ---------------------------------
William R. Sawyers Thomas E. Gibbons
Secretary Vice President
</TABLE>
<PAGE> 6
EXHIBIT A
CONFORMED COPY
CERTIFICATE OF INCORPORATION OF
DEL MONTE FOODS COMPANY
ARTICLE I -NAME
The name of the company is Del Monte Foods Company (the "Corporation").
ARTICLE II - AGENT
The registered office of the Corporation is located at 1209 Orange Street,
in the City of Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is The Corporation
Trust Company.
ARTICLE III - PURPOSE
The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
ARTICLE IV - STOCK
Section 1. Authorized Stock. The aggregate number of shares which the
Corporation shall have authority to issue is 502,000,000 of which 2,000,000 of
said shares shall be par value $0.01, and shall be designated Preferred Stock,
and 500,000,000 of said shares shall be par value $0.01 per share, and shall be
designated Common Stock.
Section 2. Preferred Stock. Subject to the limitations and in the manner
provided by law, shares of the Preferred Stock may be issued from time to time
in series and the Board of Directors of the Corporation is hereby authorized to
establish and designate series of the Stock, to fix the number of shares
constituting each series, and to fix the designations and the relative rights,
preferences and limitations of the shares of each series and the variations in
the relative rights, preferences and limitations as between series, and to
increase and to decrease the number of shares constituting each series.
Subject to the limitations and in the manner provided by law, the authority of
the Board of Directors of the Corporation with respect to each series shall
include but shall not be limited to the authority to determine the following:
(a) The designation of such series.
(b) The number of shares initially constituting such series.
(c) The increase, and the decrease to a number not less than the
number of the outstanding shares of such series, of the number of shares
constituting such series theretofore fixed.
<PAGE> 7
(d) The rate or rates and the times at which dividends on the shares
of such series shall be paid, the form in which such dividends shall be
paid or payable (which may include additional shares of capital stock of
the Company) and whether or not such dividends shall be cumulative and,
if such dividends shall be cumulative, the date or dates from and after
which they shall accumulate; provided, however, that, if the stated
dividends are not paid in full, the shares of all series of the Preferred
Stock ranking pari passu shall share ratably in the payment of dividends,
including accumulations, if any, in accordance with the sums which would
be payable on such shares if all dividends were declared and paid in
full.
(e) Whether or not the shares of such series shall be redeemable
and, if such shares shall be redeemable, the terms and conditions of such
redemption, including but not limited to the date or dates upon or after
which such shares shall be redeemable and the amount per share which
shall be payable upon such redemption, which amount may vary under
different conditions and at different redemption dates.
(f) The amount payable on the shares of such series in the event of
the voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; provided, however, that the holders of such shares shall
be entitled to be paid, or to have set apart for payment, not less than
$.01 per share before the holders of shares of the Common Stock or the
holders of any other class or series of stock ranking junior to the
Preferred Stock as to rights on liquidation shall be entitled to be paid
any amount or to have any amount set apart for payment; and provided
further, that, if the amounts payable on liquidation are not paid in
full, the shares of all series of the Preferred Stock ranking pari passu
shall share ratably in any distribution of assets other than by way of
dividends in accordance with the sums which would be payable in such
distribution if all sums payable were discharged in full. A liquidation,
dissolution or winding up of the Corporation, as such terms are used in
this paragraph (f), shall not be deemed to be occasioned by or to include
any consolidation or merger of the Corporation with or into any other
corporation or other entity or corporations or other entities or a sale,
lease or conveyance of all or a part of its assets.
(g) Whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law and, if such
shares shall have such voting rights, the terms and conditions thereof,
including but not limited to the right of the holders of such shares to
vote as a separate class either alone or with the holders of shares of
one or more other series of Preferred Stock and the right to have more
than one vote per share.
(h) Whether or not a sinking fund shall be provided for the
redemption of the shares of such series and, if such a sinking fund shall
be provided, the terms and conditions thereof.
(i) Whether or not a purchase fund shall be provided for the shares
of such series, and, if such a purchase fund shall be provided, the terms
and conditions thereof.
2
<PAGE> 8
(j) Whether or not the shares of such series shall have conversion
or exchange privileges, and, if such shares shall have conversion or
exchange privileges, the terms and conditions of conversion or exchange,
including but not limited to any provision for the adjustment of the
conversion rate or the conversion price and whether conversion or
exchange can be effected solely by the Company or the holder.
(k) Any other relative rights, preferences and limitations.
Section 3. Voting Rights. Except as otherwise provided by law or by the
resolution or resolutions providing for the issue of any series of Preferred
Stock, the holders of outstanding shares of Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, each holder of record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in such holder's name on the books
of the Corporation.
ARTICLE V - SOLE INCORPORATOR
The name and address of the sole incorporator of the Corporation is David
J. Wermuth, and his address is c/o Cleary, Gottlieb, Steen & Hamilton, One
Liberty Plaza, New York, New York 10006.
ARTICLE VI - AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors of the Corporation (the "Board") is expressly authorized and
empowered to adopt, amend and repeal the Bylaws of the Corporation by a
majority vote at any regular or special meeting of the Board or by written
consent. The stockholders of the Corporation may not adopt, amend or repeal
any By-law unless such action is approved by the affirmative vote of the
holders of not less than eighty percent (80%) of the voting power of all of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for purposes of this Article
SIXTH as a single class.
ARTICLE VII - AMENDMENT OF CHARTER
The Corporation reserves the right at any time from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE VIII - BOARD OF DIRECTORS
Section 1. Number. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors consisting of not
fewer than seven nor more than fourteen directors (exclusive of directors
referred to in the following paragraph), the exact
3
<PAGE> 9
number to be determined from time to time by resolution adopted by affirmative
vote of a majority of such directors then in office. From and after the date
of the first annual meeting of the stockholders of the Corporation, the
directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors determined by the Board pursuant to
this Section 1. Class I directors shall serve for an initial term ending at
the annual meeting of stockholders held in 1999, Class II directors for an
initial term ending at the annual meeting of stockholders held in 2000 and
Class III directors for an initial term ending at the annual meeting of
stockholders held in 2001. At each annual meeting of stockholders beginning in
1999, successors to the directors in the class whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for the remaining
term of that class, but in no case will a decrease in the number of directors
shorten the term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his or her term expires and until his
or her successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the number of such directors and the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the provisions of Article IV of this Certificate of
Incorporation and any resolution or resolutions adopted by the Board pursuant
thereto, and such directors shall not be divided into classes unless expressly
so provided therein.
Unless and except to the extent that the Bylaws of the Corporation shall
so require, the election of directors of the Corporation need not be by written
ballot.
Section 2. Removal. Subject to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the Corporation, any
director, or the entire Board, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of not less than
eighty percent (80%) of the voting power of all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes of this sentence as a single class. Any
vacancy in the Board that results from an increase in the number of directors
may be filled by a majority of the directors then in office, provided that a
quorum is present, and any other vacancy may be filled only by a majority of
the directors then in office, even if less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy not resulting from
an increase in the number of directors shall hold office for the remaining term
of his or her predecessor.
ARTICLE IX - STOCKHOLDER ACTION
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting.
4
<PAGE> 10
ARTICLE X - LIABILITY OF DIRECTORS & OFFICERS, ETC.
Section 1. Elimination of Certain Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 2. Indemnification and Insurance.
(a) Right to indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, to the fullest extent permitted by law, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, amounts paid or to be paid in
settlement, and excise taxes or penalties arising under the Employee Retirement
Income Security Act of 1974) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Section shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
General Corporation Law of the State of Delaware requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of the Board, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
5
<PAGE> 11
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the Corporation (including its Board, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability
or loss under the General Corporation Law of the State of Delaware.
ARTICLE XI - ISSUANCE OF STOCK AND RIGHTS
The Board shall have authority to authorize the issuance, from time to
time without any vote or other action by the stockholders, of any or all shares
of stock of the Corporation of any class at any time authorized, any securities
convertible into or exchangeable for any such shares so authorized, and any
warrant, option or right to purchase, subscribe for or otherwise acquire,
shares of stock of the Corporation for any such consideration and on such terms
as the Board from time to time in its discretion lawfully may determine, which
terms and conditions may include, without limitation, restrictions or
conditions that preclude or limit the exercise, transfer or receipt thereof or
that invalidate or void any such securities, warrants, options or rights;
provided, however, that the consideration for the issuance of shares of stock
of the Corporation having par value shall not be less than such par value.
Stock so issued, for which the consideration has been paid to the Corporation,
shall be fully paid stock, and the holders of such stock shall not be liable to
any further call or assessments thereon.
6
<PAGE> 12
ARTICLE XII - CONSIDERATION OF OTHER CONSTITUENCIES
In addition to any other considerations which the Board may lawfully take
into account in determining whether to take or to refrain from taking corporate
action on any matter, including proposing any matter to the stockholders of the
Corporation, the Board may, but shall not be obligated to, take into account
the interests of clients or other customers, creditors, current and retired
employees and other constituencies of the Corporation and its subsidiaries and
the effect upon communities in which the Corporation and its subsidiaries do
business.
ARTICLE XIII - SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES
The Bylaws of the Corporation may establish procedures regulating the
submission by stockholders of nominations and proposals for consideration at
meetings of stockholders of the Corporation.
ARTICLE XIV - BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
The provisions of Section 203 of the Delaware General Corporation Law
shall not apply to the Company.
7
<PAGE> 13
IN WITNESS WHEREOF, the undersigned hereby signs this Certificate of
Incorporation on this 20th day of April, 1998.
By /s/ David J. Wermuth
David J. Wermuth
Sole Incorporator
S-1
<PAGE> 1
EXHIBIT 4.1
This Certifies that is the owner of
COMMON COMMON
PAR VALUE
$0.01
PER SHARE PAR VALUE
$0.01
PER SHARE
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE
IN THE CITY OF NEW YORK
CUSIP 24522P 10 3
SEE REVERSE FOR
CERTAIN DEFINITIONS
REGISTERED:
THE BANK OF NEW YORK
REGISTRAR,
BY
AUTHORIZED OFFICER
COUNTERSIGNED:
THE BANK OF NEW YORK
TRANSFER AGENT,
BY
AUTHORIZED OFFICER
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $0.01 EACH OF THE
COMMON STOCK OF
Del Monte Foods Company transferable on the books of the Corporation in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
Witness the seal of the Corporation and the
signatures of its duly authorized officers.
Dated
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE> 2
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights as established, from time to time, by the Certificate
of Incorporation of the Corporation and by any certificate of determination,
the number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
at the principal office of the Corporation.
The following abbreviations, when used in the inscription of the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM N as tenants in common
TEN ENT N as tenants by the entireties
JT TEN N as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT N Custodian
(Minor) (Cust)
under Uniform Gifts to Minors
Act
(State)
UNIF TRF MIN ACT N
Custodian (until age )
(Cust)
under Uniform Transfers
(Minor)
to Minors Act
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
<PAGE> 3
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
The signature to this assignment must correspond with the name as written upon
the face of the certificate in every particular, without alteration or
enlargement or any change whatever.
NOTICE:
Signature Guaranteed:
THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANK, STOCKBROKER, SAVINGS AND LOAN ASSOCIATION, OR CREDIT UNION WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM) PURSUANT TO SEC
RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.4
STOCKHOLDERS' AGREEMENT
(Form for Non-Employee Directors)
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of ________,
199__, between Del Monte Foods Company (the "Company") and
________________________ (the "Stockholder").
WHEREAS, the Stockholder is a member of the Board of Directors of
the Company (the "Board of Directors") and in such capacity was granted an
option (the "Option") to purchase shares of common stock of the Company, par
value $.01 per share ("Common Stock"), pursuant to the Company's Non-Employee
Director and Independent Contractor 1997 Stock Incentive Plan (the "Option
Plan");
WHEREAS, as a condition to the issuance of shares of Common Stock
pursuant to the exercise of an Option, the Stockholder is required under the
Option Plan to execute this Agreement;
WHEREAS, the Stockholder desires to exercise the Option to purchase
__________ shares of Common Stock; and
WHEREAS, the Stockholder and the Company desire to enter this
Agreement and to have this Agreement apply to the shares to be purchased
pursuant to the Option Plan and to any shares of Common Stock acquired after the
date hereof by the Stockholder from whatever source, subject to any future
agreement between the Company and the Stockholder to the contrary (in the
aggregate, the "Shares").
NOW THEREFORE, in consideration of the premises hereinafter set
forth, and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows.
1. Investment. The Stockholder represents that the Shares are
being acquired for investment and not with a view toward the distribution
thereof.
2. Issuance of Shares. The Stockholder acknowledges and agrees
that the certificate for the Shares shall bear the following legends (except
that the second paragraph of this legend shall not be required after the Shares
have been registered and except that the first paragraph of this legend shall
not be required after the termination of this Agreement):
The shares represented by this certificate are subject to the terms and
conditions of a Stockholders' Agreement dated as of ______________, 19__
and may not be sold, transferred, hypothecated, assigned or encumbered,
except as may be
<PAGE> 2
permitted by the aforesaid Agreement. A copy of the Stockholders'
Agreement may be obtained from the Secretary of the Company.
The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired for investment
and may not be sold, transferred, pledged or hypothecated in the absence
of an effective registration statement for the shares under the Securities
Act of 1933 or an opinion of counsel for the Company that registration is
not required under said Act.
Upon the termination of this Agreement, or upon registration of the
Shares under the Securities Act of 1933 (the "Securities Act"), the Stockholder
shall have the right to exchange any Shares containing the above legend (i) in
the case of the registration of the Shares, for Shares legended only with the
first paragraph described above and (ii) in the case of the termination of this
Agreement, for Shares legended only with the second paragraph described above.
3. Transfer of Shares; Put and Call Options.
(a) The Stockholder agrees that he will not cause or permit the
Shares or his interest in the Shares to be sold, transferred, hypothecated,
assigned or encumbered except as expressly permitted by this Section 3;
provided, however, that the Shares or any such interest may be transferred (i)
on the Stockholder's death by bequest or inheritance to the Stockholder's
executors, administrators, testamentary trustees, legatees or beneficiaries,
(ii) to a trust or custodianship the beneficiaries of which may include only the
Stockholder, the Stockholder's spouse, or the Stockholder's lineal descendants
(by blood or adoption), (iii) in accordance with Section 4 of this Agreement and
(iv) to the Company pursuant to Section 6(e)(2) of the Option Plan, subject in
any such case to the transferee's agreement in writing to be bound by the terms
of this Agreement and provided in any such case that no such transfer that would
cause the Company to be required to register the Common Stock under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
shall be permitted.
(b) The Company (or its designated assignee) shall have the right,
during the ninety-day period beginning 275 days after the termination of the
Stockholder's membership on the Board of Directors for any reason at any time,
to purchase from the Stockholder, and upon the exercise of such right the
Stockholder shall sell to the Company (or its designated assignee), all or any
portion of the Shares held by the Stockholder as of the date as of which such
right is exercised at a per Share price equal to the value of a share of Common
Stock as determined by the Board of Directors as of the date as of which such
right is exercised. The Company (or its designated assignee) shall exercise such
right by delivering to the Stockholder a written notice specifying its intent to
purchase Shares held by the Stockholder, the date as of which such right is to
be exercised and the number of Shares to be purchased. Such purchase and sale
shall occur on such date as the Company (or its designated assignee) and the
Stockholder shall agree, which date shall not be later than the earlier of (i)
ninety (90) days after the fiscal quarter-end
<PAGE> 3
immediately following the date as of which the Company's right is exercised and
(ii) thirty (30) days after the date on which such value is determined by the
Board of Directors.
(c) The Stockholder shall have the right, during the (x) one-year
period following the termination of the Stockholder's membership on the Board of
Directors as a result of death or permanent disability or (y) ninety-day period
immediately following the termination of the Stockholder's membership on the
Board of Directors for any other reason at any time, to sell to the Company (or
its designated assignee), and upon the exercise of such right the Company (or
its designated assignee) shall purchase from the Stockholder, all or any portion
of the Shares held by the Stockholder as of the date as of which such right is
exercised at a per Share price equal to the value of a share of Common Stock as
determined by the Board of Directors as of the date as of which such right is
exercised. The Stockholder shall exercise such right by delivering to the
Company a written notice specifying its intent to sell Shares held by the
Stockholder, the date as of which such right is to be exercised and the number
of Shares to be sold. Such purchase and sale shall occur on such date as the
Company (or its designated assignee) and the Stockholder shall agree, which date
shall not be later than the earlier of (i) ninety (90) days after the fiscal
quarter-end immediately following the date as of which the Stockholder's right
is exercised and (ii) thirty (30) days after the date on which such value is
determined by the Board of Directors.
4. Certain Rights.
(a) Drag Along Rights. If TPG Partners, L.P. ("TPG") desires to
sell its shares of Common Stock to a good faith independent purchaser (a
"Purchaser") (other than any other investment partnership, limited liability
company or other entity established for investment purposes and controlled by
the principals of TPG) and said Purchaser desires to acquire all of the issued
and outstanding shares of Common Stock upon such terms and conditions as agreed
to with TPG, the Stockholder agrees to sell all of his Shares to said Purchaser
(or to vote in favor of any merger or other transaction which would effect such
a sale) at the same price per share of Common Stock and pursuant to the same
terms and conditions with respect to payment for the shares of Common Stock as
agreed to by TPG. In such case, TPG shall give written notice of such sale to
the Stockholder at least 30 days prior to the consummation of such sale, setting
forth (i) the consideration to be received by the holders of shares of Common
Stock, (ii) the identity of the Purchaser, (iii) any other material items and
conditions of the proposed transfer and (iv) the date of the proposed transfer.
(b) Tag Along Rights. If TPG or its affiliates proposes to
transfer any of its shares of Common Stock to a Purchaser other than an
affiliate or employee of TPG or its affiliates, then TPG or such affiliate
(hereinafter referred to as a "Selling Stockholder") shall give written notice
of such proposed transfer to the Stockholder at least 30 days prior to the
consummation of such proposed transfer, setting forth (i) the number of shares
of Common Stock offered, (ii) the consideration to be received by such Selling
Stockholder, (iii) the identity of the Purchaser, (iv) any other material items
and conditions of the proposed transfer and (v) the date of the proposed
transfer.
<PAGE> 4
The Stockholder may elect to sell a Pro Rata Portion (as hereinafter
defined) of his Shares, at the same price per share of Common Stock and pursuant
to the same terms and conditions with respect to payment for the shares of
Common Stock as agreed to by the Selling Stockholder, by sending written notice
to the Selling Stockholder within 15 days of the date of the Selling
Stockholder's notice, indicating a desire to sell such Pro Rata Portion of his
Shares in the same transaction. Following such 15 day period, the Selling
Stockholder shall be permitted to sell to the Purchaser additional Shares
representing Shares not sold by other stockholders of the Company.
For purposes of Sections 4(b) and 4(c) hereof, "Pro Rata Portion"
shall mean a number equal to the product of (x) the total number of Shares owned
by the Stockholder and (y) a fraction, the numerator of which shall be the total
number of shares of Common Stock offered (for sale or registration, as
applicable) by the Selling Stockholder, and the denominator of which shall be
the total number of shares of Common Stock owned by the Selling Stockholder
(including the shares of Common Stock proposed to be sold or registered by the
Selling Stockholder); provided, however, that any fraction of a share resulting
from such calculation shall be disregarded for purposes of determining the Pro
Rata Portion.
(c) Piggyback Registration Rights.
(i) Notice to Stockholder. If the Company determines that it will
file a registration statement under the Securities Act, other than a
registration statement on Form S-4 or Form S-8 or any successor form, for an
offering which includes shares of Common Stock held by TPG or its affiliates
(hereinafter referred to as a "Selling Stockholder"), then the Company shall
give prompt written notice to the Stockholder that such filing is expected to be
made (but in no event less than 30 days nor more than 60 days in advance of
filing such registration statement), the jurisdiction or jurisdictions in which
such offering is expected to be made, and the underwriter or underwriters (if
any) that the Company (or the person requesting such registration) intends to
designate for such offering. If the Company, within 15 days after giving such
notice, receives a written request for registration of any Shares from the
Stockholder, then the Company shall include in the same registration statement
the number of Shares to be sold by the Stockholder as shall have been specified
in his request, except that the Stockholder shall not be permitted to register
more than a Pro Rata Portion of his Shares. The Company shall bear all costs of
preparing and filing the registration statement, and shall indemnify and hold
harmless, to the extent customary and reasonable, pursuant to indemnification
and contribution provisions to be entered into by the Company at the time of
filing of the registration statement, the seller of any shares of Common Stock
covered by such registration statement.
Notwithstanding anything herein to the contrary, the Company, on
prior notice to the participating Stockholder, may abandon its intention to file
a registration statement under this Section 4(c) at any time prior to such
filing.
(ii) Allocation. If the managing underwriter shall inform the
Company in writing that the number of shares of Common Stock requested to be
included in such registration exceeds the number which can be sold in (or during
the time of) such offering within a price
<PAGE> 5
range acceptable to TPG, then the Company shall include in such registration
such number of shares of Common Stock which the Company is so advised can be
sold in (or during the time of) such offering. All holders of shares of Common
Stock proposing to sell shares of Common Stock shall share pro rata in the
number of shares of Common Stock to be excluded from such offering, such sharing
to be based on the respective numbers of shares of Common Stock as to which
registration has been requested by such holders.
(iii) Permitted Transfer. Notwithstanding anything to the contrary
contained herein, sales of Shares pursuant to a registration statement filed by
the Company may be made without compliance with any other provision of this
Agreement.
5. Termination. This Agreement shall terminate immediately
following the commencement of a Public Market for the Common Stock, except that
(i) the requirements contained in Section 2 hereof shall survive the termination
of this Agreement and (ii) the provisions contained in Section 3 hereof shall
continue with respect to each Share during such period of time, if any, as the
Stockholder is precluded from selling such Share pursuant to Rule 144 of the
Securities Act. For this purpose, a "Public Market" for the Common Stock shall
be deemed to exist if the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, or if trading regularly occurs in such Common Stock
in, on or through the facilities of securities exchanges and/or inter-dealer
quotation systems in the United States (within the meaning of Section 902(n) of
the Securities Act) or any designated offshore securities market (within the
meaning of Rule 902(a) of the Securities Act).
6. Distributions With Respect To Shares. As used herein, the term
"Shares" includes securities of any kind whatsoever distributed with respect to
the Common Stock acquired by the Stockholder or any such securities resulting
from a stock split or consolidation involving such Common Stock.
7. Amendment; Assignment. This Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by authorized representatives of the parties
or, in the case of a waiver, by an authorized representative of the party
waiving compliance. No such written instrument shall be effective unless it
expressly recites that it is intended to amend, supersede, cancel, renew or
extend this Agreement or to waive compliance with one or more of the terms
hereof, as the case may be. Except for the Stockholder's right to assign his or
her rights under Section 3(a) or the Company's right to assign its rights under
Section 3(b) or its obligations under Section 3(c), no party to this Agreement
may assign any of its rights or obligations under this Agreement without the
prior written consent of the other parties hereto.
8. Notices. All notices and other communications hereunder shall
be in writing, shall be deemed to have been given if delivered in person or by
certified mail, return receipt requested, and shall be deemed to have been given
when personally delivered or three (3) days after mailing to the following
address:
If to the Stockholder:
<PAGE> 6
If to the Company:
Del Monte Foods Company
One Market
San Francisco, CA 94105
Attention: Board of Directors and Secretary
If to TPG:
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to its principles of conflicts of law.
11. Binding Effect. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the heirs, personal representatives,
successors and permitted assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement, or their respective heirs,
personal representatives, successors or assigns, any legal or equitable rights,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
13. Severability. If any term, provision, covenant or restriction
of this Agreement, is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
14. Miscellaneous. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * * *
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
---------------------------
[Stockholder]
DEL MONTE FOODS COMPANY
-----------------------------
By:
Title:
TPG PARTNERS, L.P.
-----------------------------
By:
Title:
<PAGE> 1
EXHIBIT 4.5
STOCKHOLDERS' AGREEMENT
(Form for Non-Employee Directors -- Directors' Fee Arrangement)
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of _____ __,
199__, between Del Monte Foods Company (the "Company") and _________________
(the "Stockholder").
WHEREAS, the Stockholder is a member of the Board of Directors of
the Company (the "Board of Directors") and in such capacity was granted the
opportunity to receive his directors' fees in shares of common stock of the
Company, par value $.01 per share ("Common Stock");
WHEREAS, as a condition to the issuance of shares of Common Stock,
the Stockholder is required to execute this Agreement;
WHEREAS, the Stockholder and the Company desire to enter this
Agreement and to have this Agreement apply to all shares of Common Stock to be
acquired by the Stockholder in respect of his directors' fees, and to any shares
of Common Stock acquired after the date hereof by the Stockholder from whatever
source, subject to any future agreement between the Company and the Stockholder
to the contrary (in the aggregate, the "Shares").
NOW THEREFORE, in consideration of the premises hereafter set forth,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows.
1. Investment. The Stockholder represents that the Shares are
being acquired for investment and not with a view toward the distribution
thereof.
2. Issuance of Shares, The Stockholder acknowledges and agrees
that the certificate for the Shares shall bear the following legends (except
that the second paragraph of this legend shall not be required after the Shares
have been registered and except that the first paragraph of this legend shall
not be required after the termination of this Agreement):
The shares represented by this certificate are subject to the terms and
conditions of a Stockholders' Agreement dated as of _________ __, 19__ and
may not be sold, transferred, hypothecated, assigned or encumbered, except
as may be permitted by the aforesaid Agreement. A copy of the
Stockholders' Agreement may be obtained from the Secretary of the Company.
The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired for investment
and may not be sold, transferred, pledged or hypothecated in the absence
of an effective
<PAGE> 2
registration statement for the shares under the Securities Act of 1933 or
an opinion of counsel for the Company that registration is not required
under said Act.
Upon the termination of this Agreement, or upon registration of the
Shares under the Securities Act of 1933 (the "Securities Act"), the Stockholder
shall have the right to exchange any Shares containing the above legend (i) in
the case of the registration of the Shares, for Shares legended only with the
first paragraph described above and (ii) in the case of the termination of this
Agreement, for Shares legended only with the second paragraph described above.
3. Transfer of Shares; Put and Call Options.
(a) The Stockholder agrees that he will not cause or permit the
Shares or his interest in the Shares to be sold, transferred, hypothecated,
assigned or encumbered except as expressly permitted by this Section 3;
provided, however, that the Shares or any such interest may be transferred (i)
on the Stockholder's death by bequest or inheritance to the Stockholder's
executors, administrators, testamentary trustees, legatees or beneficiaries,
(ii) to a trust or custodianship the beneficiaries of which may include only the
Stockholder, the Stockholder's spouse, or the Stockholder's lineal descendants
(by blood or adoption), (iii) in accordance with Section 4 of this Agreement and
(iv) to the Company pursuant to Section 6(e)(2) of the Del Monte Foods Company
Non-Employee Director and Independent Contractor 1997 Stock Incentive Plan,
subject in any such case to the transferee's agreement in writing to be bound by
the terms of this Agreement and provided in any such case that no such transfer
that would cause the Company to be required to register the Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), shall be permitted.
(b) The Company (or its designated assignee) shall have the right,
during the ninety-day period beginning 275 days after the termination of the
Stockholder's membership on the Board of Directors for any reason at any time,
to purchase from the Stockholder, and upon the exercise of such right the
Stockholder shall sell to the Company (or its designated assignee), all or any
portion of the Shares held by the Stockholder as of the date as of which such
right is exercised at a per Share price equal to the value of a share of Common
Stock as determined by the Board of Directors as of the date as of which such
right is exercised, The Company (or its designated assignee) shall exercise such
right by delivering to the Stockholder a written notice specifying its intent to
purchase Shares held by the Stockholder, the date as of which such right is to
be exercised and the number of Shares to be purchased. Such purchase and sale
shall occur on such date as the Company (or its designated assignee) and the
Stockholder shall agree, which date shall not be later than the earlier of (i)
ninety (90) days after the fiscal quarter-end immediately following the date as
of which the Company's right is exercised and (ii) thirty (30) days after the
date on which such value is determined by the Board of Directors.
(c) The Stockholder shall have the right, during the (x) one-year
period following the termination of the Stockholder's membership on the Board of
Directors as a result of death or permanent disability or (y) ninety-day period
immediately following the termination
<PAGE> 3
of the Stockholder's membership on the Board of Directors for any other reason
at any time, to sell to the Company (or its designated assignee), and upon the
exercise of such right the Company (or its designated assignee) shall purchase
from the Stockholder, all or any portion of the Shares held by the Stockholder
as of the date as of which such rights exercised at a per Share price equal to
the value of a share of Common Stock as determined by the Board of Directors as
of the date as of which such right is exercised. The Stockholder shall exercise
such right by delivering to the Company a written notice specifying its intent
to sell Shares held by the Stockholder, the date as of which such right is to be
exercised and the number of Shares to be sold. Such purchase and sale shall
occur on such date as the Company (or its designated assignee) and the
Stockholder shall agree, which date shall not be later than the earlier of (i)
ninety (90) days after the fiscal quarter-end immediately following the date as
of which the Stockholder's right is exercised and (ii) thirty (30) days after
the date on which such value is determined by the Board of Directors.
4. Certain Rights.
(a) Drag Along Rights. If TPG Partners, L.P. ("TPG") desires to
sell its shares of Common Stock to a good faith independent purchaser (a
"Purchaser") (other than any other investment partnership, limited liability
company or other entity established for investment purposes and controlled by
the principals of TPG) and said Purchaser desires to acquire ail of the issued
and outstanding shares of Common Stock upon such terms and conditions as, agreed
to with TPG, the Stockholder agrees to sell all of his Shares to said Purchaser
(or to vote in favor of any merger or other transaction which would effect such
a sale) at the same price per share of Common Stock and pursuant to the same
terms and conditions with respect to payment for the shares of Common Stock as
agreed to by TPG. In such case, TPG shall give written notice of such sale to
the Stockholder at least 30 days prior to the consummation of such sale, setting
forth (i) the consideration to be received by the holders of shares of Common
Stock, (ii) the identity of the Purchaser, (iii) any other material items and
conditions of the proposed transfer and (iv) the date of the proposed transfer.
(b) Tag Along Rights. If TPG or its affiliates proposes to
transfer any of its shares of Common Stock to a Purchaser other than an
affiliate or employee of TPG or its affiliates, then TPG or such affiliate
(hereinafter referred to as a "Selling Stockholder") shall give written notice
of such proposed transfer to the Stockholder at least 30 days prior to the
consummation of such proposed transfer, setting forth (i) the number of shares
of Common Stock offered, (ii) the consideration to be received by such Selling
Stockholder, (iii) the identity of the Purchaser, (iv) any other material items
and conditions of the proposed transfer and (v) the date of the proposed
transfer.
The Stockholder may elect to sell a Pro Rata Portion (as hereinafter
defined) of his Shares, at the same price per share of Common Stock and pursuant
to the same terms and conditions with respect to payment for the shares of
Common Stock as agreed to by the Selling Stockholder, by sending written notice
to the Selling Stockholder within 15 days of the date of the Selling
Stockholder's notice, indicating a desire to sell such Pro Rata Portion of his
Shares in the same transaction. Following such 15 day period, the Selling
Stockholder shall be permitted
<PAGE> 4
to sell to the Purchaser additional Shares representing Shares not sold by
other stockholders of the Company.
For purposes of Sections 4(b) and 4(c) hereof, "Pro Rata Portion"
shall mean a number equal to the product of (x) the total number of Shares owned
by the Stockholder and (y) a fraction, the numerator of which shall be the total
number of shares of Common Stock offered (for sale or registration, as
applicable) by the Selling Stockholder, and the denominator of which shall be
the total number of shares of Common Stock owned by the Selling Stockholder
(including the shares of Common Stock proposed to be sold or registered by the
Selling Stockholder); provided, however, that any fraction of a share resulting
from such calculation shall be disregarded for purposes of determining the Pro
Rata Portion.
(c) Piggyback Registration Rights.
(i) Notice to Stockholder. If the Company determines that it will
file a registration statement under the Securities Act, other than a
registration statement on Form S-4 or Form S-8 or any successor form, for an
offering which includes shares of Common Stock held by TPG or its affiliates
(hereinafter referred to as a "Selling Stockholder"), then the Company shall
give prompt written notice to the Stockholder that such filing is expected to be
made (but in no event less than 30 days nor more than 60 days in advance of
filing such registration statement), the jurisdiction or jurisdictions in which
such offering is expected to be made, and the underwriter or underwriters (if
any) that the Company (or the person requesting such registration) intends to
designate for such offering. If the Company, within 15 days after giving such
notice, receives a written request for registration of any Shares from the
Stockholder, then the Company shall include in the same registration statement
the number of Shares to be sold by the Stockholder as shall have been specified
in his request, except that the Stockholder shall not be permitted to register
more than a Pro Rata Portion of his Shares. The Company shall bear all costs of
preparing and filing the registration statement, and shall indemnify and hold
harmless, to the extent customary and reasonable, pursuant to indemnification
and contribution provisions to be entered into by the Company at the time of
filing of the registration statement, the seller of any shares of Common Stock
covered by such registration statement.
Notwithstanding anything herein to the contrary, the Company, on
prior notice to the participating Stockholder, may abandon its intention to
file a registration statement under this Section 4(c) at any time prior to such
filing.
(ii) Allocation. If the managing underwriter shall inform the
Company in writing that the number of shares of Common Stock requested to be
included in such registration exceeds the number which can be sold in (or during
the time of) such offering within a price range acceptable to TPG, then the
Company shall include in such registration such number of shares of Common
Stock which the Company is so advised can be sold in (or during the time of)
such offering. All holders of shares of Common Stock proposing to sell shares of
Common Stock shall share pro rata in the number of shares of Common Stock to be
excluded from such offering, such sharing to be based on the respective numbers
of shares of Common Stock as to which registration has been requested by such
holders.
<PAGE> 5
(iii) Permitted Transfer. Notwithstanding anything to the contrary
contained herein, sales of Shares pursuant to a registration statement filed by
the Company may be made without compliance with any other provision of this
Agreement.
5. Termination. This Agreement shall terminate immediately
following the commencement of a Public Market for the Common Stock, except that
(i) the requirements contained in Section 2 hereof shall survive the termination
of this Agreement and (ii) the provisions contained in Section 3 hereof shall
continue with respect to each Share during such period of time, if any, as the
Stockholder is precluded from selling such Share pursuant to Rule 144 of the
Securities Act. For this purpose, a "Public Market" for the Common Stock shall
be deemed to exist if the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, or if trading regularly occurs in such Common Stock
in, on or through the facilities of securities exchanges and/or inter-dealer
quotation systems in the United States (within the meaning of Section 902(n) of
the Securities Act) or any designated offshore securities market (within the
meaning of Rule 902(a) of the Securities Act).
6. Distributions With Respect To Shares. As used herein, the term
"Shares" includes securities of any kind whatsoever distributed with respect to
the Common Stock acquired by the Stockholder or any such securities resulting
from a stock split or consolidation involving such Common Stock.
7. Amendment; Assignment. This Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by authorized representatives of the parties
or, in the case of a waiver, by an authorized representative of the party
waiving compliance. No such written instrument shall be effective unless it
expressly recites that it is intended to amend, supersede, cancel, renew or
extend this Agreement or to waive compliance with one or more of the terms
hereof, as the case may be. Except for the Stockholder's right to assign his or
her rights under Section 3(a) or the Company's right to assign its rights under
Section 3(b) or its obligations under Section 3(c), no party to this Agreement
may assign any of its rights or obligations under this Agreement without the
prior written consent of the other parties hereto.
8. Notices. All notices and other communications hereunder shall
be in writing, shall be deemed to have been given if delivered in person or by
certified mail, return receipt requested, and shall be deemed to have been given
when personally delivered or three (3) days after mailing to the following
address:
If to the Stockholder:
If to the Company:
Del Monte Foods Company
One Market
San Francisco, CA 94105
<PAGE> 6
Attention: Board of Directors and Secretary
If to TPG:
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to its principles of conflicts of law.
11. Binding Effect. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the heirs, personal representatives,
successors and permitted assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement, or their respective heirs,
personal representatives, successors or assigns, any legal or equitable rights,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
13. Severability. If any term, provision, covenant or restriction
of this Agreement, is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
<PAGE> 7
14. Miscellaneous. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
___________________________________
[Stockholder]
DEL MONTE FOODS COMPANY
___________________________________
By:
Title:
TPG PARTNERS, L.P.
___________________________________
By:
Title:
<PAGE> 1
EXHIBIT 5.1
CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006
May 18, 1998
Del Monte Foods Company
One Market
San Francisco, California 94105
Re: Del Monte Foods Company
Registration Statement on Form S-1 (No. 333-48235)
Ladies and Gentlemen:
We have acted as counsel to Del Monte Foods Company, a Delaware
corporation (the "Company"), in connection with the registration statement on
Form S-1 (No. 333-48235) (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Act"), for the registration of (i) the sale by the
Company of up to 14,797,297 shares (the "Company Securities") of Common Stock,
par value $.01 per share ("Common Stock"), and (ii) the sale by certain selling
stockholders named in the Registration Statement of up to 5,405,405 shares of
Common Stock (the "Secondary Securities").
We have participated in the preparation of the Registration
Statement and have reviewed the originals or copies certified or otherwise
identified to our satisfaction of all such corporate records of the Company and
such other instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below.
<PAGE> 2
Del Monte Foods Company, p.2
In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is our opinion that:
1. The Company Securities have been duly authorized by all
necessary corporate action of the Company and, upon issuance of the Company
Securities against payment therefor in the manner described in the Registration
Statement, will be validly issued by the Company and fully paid and
nonassessable.
2. The Secondary Securities have been duly authorized by all
necessary corporate action of the Company, have been validly issued by the
Company and are fully paid and nonassessable.
The foregoing opinions are limited to the General Corporation Law of
the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the prospectus included in the Registration Statement. In
giving such consent, we do not thereby admit that we are "experts" within the
meaning of the Act or the rules and regulations of the Commission issued
thereunder with respect to any part of the Registration Statement, including
this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Janet L. Fisher
-----------------------------------
Janet L. Fisher, a Partner
<PAGE> 1
EXHIBIT 10.22
RETENTION AGREEMENT
THIS AGREEMENT, made as of this 1st day of January, 1992 (the
"Effective Date"), by and between DEL MONTE CORPORATION, a New York corporation
(the "Company") and WILLIAM J. SPAIN (the "Executive").
WITNESSETH:
WHEREAS, in order to provide the Executive continued incentives to
remain in the services of the Company, its subsidiaries or affiliates, the
Company desires to provide the Executive with compensation security under the
conditions set forth in this Agreement in the event that the Executive's
employment hereunder is terminated by the Company or any such subsidiary or
affiliate without Cause (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, the parties hereto hereby agree as follows:
1. Employment. The Executive agrees to devote his working time,
on substantially a full-time basis, to the performance of such services for the
Company, its subsidiaries and affiliates as may be assigned to him from time to
time and to perform such services faithfully and to the best of his ability.
This Agreement shall commence on the Effective Date and shall remain in effect
so long as the Executive remains employed by the Company, any of its
subsidiaries or any successor organization.
2. Termination for Cause: Termination by Reason of Death. (a)
This Agreement shall be terminated immediately and neither party shall have any
obligation
<PAGE> 2
hereunder if the Executive's employment is terminated for Cause (as hereinafter
defined) or by reason of the Executive's death.
(b) The Executive shall be terminated for "Cause" only if the
Executive's employment is terminated as a result of (i) criminal dishonesty,
(ii) deliberate and continual refusal to perform employment duties on
substantially a full-time basis or to act in accordance with any specific lawful
instructions given to the Executive in connection with the performance of his
duties for the Company or any of its subsidiaries or affiliates, unless, the
Executive is disabled, or (iii) deliberate misconduct which is reasonably likely
to be materially damaging to the Company without a reasonable good faith belief
by the Executive that such conduct was in the best interests of the Company.
(c) The Executive may voluntarily terminate his employment at any
time prior to notice by the Company of termination under Sections 2(a) or 3(a)
of this Agreement by written notice to the Company. Upon such notice, this
Agreement shall be terminated immediately and Executive shall have no
entitlement to any compensation provided under Section 3 of this Agreement.
3. Termination Without Cause.
(a) Severance Amount If the Executive's employment hereunder is
terminated by the Company without Cause, the Company shall pay to the Executive
the Severance Amount (as hereinafter defined) over an eighteen (18) month
period commencing with the date of such termination (the "Severance Period").
The total severance amount (the "Severance Amount") for the Severance Period
shall equal the greater of (i) the total dollar amount payable to the Executive
under the formula for
-2-
<PAGE> 3
separation pay as determined by the then existing separation program applicable
to the Executive as of the date of such termination or (ii) the sum of (A) plus
(B), where (A) is the Executive's highest annual rate of salary in effect during
the twelve (12) month period prior to such termination and (B) is the target
award under the Company's Annual Incentive Award Plan (or successor thereto) for
the year in which such termination occurs (or, if greater, the amount of the
award for the next preceding year of full-time employment). The Severance Amount
shall be paid to the Executive in eighteen (18) equal monthly installments over
the Severance Period and each such installment shall be subject to regular
payroll deductions. Payment of the Severance Amount and continuation of benefits
under Section 3(b), below, is conditioned upon the Executive executing and
delivering to the Company a written agreement in the form furnished by the
Company by which the Executive effectively reaffirms the conditions of Section 5
and releases the Company from employment termination-related claims. In
addition, the Executive will also be paid an award under the Annual Incentive
Award Plan (or successor thereto, if any) of the Company, based upon the target
award for the year in which the Executive's termination without Cause occurs,
prorated for the active employment during such year and adjusted for
performance. Such pro rata bonus shall be paid within thirty (30) days of the
date of such termination
(b) Employee Benefit Plans. In the event the Company terminates
the Executive's employment other than for Cause, the Executive will continue to
be eligible for the welfare benefits (other than disability benefits) afforded
by the employee welfare benefit plans and programs maintained by the Company in
which he participated (and at
-3-
<PAGE> 4
an equivalent level of participation) immediately prior to such termination
until the earlier to occur of (i) the end of the Severance Period or (ii) such
time as the Executive is covered by comparable programs of a subsequent
employer. For all other employee benefit plans of the Company, the date of
termination of employment will be treated as the Executive's severance date, as
of which plan participation will cease. Anything herein to the contrary
notwithstanding, the Company shall have no obligation to continue to maintain
during the Severance Period any plan or plan provision solely as a result of the
provisions of this Agreement and Executive will be subject to all changes in
such plans occurring during the Severance Period, unless former employees on
salary continuation are specifically excepted.
(c) Death. In the event of the Executive's death subsequent to
commencement of the Severance Period, the balance of the Severance Amount will
be paid to his beneficiary in a lump sum. "Beneficiary" shall mean the person or
persons designated by the Executive in writing to the Company to receive
payments under this Agreement or, if no such person or persons are designated,
the Executive's estate.
(d) Outplacement Counseling. During the Severance Period, the
Executive will be provided with outplacement counseling services at Company
expense; provided, however, the expense for such services in any calendar year
shall not exceed eighteen percent (18%) of the Severance Amount paid to the
Executive for such calendar year. This counseling shall include, but not be
limited to, skill assessment, job market analysis, resume preparation,
interviewing skills, job search techniques and negotiating.
-4-
<PAGE> 5
(e) Fringe Benefits. The Company will continue the Executive's
participation in the Management Perquisite Program applicable to the Executive
as of the date of such termination until the earlier to occur of (i) the first
anniversary of such termination or (ii) the date the Executive is covered by
comparable fringe benefit programs and perquisites of a subsequent employer.
4. Disability. The event of Permanent Disability (as hereinafter
defined) shall not entitle the Executive to any of the payments or benefits
described in Section 3 above unless the Executive is terminated by the Company
other than for Cause. "Permanent Disability" shall mean physical or mental
disability as a result of which the Executive is unable to perform his duties
with the Company on substantially a full-time basis for any period of six (6)
consecutive months. Any dispute as to whether or not the Executive is so
disabled shall be resolved by a physician reasonably acceptable to the Executive
and the Company whose determination shall be final and binding upon both the
Executive and the Company.
5. Conditions Applicable to Severance Benefits.
(a) Confidentiality and Conduct. The Executive warrants and agrees
that he will not disclose to any person, other than the employees, officers,
directors or shareholders of DMPF Holdings Corporation, a Maryland corporation,
or its affiliates and subsidiaries in connection with the performance of his
duties hereunder, any confidential information or trade secrets concerning the
Company or any of its subsidiaries or affiliates at any time. Notwithstanding
the foregoing, confidential information and trade secrets shall not be deemed to
include, without limitation,
-5-
<PAGE> 6
information which (i) is or becomes available to the public other than as a
result of disclosure by the Executive in violation of this Section 5(a) or (ii)
the Executive is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law. The Executive will at
all times refrain from taking any action or making any statements, written or
oral, which are intended to and do demonstrably and materially damage the
Company, its subsidiaries and affiliates and their respective directors,
officers or employees. In the event that the Executive materially violates the
terms and conditions of this Section 5(a), the Company may, at its election,
upon ten (10) days' notice, terminate the Severance Period and discontinue
payments of the Severance Amount and cease providing the benefits described in
Section 3 above. The Company may also initiate any form of legal action it may
deem appropriate seeking damages or injunctive relief with respect to any
material violations of this Section 5(a).
(b) Non-Competition. The Severance Period shall be terminated and
the Company shall have no further obligation to pay the Severance Amount or to
provide the benefits described in Section 3 above if the Executive, without the
Company's written approval, accepts a position of employment with any other
company conducting a business which is substantially competitive with a business
conducted by the Company.
(c) No Other Severance Benefits. Except as specifically set forth
in this Agreement, the Executive covenants and agrees that he shall not be
entitled to any other form of severance benefits from the Company, including,
without limitation, benefits
-6-
<PAGE> 7
otherwise payable under any of the Company's regular severance policies,
(including any benefits under the existing separation program referenced in
Section 3(a)(i) above) in the event his employment with the Company ends for
any reason and, except with respect to obligations of the Company expressly
provided for herein, the Executive unconditionally releases the Company and its
subsidiaries and affiliates, their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangement of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
6. General Provisions.
(a) Notices. Any notice hereunder by either party to the other
shall be given in writing by personal delivery, telex, telecopy or registered
mail, return receipt requested, to the applicable address set forth below:
(i) To the Company: Del Monte Corporation
One Market Plaza
P.O. Box 193575
San Francisco, CA 94119-3575
Attn: Secretary of the Board
(ii) To the Executive: William J. Spain
c/o Del Monte Corporation
P.O. Box 193575
San Francisco, CA 94119-3575
(b) Limited Waiver. The waiver by the Company or the Executive of
a violation of any of the provisions of this Agreement whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
-7-
<PAGE> 8
(c) No Assignment. No right, benefit or interest hereunder shall
be subject to assignment, encumbrance, charge, pledge, hypothecation or set off
by the Executive in respect of any claim, debt, obligation or similar process.
This Agreement and all of the Company's rights and obligations hereunder may be
assigned, transferred or delegated to any business entity which, at the time of
any sale, merger, consolidation or other business combination, acquires all or
substantially all of the assets of the Company or to which the Company transfers
all or substantially all of its assets, but no such assignment, transfer or
delegation shall impair any rights that the Executive may have hereunder. Upon
such assignment, transfer or delegation, any such business entity shall be
deemed to be substituted for all purposes as the Company hereunder; provided,
however, that no such assignment, transfer or delegation shall relieve the
Company of its obligations under this Agreement in the event that such
obligations are not performed when due by any such successor to the Company
hereunder.
(d) Amendment. This Agreement may not be amended, modified or
canceled except by written agreement of the parties.
(e) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full force
and effect to the fullest extent permitted by law.
(f) Unsecured Promise. Unless otherwise stated herein, no benefit
or promise hereunder shall be secured by any specific assets of the Company.
Unless
-8-
<PAGE> 9
otherwise stated herein, the Executive shall have only the rights of an
unsecured general creditor of the Company in seeking satisfaction of such
benefits or promises.
(g) Governing Law. This Agreement has been made in and shall be
governed by and construed in accordance with the laws of the State of New York.
(h) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby.
(i) Headings. The headings and captions of the Sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
(j) Counterparts. Agreement may be executed by the parties hereto
in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
DEL MONTE CORPORATION
By: /s/
-------------------------------------
Title: Sr. Vice President
/s/ WILLIAM J. SPAIN
-------------------------------------
William J. Spain
-9-
<PAGE> 1
EXHIBIT 10.23
DEL MONTE FOODS COMPANY
NON-EMPLOYEE DIRECTOR AND INDEPENDENT CONTRACTOR
1997 STOCK INCENTIVE PLAN
AS ADOPTED February 24, 1997
<PAGE> 2
1. Purpose of the Plan
This Del Monte Foods Company Non-Employee Director and Independent
Contractor 1997 Stock Incentive Plan is intended to promote the interests of the
Company by providing certain non-employee directors and independent contractors
of the Company with incentives and rewards to encourage them to continue as
service providers to the Company.
2. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Board of Directors" shall mean the Board of Directors of Del
Monte or such Board of Directors of the Board of Directors as may be designated
by the Board of Directors.
(b) "Change of Control" shall mean the occurrence of one or more of
the following events:
(1) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of the Company to any individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof (a "Person") or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates (as defined below) thereof other than to TPG Partners, L.P. ("TPG")
or its Affiliates;
(2) the approval by the holders of any and all shares, interests,
participations or other equivalents (however designated and whether or not
voting) of corporate stock, including each class of common stock and preferred
stock, of the Company ("Capital Stock") of any plan or proposal for the
liquidation or dissolution of the Company;
(3) (i) any Person or Group (other than TPG or its Affiliates) shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing more than 40% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock (the "Voting Stock") of the Company and
(ii) TPG and its Affiliates shall beneficially own, directly or indirectly, in
the aggregate a lesser percentage of the Voting Stock of the Company than such
other Person or Group; or
(4) the replacement of a majority of the Board of Directors over a
two-year period from the directors who constituted the Board of Directors at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved or who were nominated by, or designees of TPG or its Affiliates.
2
<PAGE> 3
For purposes of this Section 2(c), "Affiliate" shall mean, with respect
to any specified Person, any other Person who directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, such specified Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative of the foregoing.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(d) "Common Stock" shall mean common stock of Del Monte, $.01 par
value per share.
(e) "Company" shall mean Del Monte and its subsidiaries.
(f) "Del Monte" shall mean Del Monte Foods Company, a Maryland
corporation.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(h) "Option" shall mean an option to purchase shares of Common Stock
granted pursuant to Section 6 hereof.
(i) "Participant" shall mean a person who is eligible to participate
in the Plan and to whom an Option is granted pursuant to the Plan, and upon his
death, his successors, heirs, executors and administrators, as the case may be.
(j) "Plan" shall mean this Del Monte Foods Company Non-Employee
Director and Independent Contractor 1997 Stock Incentive Plan, as it may be
amended from time to time.
(k) A "Public Market" for the Common Stock shall be deemed to exist
if the Common Stock is registered under Section 12(b) or 12(g) of the Exchange
Act, or if trading regularly occurs in such Common Stock in, on or through the
facilities of securities exchanges and/or inter-dealer quotation systems in the
United States (within the meaning of Section 902(n) of the Securities Act) or
any designated offshore securities market (within the meaning of Rule 902(a) of
the Securities Act).
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended.
3. Stock Subject to the Plan
Subject to adjustment as provided in Section 7 hereof, the Board of
Directors may grant Options to Participants with respect to 792 shares of Common
Stock. In the event that
3
<PAGE> 4
any outstanding Option expires, terminates or is cancelled for any reason, the
shares of Common Stock subject to the unexercised portion of such Option shall
again be available for grants under the Plan.
Shares of Common Stock issued under the Plan may be either newly issued
shares or treasury shares, as determined by the Board of Directors.
4. Administration of the Plan
The Plan shall be administered by the Board of Directors. The Board of
Directors shall from time to time designate the persons who shall be granted
Options, the number of shares subject to each Option and the terms and
conditions on which each Option shall be granted.
The Board of Directors shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Option issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Board of
Directors shall be final and binding on all parties and all decisions,
determinations, selections and other actions permitted or required to be taken
or made by the Board of Directors with respect to the Plan shall be subject to
the absolute discretion of the Board of Directors. No member of the Board of
Directors shall be liable to any Participant for any action, omission, or
determination relating to the Plan.
5. Eligibility
The persons who shall be eligible to receive Options pursuant to the
Plan shall be such non-employee directors of the Company and independent
contractors retained by the Company as the Board of Directors shall select from
time to time.
6. Options
Each Option granted pursuant to the Plan shall be evidenced by an
agreement in the form attached hereto as Exhibit A. Options shall comply with
and be subject to the following terms and conditions:
(a) Identification of Options
All Options shall be clearly identified in the agreement evidencing
their grant as non-qualified stock options that are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code.
(b) Exercise Price
The exercise price per share of each Option shall be such price as the
Board of Directors shall determine at the time at which the Option is granted.
4
<PAGE> 5
(c) Term and Exercise of Options
Each Option shall be exercisable on such date or dates, during such
period and for such number of shares of Common Stock as shall be determined by
the Board of Directors on the day on which such Option is granted and set forth
in the Option agreement with respect to such Option; provided, however, that no
Option shall be exercisable after the expiration of ten (10) years from the date
such Option is granted; and provided, further, that each Option shall be subject
to earlier expiration, termination, cancellation or exercisability as provided
in this Plan.
(d) Effect of Termination of Membership on Board; Independent
Contractor Status
(1) In the event of the termination of the membership of a
Participant on the Board of Directors for any reason at any time other than on
account of permanent disability or death of the Participant (i) Options granted
to such Participant, to the extent that they were exercisable at the time of
such termination, shall remain exercisable until the expiration of ninety (90)
days after such termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on the date of
such termination; provided, however, that no Option shall be exercisable after
the expiration of its term. In the event of the termination of membership of a
Participant on the Board of Directors on account of the permanent disability or
death of the Participant, (x) Options granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall remain
exercisable until the expiration of one (1) year after such termination, on
which date they shall expire, and (y) Options granted to such Participant, to
the extent that they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration of its term.
The agreement evidencing the grant of an Option to any person who is not a
member of the Board of Directors shall include such terms and conditions as the
Board of Directors deems appropriate concerning the termination of the Option
prior to the expiration of its term.
(e) Certain Terms and Conditions
(1) Each Option shall be exercisable in whole or in part with
respect to not less than one share of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or cancellation of the
remaining portion thereof.
(2) An Option shall be exercised by delivering notice to Del Monte's
principal office in the form attached hereto as Exhibit B, to the attention of
its Chief Financial Officer with a copy to its General Counsel, no less than
three business days in advance of the effective date of the proposed exercise.
Such notice shall specify the number of shares of Common Stock with respect to
which the Option is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant. The Participant may withdraw
such notice at any time prior to the close of business on the business day
immediately preceding the effective date of the proposed exercise. Payment for
shares of Common Stock purchased upon the exercise of an
5
<PAGE> 6
Option shall be made on the effective date of such exercise in cash, by
certified check, bank cashier's check or wire transfer, or by tender to Del
Monte of shares of Common Stock already owned and held by the Participant for at
least six (6) months, which shares shall be valued as determined by the Board of
Directors on the effective date of the proposed exercise. In the event that,
prior to the existence of a Public Market for the Common Stock, a Participant
elects to pay the exercise price upon the exercise of an Option by the tender of
previously-owned shares, the delivery by Del Monte of certificates representing
the shares of Common Stock purchased upon such exercise shall be deferred
pending a determination of the exact number of the shares of Common Stock
required to be tendered by the Participant.
(3) Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant and
delivered to the Participant as soon as practicable following the effective date
on which the Option is exercised.
(4) During the lifetime of a Participant, each Option granted to him
shall be exercisable only by him. No Option shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
Notwithstanding the preceding provisions of this Section 6(e)(4), a Participant
may assign his rights with respect to any Option granted to him to a trust or
custodianship the beneficiaries of which may include only the Participant, the
Participant's spouse, or the Participant's lineal descendants (by blood or
adoption). In the event of any such assignment, such trust or custodianship
shall be subject to all the restrictions, obligations and responsibilities as
apply to the Participant under the Plan and shall be entitled to all the rights
of the Participant under the Plan.
(f) Consequences Upon Certain Transactions
Not more than ten (10) days prior to a Change of Control, all
outstanding Options shall vest and become immediately exercisable.
7. Adjustment Upon Changes in Common Stock
(a) Subject to any required action by the shareholders of Del Monte,
in the event of any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares of Common
Stock or the payment of a stock dividend (but only on the shares of Common
Stock), or any other increase or decrease in the number of such shares effected
by Del Monte without receipt or payment of consideration, the Board of Directors
shall proportionally adjust the number of shares of Common Stock subject to each
outstanding Option and the exercise price per share of Common Stock of each such
Option.
(b) Subject to any required action by the shareholders of Del Monte,
in the event that Del Monte shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Common
Stock subject to such Option would have received in such merger or
consolidation.
6
<PAGE> 7
(c) In the event of a dissolution or liquidation of Del Monte, a
sale of all or substantially all of Del Monte's assets, a sale of all or a
substantial portion of the Common Stock held by TPG, a merger or consolidation
involving Del Monte in which Del Monte is not the surviving corporation, a
merger or consolidation involving Del Monte in which Del Monte is the surviving
corporation but the holders of shares of Common Stock receive securities of
another corporation and/or other property, including cash, or any other similar
transaction, the Board of Directors shall have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each Option outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to the
Participant to whom such Option was granted an amount in cash, for each share of
Common Stock subject to such Option, equal to the excess of (A) the value, as
determined by the Board of Directors in good faith, of the property (including
cash) received by the holder of a share of Common Stock as a result of such
event over (B) the exercise price of such Option; or
(ii) permit Participants to exercise their Options and participate in
such transaction on a basis no less favorable than that afforded other owners of
Common Stock.
(d) In the event of any change in the capitalization of Del Monte or
corporate change other than those specifically referred to herein, the Board of
Directors will make such adjustments in the number and class of shares subject
to Options outstanding on the date on which such change occurs and in the per
share exercise price of each such Option as the Board of Directors may consider
necessary or appropriate.
(e) Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger
or consolidation of Del Monte or any other corporation. Except as expressly
provided in the Plan, no issuance by Del Monte of shares of stock of any class,
or securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to an Option or the exercise price of any Option.
8. Rights as a Stockholder
(a) No person shall have any rights as a stockholder with respect to
any shares of Common Stock covered by or relating to any Option granted pursuant
to this Plan until the date of the issuance of a stock certificate with respect
to such shares.
(b) Notwithstanding anything herein to the contrary, prior to the
existence of a Public Market, Del Monte shall not be obligated to cause to be
issued or delivered to or for the benefit of any Participant any certificates
evidencing shares of Common Stock pursuant to the Plan unless and until such
Participant executes a Stockholders' Agreement in the form attached
7
<PAGE> 8
hereto as Exhibit C or, in the case of a Participant who is not a member of the
Board of Directors, an agreement in such form as the Board of Directors deems
appropriate.
9. No Special Rights; No Right to Option
(a) Nothing contained in the Plan or any Option shall confer upon
any Participant any right with respect to the continuation of his relationship
with the company or interfere in any way with the right of the Company at any
time to terminate such relationship.
(b) No person shall have any claim or right to receive an Option
hereunder. The Board of Directors's granting of an Option to a Participant at
any time shall neither require the Board of Directors to grant an Option to such
Participant or any other Participant or other person at any time nor preclude
the Board of Directors from making subsequent grants to such Participant or any
other Participant or other person.
10. Securities Matters
(a) Del Monte shall be under no obligation to effect the
registration pursuant to the Securities Act of any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, Del Monte shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until Del Monte is advised by
its counsel that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Common Stock are
traded. The Board of Directors may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock pursuant to the terms
hereof, that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Board of
Directors deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be
effective at such time as counsel to Del Monte shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. Del Monte may, in its sole discretion, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the issuance of shares
of Common Stock pursuant thereto to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. Del Monte shall inform the Participant in
writing of its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the exercise of
an Option has been deferred, the Participant may, by written notice, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
(c) In the event that the Board of Directors defers the
effectiveness of the exercise by a Participant of an Option granted hereunder in
order to allow the issuance of shares of Common Stock pursuant thereto to be
made pursuant to registration or an exemption from
8
<PAGE> 9
registration or other methods for compliance available under federal or state
securities laws, such Participant may elect, by delivery of written notice by
the Participant to the Company not later than thirty (30) days following his
receipt of notice of such deferral or the expiration of such deferral, to
surrender the exercisable portion of such Option (or any portion thereof) to the
Company in consideration for a lump sum payment in cash in an amount equal to
the product of (A) the excess of (i) the value of a share of Common Stock as
determined by the Board of Directors as of the date of surrender over (ii) the
per share exercise price of the Option and (B) the number of shares with respect
to which such Participant desires and is entitled to exercise such Option.
Notice shall be delivered in person or by certified mail, return receipt
requested and shall be deemed to have been given when personally delivered or
three (3) days after mailing.
11. Termination and Amendment of the Plan
The right to grant Options under the Plan will terminate on August 4,
2007. The Board of Directors may at any time suspend or terminate the Plan or
revise or amend it in any respect whatsoever.
12. Transfers Upon Death
Upon the death of a Participant, outstanding Options granted to such
Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Option, or the
right to exercise any Option, shall be effective to bind the Company unless the
Board of Directors shall have been furnished with (a) written notice thereof and
with a copy of the will and/or such evidence as the Board of Directors may deem
necessary to establish the validity of the transfer and (b) an agreement by the
transferee to comply with all the terms and conditions of the Option that are or
would have been applicable to the Participant and to be bound by the
acknowledgements made by the Participant in connection with the grant of the
Option.
13. No Obligation to Exercise
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
14. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Option will be used for general
corporate purposes.
l5. Failure to Comply
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and conditions
of the Plan or the agreement
9
<PAGE> 10
executed by such Participant evidencing an Option, unless such failure is
remedied by such Participant within ten (10) days after having been notified of
such failure by the Board of Directors, shall be grounds for the cancellation
and forfeiture of such Option, in whole or in part, as the Board of Directors,
in its absolute discretion, may determine.
16. Applicable Law
The Plan will be administered in accordance with the laws of the State
of California, without reference to its principles of conflicts of law.
10
<PAGE> 1
EXHIBIT 10.25
CONFORMED COPY
- --------------------------------------------------------------------------------
SUPPLEMENTAL INDENTURE
DATED AS OF APRIL 24, 1998
AMONG
DEL MONTE CORPORATION,
AS ISSUER,
DEL MONTE FOODS COMPANY,
A DELAWARE CORPORATION,
AS GUARANTOR,
AND
MARINE MIDLAND BANK,
AS TRUSTEE
$150,000,000
12-1/4% SENIOR SUBORDINATED NOTES DUE 2007
SERIES B 12-1/4% SENIOR SUBORDINATED NOTES DUE 2007
SUPPLEMENTAL TO INDENTURE, DATED AS OF APRIL 18, 1997, AS AMENDED
- --------------------------------------------------------------------------------
<PAGE> 2
This SUPPLEMENTAL INDENTURE, dated as of April 24, 1998, among Del Monte
Corporation, a New York corporation ("DMC"), Del Monte Foods Company, a
Delaware corporation ("DMFC"), and Marine Midland Bank, as trustee (the
"Trustee"), supplements the Indenture dated as of April 18, 1997 (as amended,
modified and supplemented to the date hereof, (the "Indenture") among DMC, Del
Monte Foods Company, a Maryland corporation ("Holdings"), and the Trustee.
WHEREAS, the Indenture was originally executed and delivered by the DMC to
provide for the issuance from time to time of its notes, to be issued in one or
more series;
WHEREAS, two series of notes of DMC have been created under the Indenture,
known and designated as "12-1/4% Senior Subordinated Notes due 2007" and
"Series B 12-1/4% Senior Subordinated Notes due 2007";
WHEREAS, Section 5.03(a)(1)(B)(y) of the Indenture provides that if
Holdings shall merge into another corporation, the corporation into which
Holdings is merged shall expressly assume the obligations of Holdings with
respect to the due and punctual payment of the principal of and premium, if
any, and interest on all the Notes and the performance of every covenant of the
Indenture to be performed or observed by Holdings; and
WHEREAS, it has been determined that Holdings will merge (the "Merger")
with and into DMFC and, in connection therewith, DMFC will assume all of the
obligations of Holdings under the Notes and Indenture.
NOW THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Supplemental Indenture,
terms used herein in capitalized form and defined in the Indenture shall have
the meanings specified in the Indenture unless otherwise therein or herein
expressly provided.
ARTICLE II
EFFECTIVENESS
Section 2.1. When Effective. This Supplemental Indenture shall be
effective as of the date (the "Effective Date") of, and simultaneously with,
the effectiveness of the Merger.
1
<PAGE> 3
ARTICLE III
ASSUMPTION BY DMFC
Section 3.1. Responsibility. From and after the Effective Date, DMFC
shall assume the obligations of Holdings with respect to the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and for the performance of every covenant in the Indenture to be
performed and observed by Holdings, all in accordance with the tenor of the
Notes and the Indenture.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Confirmation of Indenture. Except as hereby supplemented and
amended, the Indenture is in all respects ratified and confirmed, and all the
terms and provisions thereof shall be and remain in full force and effect.
Section 4.2. Concerning the Trustee. The Trustee assumes no duties,
responsibilities or liabilities by reason of this Supplemental Indenture other
than as set forth in the Indenture.
Section 4.3. Execution and Counterparts. This Supplemental Indenture may
be executed in any number of counterparts, each of which shall be an original;
but such counterparts shall together constitute but one and the same
instrument. The Trustee shall not be liable or responsible for the validity
(other than as to due authorization and execution by the Trustee) or the
sufficiency of this Supplemental Indenture or for the recitals contained
herein, all of which recitals are made solely by DMFC and DMC.
Section 4.4. Notices to DMFC. Any notice or demand which by any provision
of this Supplemental Indenture is required or permitted to be given or served
by the holders of the Notes on DMFC may be given or served by being addressed,
postage prepaid, (until another address is filed by DMFC with the Trustee) to
Del Monte Foods Company at One Market, San Francisco, California 94105,
attention of the Treasurer.
2
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
DEL MONTE CORPORATION
By: /s/ William R. Sawyers
William R. Sawyers
Vice President, General Counsel
and Secretary
DEL MONTE FOODS COMPANY,
a Delaware corporation,
as Guarantor
By: /s/ William R. Sawyers
William R. Sawyers
Vice President, General Counsel
and Secretary
MARINE MIDLAND BANK,
as Trustee
By: /s/ Metin Caner
Metin Caner
S-1
<PAGE> 1
EXHIBIT 10.26
CONFORMED COPY
- --------------------------------------------------------------------------------
SUPPLEMENTAL INDENTURE
DATED AS OF APRIL 24, 1998
BETWEEN
DEL MONTE FOODS COMPANY,
A DELAWARE CORPORATION,
AS ISSUER
AND
MARINE MIDLAND BANK,
AS TRUSTEE
$230,000,000
12-1/2% SENIOR DISCOUNT NOTES DUE 2007
SERIES B 12-1/2% SENIOR DISCOUNT NOTES DUE 2007
SUPPLEMENTAL TO INDENTURE, DATED AS OF DECEMBER 17, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
This SUPPLEMENTAL INDENTURE, dated as of April 24, 1998, between Del Monte
Foods Company, a Delaware corporation ("DMFC"), and Marine Midland Bank, as
trustee (the "Trustee"), supplements the Indenture dated as of December 17,
1997 (as amended, modified and supplemented to the date hereof, the
"Indenture") between Del Monte Foods Company, a Maryland corporation (the
"Company") , and the Trustee.
WHEREAS, the Indenture was originally executed and delivered by the
Company to provide for the issuance from time to time of its notes, to be
issued in one or more series;
WHEREAS, two series of notes of the Company have been created under the
Indenture, known and designated as "12-1/2% Senior Discount Notes due 2007" and
"Series B 12-1/2% Senior Discount Notes due 2007";
WHEREAS, Section 5.01(a)(1)(B)(y) of the Indenture provides that if the
Company shall merge into another corporation, the corporation into which the
Company is merged shall expressly assume the due and punctual payment of the
principal of and premium, if any, and interest on all of the Notes and the
performance of every covenant contained in the Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; and
WHEREAS, it has been determined that the Company will merge (the "Merger")
with and into DMFC and, in connection therewith, DMFC will assume all of the
obligations of the Company under the Notes, the Indenture and the Registration
Rights Agreement.
NOW THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Supplemental Indenture,
terms used herein in capitalized form and defined in the Indenture shall have
the meanings specified in the Indenture unless otherwise therein or herein
expressly provided.
ARTICLE II
EFFECTIVENESS
Section 2.1. When Effective. This Supplemental Indenture shall be
effective as of the date (the "Effective Date") of, and simultaneously with,
the effectiveness of the Merger.
1
<PAGE> 3
ARTICLE III
ASSUMPTION BY DMFC
Section 3.1. Responsibility. From and after the Effective Date, DMFC
shall assume the due and punctual payment of the principal of and premium, if
any, and interest on all of the Notes and the performance of every covenant in
the Notes, the Indenture and the Registration Rights Agreement on the part of
the Company to be performed and observed, all in accordance with the tenor of
the Notes, the Indenture and the terms of the Registration Rights Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Confirmation of Indenture. Except as hereby supplemented and
amended, the Indenture is in all respects ratified and confirmed, and all the
terms and provisions thereof shall be and remain in full force and effect.
Section 4.2. Concerning the Trustee. The Trustee assumes no duties,
responsibilities or liabilities by reason of this Supplemental Indenture other
than as set forth in the Indenture. The Trustee shall not be liable or
responsible for the validity (other than as to due authorization and execution
by the Trustee) or the sufficiency of this Supplemental Indenture or for the
recitals contained herein, all of which recitals are made solely by DMFC.
Section 4.3. Execution and Counterparts. This Supplemental Indenture may
be executed in any number of counterparts, each of which shall be an original;
but such counterparts shall together constitute but one and the same
instrument.
Section 4.4. Notices to DMFC. Any notice or demand which by any provision
of this Supplemental Indenture is required or permitted to be given or served
by the holders of the Notes on DMFC may be given or served by being addressed,
postage prepaid, (until another address is filed by DMFC with the Trustee) to
Del Monte Foods Company at One Market, San Francisco, California 94105,
attention of the Treasurer.
2
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written.
DEL MONTE FOODS COMPANY,
a Delaware corporation,
as Issuer
By: /s/ William R. Sawyers
William R. Sawyers
Vice President, General Counsel
and Secretary
MARINE MIDLAND BANK,
as Trustee
By: /s/ Metin Caner
Metin Caner
S-1
<PAGE> 1
EXHIBIT 10.27
AMENDMENT AND WAIVER
This Amendment and Waiver (this "Amendment and Waiver"), dated as of April
16, 1998, to the Amended and Restated Credit Agreement (the "Restated Credit
Agreement"), dated as of December 17, 1997, among Del Monte Corporation, a New
York corporation (the "Company"), Bank of America National Trust and Savings
Association, an administrative agent for the Lenders (the "Administrative
Agent"), and the other financial institutions parties thereto, and to the
Amended and Restated Parent Guaranty (the "Restated Parent Guaranty"), dated as
of December 17, 1997, executed by Del Monte Foods Company, a Maryland
corporation ("Parent"), in favor of the Administrative Agent, is made by and
among the Company and the financial institutions party hereto. Capitalized terms
used herein without definition have the meanings assigned thereto in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, Parent desires to merge (the "Merger") with and into a newly
formed, wholly-owned subsidiary of Parent ("Merger Sub"), for the purpose of
changing Parent's state of incorporation from Maryland to Delaware (the
"Reincorporation");
WHEREAS, upon consummation of the Reincorporation, (i) Parent shall be
merged with and into Merger Sub and its separate corporate existence shall cease
and (ii) Merger Sub will continue as the surviving corporation (the "Surviving
Corporation") with the corporate name "Del Monte Foods Company" and, as
successor of Parent, will be bound by all terms and provisions of the Restated
Parent Guaranty and the other Loan Documents to which Parent, immediately prior
to the Merger, was a party to the same extent as if Merger Sub had originally
been bound thereby; and
WHEREAS, at the effective time of the Merger (the "Effective Time"), each
share of Series C Redeemable Preferred Stock, liquidation preference $1,000 per
share, of Parent outstanding immediately prior to the Effective Time will be
converted into one share of a newly created series of preferred stock,
liquidation value $1,000 per share, of the Surviving Corporation having terms
which are substantially the same as the terms of the Series C Preferred Stock.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and payments herein contained, the parties hereto hereby
agree as follows:
SECTION 1. Amendment to the Restated Credit Agreement. The definition of
the term "TPG Acquisition Preferred Stock" set forth in Section 1.1 of the
Restated Credit Agreement shall be amended and restated to read in its entirety
as follows:
TPG Acquisition Preferred Stock means the 14% Series C Redeemable
Preferred Stock, liquidation preference $1,000 per share, of Parent
and, upon consummation of a merger of Parent with and into a newly
formed, wholly-owned
<PAGE> 2
Subsidiary of Parent for the purpose of changing Parent's state of
incorporation from Maryland to Delaware, shall include the
corresponding class of preferred stock of the surviving corporation
having terms which are substantially the same as the terms of such
Series C Redeemable Preferred Stock of Parent.
SECTION 2. Waiver to the Restated Parent Guaranty. Notwithstanding the
covenants contained in the Restated Parent Guaranty, in order to permit Parent
to effect the Reincorporation, Parent may merge with and into Merger Sub, with
Merger Sub continuing as the surviving corporation.
SECTION 3. Assumption. For purposes of greater clarity, immediately
following the effectiveness of the Merger, Merger Sub, as survivor of the
Merger, shall execute and deliver to the Administrative Agent for the benefit of
the Lenders an instrument expressly assuming the obligations of Parent under the
Restated Parent Guaranty and all other Loan Documents to which Parent was party
immediately prior to the Merger.
SECTION 4. Miscellaneous.
(a) Other than as set forth in Section 1 and Section 2 hereof, this
Amendment and Waiver does not modify, change or delete any other term,
provision, representation, warranty of covenant relating to or contained in the
Restated Credit Agreement or the Restated Parent Guaranty, and all such terms,
provisions, representations, warranties and covenants remain in full force and
effect.
(b) This Amendment and Waiver shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
This Amendment and Waiver may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of which taken together shall constitute but one and the same instrument.
(c) After the effectiveness of the Merger, Merger Sub shall execute such
documents, and do such further acts and things, as the Administrative Agent or
the Required Lenders may reasonably request to maintain the validity,
effectiveness and priority of the Collateral Documents and the Liens intended to
created thereby and to assure the Administrative Agent and the Lenders the
benefits of the Loan Documents after giving effect to the Merger.
* * *
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have caused this Amendment and Waiver
to be executed by their duly authorized officers as of the date and year first
above written.
DEL MONTE CORPORATION
By: /s/William R. Sawyer
----------------------------------
William R. Sawyer
Title:
--------------------------------
DEL MONTE FOODS COMPANY,
a Maryland corporation
By: /s/ William R. Sawyer
----------------------------------
William R. Sawyer
Title:
--------------------------------
DEL MONTE FOODS COMPANY,
a Delaware corporation
By: /s/ William R. Sawyer
----------------------------------
William R. Sawyer
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent, Issuing
Lender, Swingline Lender and Lender
By: /s/ William J. Stafeil
----------------------------------
William J. Stafeil
Title: Vice President
--------------------------------
BANKERS TRUST COMPANY, as
Documentation Agent and as a Lender
By: /s/ Mary Jo Jolly
----------------------------------
Mary Jo Jolly
Title: Assistant Vice President
--------------------------------
BANKBOSTON, N.A., as Co-Agent and as a Lender
3
<PAGE> 4
By: /s/
----------------------------------
Title: Vice President
--------------------------------
CITICORP USA, INC., as Co-Agent and as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Agent
and as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
THE LONG-TERM CREDIT BANK OP JAPAN, LTD., LOS
ANGELES AGENCY, as Co-Agent and as a Lender
By: /s/
----------------------------------
Title: Deputy General Manager
--------------------------------
ABN AMRO BANK N.V., as a Lender
By: /s/ Gina M. Bysateri
----------------------------------
Gina M. Bysateri
Title: Vice President
--------------------------------
By: /s/ Dianne D. Barkley
----------------------------------
Dianne D. Barkley
Title: Group Vice President
--------------------------------
4
<PAGE> 5
BHF-BANK AKTIENGESELLSCHAFT, as a Lender
By: /s/
----------------------------------
Title: Vice President
--------------------------------
By: /s/
----------------------------------
Title: Assistant Treasurer
--------------------------------
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENE, as a Lender
By: /s/Brian O'Leary Anthony Rock
----------------------------------
Brian O'Leary Anthony Rock
Title: Vice Presidents
--------------------------------
HELLER FINANCIAL, INC. as a Lender
By: /s/
----------------------------------
Title: Vice President
--------------------------------
IMPERIAL BANK, a California banking corporation,
as a Lender
By: /s/ Ray Vadalma
----------------------------------
Ray Vadalma
Title: Senior Vice President
--------------------------------
THE INDUSTRIAL BANK OF JAPAN, Limited, Los
Angeles Agency, as a Lender
By: /s/
---------------------------------
Title: Senior Vice President
--------------------------------
5
<PAGE> 6
THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND,
L.P., as a Lender
By: ING Capital Advisors, Inc., as
Investment Advisor
By: /s/ Michael D. Hatley
----------------------------------
Michael D. Hatley
Title: Vice President & Portfolio
Manager
--------------------------------
MARINE MIDLAND BANK, as a lender
By: /s/
----------------------------------
Title: Authorized Signatory
--------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
as a Lender
By: /s/ Richard E. Spruces II
----------------------------------
Richard E. Spruces II
Title: Managing Director
--------------------------------
MERITA BANK LTD., NEW YORK BRANCH
as a Lender
By: /s/ Frank Maffei
----------------------------------
Frank Maffei
Title: Vice President
--------------------------------
By: /s/
----------------------------------
Title: Vice President
--------------------------------
6
<PAGE> 7
METROPOLITAN LIFE INSURANCE COMPANY,
as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
THE MITSUBISHI TRUST AND BANKING CORPORATION, Los
Angeles Agency, as Lender
By: /s/ Yasushi Satomi
----------------------------------
Yasushi Satomi
Title: Senior Vice President
--------------------------------
MITSUI LEASING CAPITAL CORPORATION, as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
NATIONAL CITY BANK, as a Lender
By: /s/ Joseph D. Robison
----------------------------------
Joseph D. Robison
Title: Vice President
--------------------------------
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a Unit
of The Chase Manhattan Bank), as a Lender
By: /s/ Richard W. Stewart
----------------------------------
Richard W. Stewart
Title: Managing Director
--------------------------------
7
<PAGE> 8
OAK HILL SECURITIES FUND, L.P., as a Lender
By: Oak Hill Securities GenPar, L.P., its
General Partner
By: Oak Hill Securities MGP, Inc., its General
Partner
By:
----------------------------------
Title:
--------------------------------
MORGAN STANLEY SENIOR FUNDING. INC.,
as a Lender
By:
----------------------------------
Title:
--------------------------------
PILGRIM AMERICA PRIME RATE TRUST, as a Lender
By: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager,
By: /s/ Howard Tiffen
----------------------------------
Howard Tiffen
Title: Senior Vice President
--------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND" NEW
YORK BRANCH, as a Lender
By: /s/ Ellen A. Polansky
----------------------------------
Ellen A. Polansky
Title: Vice President
--------------------------------
By: /s/ W. Pieter C. Kodde
----------------------------------
W. Pieter C. Kodde
Title: Vice President
--------------------------------
8
<PAGE> 9
KZH-SOLEIL CORPORATION, as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
VAN KAMPFN CLOI, LIMITED
By: VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.,
As Collateral Manager, as a Lender
By: /s/ Jeffrey W. Maillet
----------------------------------
Jeffrey W. Maillet
Title: Senior Vice President and Director
--------------------------------
9
<PAGE> 10
CITY NATIONAL BANK, as a Lender
By: /s/
----------------------------------
Title: Vice President
--------------------------------
ORIX USA CORPORATION, as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
UNION BANK OF CALIFORNIA, N.A., as a Lender
By: /s/ David E. Taylor
----------------------------------
David E. Taylor
Title: Vice President
--------------------------------
NATEXIS BANQUE (Formerly Banque Francaise du
Commerce Exterieur), as a Lender
By: /s/ Iain A. Whyte
----------------------------------
Iain A. Whyte
Title: Vice President
--------------------------------
By: /s/ Daniule Touffu
----------------------------------
Daniule Touffu
Title: First Vice President and Regional Manager
--------------------------------
10
<PAGE> 11
DRESDNER BANK AG, NEW YORK BRANCH and
GRAND CAYMAN BRANCH, as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
By: /s/
----------------------------------
Title:
--------------------------------
SANWA BUSINESS CREDIT CORP., as a Lender
By: /s/
----------------------------------
Title:
--------------------------------
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/
----------------------------------
Title: Senior Relationship Manager
--------------------------------
TCW ASSET MANAGEMENT COMPANY, as Attorney-In-Fact
for United Companies Life Insurance Company, as a
Lender
By: /s/
----------------------------------
Title:
--------------------------------
TCW ASSET MANAGEMENT COMPANY, as Attorney-In Fact
for Integon Life Insurance Corporation, as a
Lender
By: /s/
----------------------------------
Title:
--------------------------------
11
<PAGE> 12
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
its investment adviser
By: /s/ Payson F. Swaffield
----------------------------------
Payson F. Swaffield
Title: Vice President
--------------------------------
SOUTHERN PACIFIC BANK
By: /s/ Chris Kelleher
----------------------------------
Chris Kelleher
Title: Vice President
--------------------------------
SWISS BANK CORPORATION
By: /s/
----------------------------------
Title:
--------------------------------
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/
----------------------------------
Title:
--------------------------------
PAMCO CAYMAN LTD.
By: Protective Asset Management
Company, as Collateral Manager
By:
----------------------------------
Title:
--------------------------------
12
<PAGE> 13
SUMITOMO TRUST & BANKING COMPANY, LTD.
By: /s/ Akifumi Shiozaki
----------------------------------
Akifumi Shiozaki
Title: Deputy General Manager
--------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ William M. Swenson
----------------------------------
William M. Swenson
Title: Authorized Signatory
--------------------------------
DLJ CAPITAL FUNDING, INC.
By: /s/
----------------------------------
Title:
--------------------------------
ML CBO IV (Cayman) Ltd.
By: Protective Asset Management
Company, as Collateral Manager
By: /s/ Mark K. Okadn CFA
----------------------------------
Mark K. Okadn CFA
Title: Protective Asset Management Company
--------------------------------
13
<PAGE> 14
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Charles M. Fears
----------------------------------
Charles M. Fears
Title: Director
--------------------------------
ROYALTON COMPANY
By: Pacific Investment Management Company, as its
invesment advisor
By: PIMCO Management Inc., a general partner
By: /s/ Raymond G. Kennedy
----------------------------------
Raymond G. Kennedy
Title: Senior Vice President
--------------------------------
14
<PAGE> 1
EXHIBIT 10.28
April 15, 1998
Page 1
BANK OF AMERICA NATIONAL TRUST BANKERS TRUST COMPANY
AND SAVINGS ASSOCIATION 130 Liberty Street
BANCAMERICA ROBERTSON STEPHENS New York, New York 10006
231 South LaSalle Street
Chicago, Illinois 60697
April 15, 1998
DEL MONTE CORPORATION
One Market
San Francisco, California 94105
Attention: Thomas E. Gibbons, Treasurer
Re: Senior Secured Facilities for
Del Monte Corporation
Gentlemen:
You have advised us that Del Monte Corporation (the "Company") proposes
to engage in an amendment and restatement of its senior credit facilities
immediately following an initial public offering (the "Offering") of the common
stock of its parent corporation, Del Monte Foods Corporation ("DMFC"). You have
further advised us that, in connection with the Offering, each of DMFC and the
Company intends to redeem certain of its public indebtedness. Such amendment and
restatement, the Offering and such debt redemptions are collectively called the
"Transactions."
Sources and Uses of Funds
The approximate sources of funds for the Transactions are as follows:
<PAGE> 2
April 15, 1998
Page 2
<TABLE>
<CAPTION>
AMOUNT
SOURCES ($MILLIONS)
------- -----------
<S> <C>
Revolving Credit Facility (drawn amount) 87
Term Loan Facility
Tranche A term loan 150
Tranche B term loan 150 300
---
DEL MONTE SENIOR DEBT SUBTOTAL 387
Gross Proceeds of Offering 250
---
TOTAL SOURCES 637
===
</TABLE>
The approximate uses of funds in the Transactions are as follows:
<TABLE>
<CAPTION>
AMOUNT
USES ($MILLIONS)
---- -----------
<S> <C>
Refinance Senior Credit Facilities 460
Redeem DMFC Preferred Stock 40
Redemption of Company Senior Subordinated Notes 52
Redemption of DMFC Notes 47
Redemption Premiums 13
Fees and Expenses 25
---
TOTAL USES 637
===
</TABLE>
You have further advised us that the Revolving Credit Facility will be
used to provide for the working capital requirements and other general corporate
purposes of the Company and its subsidiaries upon consummation of the
Transactions.
Facilities Commitment
Based on (and subject to) the foregoing, each of Bank of America
National Trust and Savings Association ("BofA") and Bankers Trust Company
("BTCo.") is severally pleased to confirm that it is willing to provide up to
$50 million of an aggregate $700 million of senior secured bank facilities,
under which the "Del Monte Senior Debt Subtotal" described above will be
provided. The senior secured bank facilities (the "Facilities") will be
comprised of a six-year Tranche A term loan of up to $150 million and an
eight-year Tranche B term loan of up to $150 million (collectively, the "Term
Loan Facility") and a six-year borrowing base revolving credit
<PAGE> 3
April 15, 1998
Page 3
facility of up to $400 million, which shall be available for working capital
loans, letters of credit and general corporate purposes, with sublimits to be
agreed upon (the "Revolving Credit Facility").
Upon your acceptance of this letter, BofA's affiliate, BancAmerica
Robertson Stephens ("BARS"), will endeavor on a best efforts basis, as arranger
(in such capacity, the "Arranger"), to form a group of banks, financial
institutions and other "accredited investors" (as defined in SEC regulations;
each such bank, financial institution and accredited investor, including BofA
and BTCo., being a "Lender" and collectively the "Lenders") to commit to the
balance of the Facilities. BofA proposes to act as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"). BTCo. proposes to act as
documentation agent for the Lenders (in such capacity, the "Documentation Agent"
and, together with the Administrative Agent, the "Agents"). The principal terms
and conditions of each of the Facilities are set forth in the Summary of Terms
attached hereto as Annex A.
To assist the Arranger in its syndication efforts, you agree to provide
upon their request all information reasonably deemed necessary by them to
complete successfully the syndication of the Facilities, including but not
limited to information and projections prepared by you or on your behalf
relating to the Transactions. You hereby authorize the Arranger to commence its
syndication efforts immediately, and agree actively to assist the Arranger in
achieving a syndication that is satisfactory to the Arranger and you. The
Arranger reserves the right (in consultation with you) to allocate the
commitments offered by the Lenders.
BofA Relationships
BARS is a wholly-owned, non-bank subsidiary of BankAmerica Corporation,
the parent company of BofA. BARS is a broker-dealer registered with the
Securities and Exchange Commission, and is a member of the National Association
of Securities Dealers, Inc. and the Securities Investor Protection Corporation.
BofA and BARS shall have the right to assign and delegate their
respective commitments, rights and obligations under this letter and the Fee
Letter (defined below) to their respective affiliates.
Representations and Covenants
The Company hereby represents that: (a) all information (including,
without limitation, the Form S-1 Registration Statement of DMFC filed with the
Securities and Exchange
<PAGE> 4
April 15, 1998
Page 4
Commission on March 19, 1998), other than Projections (as defined below), which
has been made available to the Agents, the Arranger or the Lenders by the
Company or any of its representatives in connection with the transactions
contemplated hereby (together with information hereafter made available, the
"Information"), taken as a whole, is now, and as supplemented by the Company
prior to the closing date, as of the closing date will be, complete and correct
in all material respects and does not now, and as supplemented by the Company
prior to the closing date, on the closing date will not, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which such
statements were or are made, not materially misleading; and (b) all financial
projections concerning DMFC and the Company that have been or are hereafter made
available to the Agents, the Arranger or the Lenders by the Company or any of
its representatives (the "Projections") prior to the closing date in connection
with the transactions contemplated hereby have been or, in the case of such
Projections made available after the date hereof, will be prepared in good faith
based upon assumptions believed by the Company at the time of preparation
thereof to be reasonable (it being understood that the Projections are subject
to significant uncertainties and contingencies, many of which are beyond the
control of the Company, and that no assurance can be given that such Projections
will be realized). In arranging and syndicating the Facilities, the Arranger
will be using and relying on the Information and the Projections without
independent verification thereof. The representations and covenants contained in
this paragraph shall remain effective until a definitive financing agreement is
executed and thereafter the disclosure representations and covenants contained
in this letter shall be superseded by those contained in such definitive
financing agreement.
Expenses and Indemnification
The Company shall pay the reasonable costs and expenses (including the
reasonable fees and expenses of counsel (including the non-duplicative allocated
costs of any internal counsel) to the Agents, reasonable professional fees of
consultants and other experts and reasonable out-of-pocket expenses of the
Agents, including without limitation syndication expenses) arising in connection
with the preparation, execution and delivery of this letter and the definitive
financing agreements and the syndication of the Facilities. The Company further
agrees to indemnify and hold harmless each of the Lenders (including BofA and
BTCo.) and each controlling person, director, officer, employee, agent, attorney
and affiliate thereof (each an "indemnified person") from and against any
losses, claims, damages, liabilities or other expenses to which a Lender or such
indemnified persons may become subject, insofar as such losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses arise out of or in any way relate to or result from
the actions of the Company and its affiliates in connection with the
Transactions, any of the statements contained in this letter or
<PAGE> 5
April 15, 1998
Page 5
relating to the extension of the financing contemplated by this letter, or any
use or intended use of the proceeds of any of the loans and other extensions of
credit contemplated by this letter, and to reimburse each of the Lenders and
each indemnified person for any reasonable legal or other expenses incurred in
connection with investigating, defending or participating in any such
investigation, litigation or other proceeding (whether or not such Lender or any
such indemnified person is a party to any investigation, litigation or
proceeding out of which any such expenses arise); provided that the indemnity
contained herein shall not apply to the extent that such losses, claims,
damages, liabilities or other expenses result from the gross negligence or
willful misconduct of such Lender or indemnified person. The obligations to
indemnify each Lender and such indemnified persons and pay such legal and other
expenses shall remain effective until the initial funding under a definitive
financing agreement and thereafter the indemnification and expense reimbursement
obligations contained herein shall be superseded by those contained in such
definitive financing agreement. Neither BofA or BTCo. nor any other Lender nor
the Company shall be responsible or liable to any other person for consequential
damages which may be alleged as a result of this letter. The foregoing
provisions of this paragraph shall be in addition to any rights that BofA or
BTCo. or any indemnified person may have at common law or otherwise.
Confidentiality
In connection with the services to be provided hereunder by the Agents,
the Agents may employ the services of their respective affiliates. The Agents
may share with such affiliates, and such affiliates may share with the Agents,
any information concerning the Company and its subsidiaries; provided that the
Agents and such affiliates agree to hold any non-public information
confidential. Any such affiliate so employed (and its directors, officers,
employees, agents, attorneys and affiliates) shall be entitled to all of the
benefits afforded to the Agents hereunder.
No Disclosure
This letter is confidential and shall not be disclosed by you to any
person other than your accountants, attorneys and, to the extent approved by the
Agents, other advisors, and then only on a confidential basis and in connection
with the Transactions and the related transactions contemplated herein.
Additionally, you may make such disclosures of this letter (and the Fee Letter
(as defined below)) as are required by law or judicial process and you may make
such disclosures of this letter (but not the Fee Letter) as may be requested or
appropriate in connection with any litigation.
<PAGE> 6
April 15, 1998
Page 6
Termination
Our offer will terminate on April 16, 1998, unless on or before that
date you sign and return an enclosed counterpart of this letter together with an
executed copy of the accompanying letter concerning certain fee arrangements
(the "Fee Letter"). The Facilities referred to herein shall in no event be
available unless the Transactions have been consummated on or prior to July 31,
1998.
Governing Law; Counterparts
This letter agreement shall be construed in accordance with the internal
laws of the State of New York. This letter agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
<PAGE> 7
We appreciate having been given the opportunity by you to be involved in
this transaction.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/William J. Stafeil
---------------------------------------
Title: Vice President
------------------------------------
BANCAMERICA ROBERTSON STEPHENS
By: /s/Mark L. Rice
---------------------------------------
Title: Managing Director
------------------------------------
BANKERS TRUST COMPANY
By: /s/Virginia M. Summer
---------------------------------------
Title: Managing Director
------------------------------------
AGREED AND ACCEPTED AS OF
April 15, 1998
DEL MONTE CORPORATION
By: /s/T.C. Gibbons
---------------------------------------
Title: Senior Vice President & Treasurer
------------------------------------
A-7
<PAGE> 8
ANNEX A
DEL MONTE CORPORATION
SUMMARY OF TERMS
This Summary of Terms is intended as an outline of certain of the
material terms of the Facilities but does not include descriptions of all of the
terms, conditions and other provisions that are to be contained in the
definitive documentation. This Summary of Terms is not intended to limit the
scope of discussions and negotiation of any and all matters not inconsistent
with the specific matters set forth herein. All terms defined in the financing
letter to which this Annex A is attached (the "Financing Letter") and not
otherwise defined herein shall have the same meanings when used herein.
I. THE FACILITIES
Borrower: The Company.
Arranger: BancAmerica Robertson Stephens (in such capacity, the
"Arranger").
Lenders: Bank of America National Trust and Savings Association
and certain of its affiliates ("BofA"), Bankers Trust
Company and certain of its affiliates ("BTCo.") and a
syndicate of banks, financial institutions and other
accredited investors (the "Lenders").
Administrative
Agent: BofA (in such capacity, the "Administrative Agent").
Documentation
Agent: BTCo. (in such capacity, the "Documentation Agent"; and
with the Administrative Agent, the "Agents").
Type and Amount: The Facilities shall consist of a Term Loan Facility and
a Revolving Credit Facility.
Term Loan Facility. The Term Loan Facility will consist
of Tranche A Loans and Tranche B Loans.
A-8
<PAGE> 9
Tranche A Loans. The Tranche A Loans will have a final
maturity date of approximately six years after the
Closing and be in an original principal amount of up to
$150 million. Commencing on June 30, 1999, quarterly
amortization will be required in aggregate quarterly
amounts of $7.5 million.
Tranche B Loans. The Tranche B Loans will have a final
maturity date of approximately eight years after the
Closing Date and be in an original principal amount of
up to $150 million. Commencing on June 30, 1999,
quarterly amortization will be required in aggregate
quarterly amounts of $375,000 each for 24 consecutive
quarters and quarterly amortization will be required in
the eighth year in an aggregate annual amount of $141
million.
Revolving Credit Facility. The Revolving Credit Facility
will have a final maturity date of six years after the
Closing Date and be in an amount of up to $400 million,
which shall be available for working capital loans and
other general corporate purposes and a portion of up to
$70 million of which shall be available for letters of
credit. Availability under the Revolving Credit Facility
will be subject to a borrowing base with eligibility
requirements and advance rates as set forth in the
Company's Amended and Restated Credit Agreement dated as
of December 17, 1997 (the "Existing Credit Agreement").
Up to $25 million of the Revolving Credit Facility may
be made available by BofA as a risk-participated
swingline facility.
Guarantors: Del Monte Foods Company ("DMFC"), the Company's parent,
and all material domestic subsidiaries of the Company.
Security: All extensions of credit under the Facilities to the
Company and guaranties of material domestic subsidiaries
of the Company will be secured by all existing and
after-acquired personal property of the Company and its
material domestic subsidiaries, including all
outstanding capital stock of all subsidiaries of the
Company and any intercompany debt obligations, and,
subject to exceptions to be agreed upon, all existing
and after-acquired real property fee and leasehold
interests. DMFC's guaranty will be secured by a pledge
of all outstanding capital stock of the Company.
A-9
<PAGE> 10
The Facilities will continue to be secured by the
collateral securing the Existing Credit Agreement, and
will be secured by all after-acquired property.
Negative pledge on all assets of DMFC, the Company and
its subsidiaries.
Interest Rates: All amounts outstanding under the Facilities initially
shall bear interest, at the Company's option, as
follows:
A. With respect to the Tranche A Loans and loans
made under the Revolving Credit Facility:
(i) at the Base Rate plus 0.50% per annum;
or
(ii) at the Euro-Dollar Rate plus 1.50% per
annum.
B. With respect to the Tranche B Loans:
(i) at the Base Rate plus 0.875% per annum;
or
(ii) at the Euro-Dollar Rate plus 1.875% per
annum.
Loans outstanding under the swingline facility shall
bear interest at the Base Rate plus 0.50% per annum and
such outstanding loans shall not constitute usage of the
Revolving Credit Facility for purposes of calculating
the commitment fee.
Beginning when the compliance certificate for the
Company's fiscal year ended 6/30/98 has been received by
the Administrative Agent, there shall be adjustments in
the interest rates set forth above for the Tranche A
Loans, the Revolving Credit Facility and Tranche B
Loans, as set forth on Schedule I hereto.
As used herein:
"Base Rate" means the highest of (i) the rate of
interest publicly announced by BofA as its "reference
rate" (the "Reference Rate"), and (ii) the federal funds
effective rate from time to time plus 0.5%.
A-10
<PAGE> 11
"Euro-Dollar Rate" means the rate (adjusted for
statutory reserve requirements for eurocurrency
liabilities) appearing on page 3750 of the Telerate
screen corresponding to interest periods of one, two,
three or six months (as selected by the Company) (or, if
such rate is not available, the rate at which eurodollar
deposits for such periods are offered to BofA in the
interbank eurodollar market).
Interest on loans during the continuance of an Event of
Default shall accrue at a rate equal to the rate on
loans bearing interest at the rate determined by
reference to the Base Rate plus an additional two
percentage points (2.00%) per annum and shall be payable
on demand.
Interest on Base Rate loans bearing interest by
reference to the Reference Rate shall be calculated on
the basis of a year of 365 (or, if applicable, 366) days
and for actual days elapsed. All other interest rates
shall be calculated on the basis of a year of 360 days
and for actual days elapsed.
Interest Payments: Quarterly for Base Rate Loans; on the last day of
interest periods for Euro-Dollar Loans (and at the end
of every three months, in the case of interest periods
of longer than three months); and upon prepayment, in
each case payable in arrears.
Interest Rate
Protection: The Company will either (i) maintain in effect the
interest rate protection agreements put in place in
connection with the Existing Credit Agreement for the
remainder of their respective terms or (ii) put in place
replacement arrangements on terms no less favorable for
a term at least equal to the remaining terms of interest
rate protection arrangements replaced. Interest rate
swaps, caps or other hedging agreements provided by any
Lender or affiliate of any Lender will be equally and
ratably secured by the collateral described under
"Security" above and covered by the guaranties described
under "Guarantors" above.
Letter of Credit
Fee: The letter of credit fee for trade letters of credit
shall be a rate per annum equal to the Euro-Dollar
margin for Revolving Credit Loans minus 0.50% and for
all other letters of credit shall be a per annum rate
equal to the Euro-Dollar margin for Revolving Credit
A-11
<PAGE> 12
Loans, which, in each case, shall be shared by all
Lenders, and an additional 0.25% per annum to be
retained by BofA for issuing the letters of credit,
based upon the amount available for drawing under
outstanding letters of credit. There shall be
adjustments in the letter of credit fees set forth above
as set forth on Schedule I hereto.
Commitment Fees: Commitment fees equal to 0.375% per annum times the
daily average unused portion of the Revolving Credit
Facility shall accrue from the Closing Date and shall be
payable quarterly in arrears on the unused portion of
the Revolving Credit Facility, as the case may be, and
computed on the basis of a 360-day year. There shall be
adjustments in the commitment fee set forth above as set
forth on Schedule I hereto.
Voluntary
Prepayments: The Facilities may be prepaid in whole or in part
without premium or penalty (Euro-Dollar Loans prepayable
only upon payment of related breakage) and the Lenders'
commitments relative thereto reduced or terminated upon
such notice and in such amounts as may be agreed upon.
Voluntary prepayments of the Term Loan Facility shall be
applied ratably among Tranche A Loans and Tranche B
Loans and shall be applied pro rata to scheduled
amortization payments.
Notwithstanding the foregoing, in the case of any
voluntary prepayment to be applied to the Tranche B
Loans, the Company may elect to offer the holders of
such term loans the opportunity to waive the right to
receive the amount of such voluntary prepayment. In the
event any such holders elect to waive such right, 50% of
the amount that would otherwise have been applied as
such voluntary prepayment of the applicable term loans
of such holders shall be applied to the prepayment of
the Tranche A Loans and 50% of such amount shall be
retained by the Company.
Mandatory
Prepayments: The Company shall make the following mandatory
prepayments (subject to certain exceptions and basket
amounts to be negotiated in the definitive financing
agreements):
A-12
<PAGE> 13
1. Asset Sales -- prepayments in an amount equal to
100% of the net after-tax cash proceeds of the
sale or other disposition of any property or
assets of the Company or any of its subsidiaries
other than net cash proceeds of sales or certain
other dispositions in the ordinary course of
business, Assets Held for Sale (as defined in
the Existing Credit Agreement and including, in
any event, the Company's Stockton and San Jose
facilities), or the net after-tax cash proceeds
of the sale or other disposition of receivables,
payable within 180 days after receipt; provided
that the foregoing shall not apply to sales,
transfers or other dispositions of such assets
the proceeds (or an amount equal to anticipated
proceeds) of which are used or committed to be
used by the Company for the financing of the
replacement or substitution of such assets being
sold prior to or within 180 days after any such
sale;
2. Debt Financings -- prepayments in an amount
equal to 100% of the net cash proceeds received
from debt financings of DMFC, the Company or any
of its subsidiaries, payable promptly following
receipt;
3. Equity Offerings -- prepayments in an amount
equal to 50% of the net cash proceeds received
from the issuance of equity securities DMFC, the
Company or any of its subsidiaries, payable
promptly following receipt;
4. Excess Cash Flow -- prepayments in an amount
equal to 50% of excess cash flow (to be
defined), payable within 90 days of fiscal
year-end (commencing with the fiscal year ending
June 30, 1999), reducing to 0% of excess cash
flow after the outstanding aggregate principal
amount of Term Loans has been repaid to 50% of
the Term Loans outstanding on the Closing Date.
All mandatory prepayments shall be applied first to
reduce term loans outstanding under the Term Loan
Facility to the full extent thereof and thereafter to
the permanent reduction of the commitments under the
Revolving Credit Facility. All mandatory prepayments
shall be applied ratably between Tranche A Loans and
Tranche B Loans and to scheduled amortization payments
of the Term Loan Facility as follows:
A-13
<PAGE> 14
1. Asset Sale Proceeds -- prepayment amount applied
pro rata to all remaining scheduled amortization
payments;
2. Excess Cash Flow and Equity Offerings --
prepayment amount applied pro rata to all
remaining scheduled amortization payments; and
3. Debt Financings -- prepayment amount applied to
remaining scheduled amortization payments in
inverse order of maturity.
Notwithstanding the foregoing, in the case of any
mandatory prepayment to be applied to the Tranche B
Loans, the Company may elect to offer the holders of
such term loans the opportunity to waive the right to
receive the amount of such mandatory prepayment. In the
event any such holders elect to waive such right, 50% of
the amount that would otherwise have been applied as
such mandatory prepayment of the applicable term loans
of such holders shall be applied to the prepayment of
the Tranche A Loans and 50% of such amount shall be
retained by the Company.
Representations
and Warranties: Customary and appropriate, including without limitation
due organization and authorization, financial condition,
no material adverse changes, title to properties, liens,
litigation, payment of taxes, no material adverse
agreements, compliance with laws, environmental
liabilities and full disclosure.
Covenants: Customary and appropriate affirmative and negative
covenants, including but not limited to financial
covenants related to minimum fixed charge coverage,
minimum net worth and maximum leverage tests. Other
covenants will include limitations on other
indebtedness, liens, investments, guarantees, restricted
junior payments (dividends, redemptions and payments on
subordinated debt), mergers and acquisitions, sales of
assets, capital expenditures, leases, appropriate for
financings of this type, including exceptions and
baskets to be mutually agreed upon.
The basket for permitted acquisitions in the Existing
Credit Agreement will be raised from $75 million to $150
million;
A-14
<PAGE> 15
provided that there will be disregarded for purposes of
the $150 million cap amounts paid in acquisitions for
which the Company has entered into definitive agreements
prior to the Closing Date and as to which, prior to the
effectiveness of the definitive loan documentation, the
Company has provided to the Lenders information
(including evidence of pro forma covenant compliance)
reasonably satisfactory to the Lenders.
The existing restriction on sale leasebacks in the
Existing Credit Agreement will be revised to permit the
Company to do sale leaseback transactions in an
aggregate amount not to exceed $25 million during the
life of the deal, so long as the resulting sale proceeds
are subject to the "Mandatory Prepayments" provision
above. Conforming changes will be made to the debt, lien
and asset sale covenants.
The restricted junior payments covenant referred to
above shall be revised from the Existing Credit
Agreement to permit, so long as no default has occurred
and is continuing, (i) the redemptions of DMFC and
Company public debt as identified in the sources and
uses table in the Financing Letter, (ii) semi-annual
dividends to DMFC commencing in 2003, each in an amount
sufficient to permit DMFC to pay its next scheduled
payment of cash interest on its 12.5% Senior Discount
Notes due 2007 (the "DMFC Notes") and (iii) other
dividends to DMFC; provided, that the Company (x) in the
cases of clauses (i) and (ii), both prior to and
immediately after giving effect to any such dividend,
must satisfy a pro forma ratio of leverage to EBITDA
(which ratio shall, in each case, be lower than the
corresponding ratio in the financial covenants) and (y)
in the case of clause (iii), both prior to and
immediately after giving effect to any such dividend,
must satisfy a pro forma ratio of leverage to EBITDA
(which ratio shall be lower than the corresponding ratio
in the financial covenants and shall be lower than the
ratio applicable to clause (ii) above).
Events of Default: Customary and appropriate, including without limitation
nonpayment of principal when due, nonpayment of
interest, fees or other amounts after a grace period to
be agreed upon, defaults under other agreements or
instruments of indebtedness in excess of specified
amounts, noncompliance with covenants (subject, in the
case of certain covenants, to a grace period to be
agreed upon),
A-15
<PAGE> 16
material inaccuracy of representations and warranties,
bankruptcy, unsatisfied judgments in excess of specified
amounts, impairment of security interests in collateral,
invalidity of guarantees, and "change of control" (to be
revised from the definition in the Existing Credit
Agreement to reflect the changed character of share
ownership following the Offering).
II. CONDITIONS TO LOANS
Certain Conditions
Precedent to
Initial Funding: Customary and appropriate conditions precedent to the
initial funding of the Facilities on the Closing Date
will include, without limitation, the following:
1. Satisfactory Financing Documentation. The
definitive documentation evidencing the
Facilities (the "Definitive Financing
Documents") shall be prepared by counsel to the
Agents and shall be in form and substance
reasonably satisfactory to the Agents and
Lenders.
2. Satisfactory Transaction Documentation. The
definitive documentation relating to the
Transactions shall be in form and substance
reasonably satisfactory to the Agents and
Lenders.
3. Offering, Prepayment and Redemptions. DMFC shall
have received not less than $225 million in
gross proceeds from the Offering. Of such
proceeds, DMFC may retain an amount not in
excess of 35% of the accreted value at the time
of redemption of DMFC Notes (plus an amount
equal to the applicable prepayment premium
thereon) to redeem such notes. DMFC shall have
contributed the balance of such proceeds to the
Company and the Company shall have redeemed not
more than 35% of its 12-1/4% Senior Subordinated
Notes due 2007. Furthermore, the Company shall
have paid down amounts outstanding under the
Existing Credit Facility such that, after giving
effect to the amendment and restatement thereof,
on the Closing Date the total amount drawn will
not exceed the amount set forth
A-16
<PAGE> 17
in the sources and uses table in the Financing
Letter across from the caption "Del Monte Senior
Debt Subtotal".
4. Syndication. The portion of the Facilities not
committed to in the Financing Letter shall have
been committed to by financial institutions
satisfactory to the Arranger and the Company.
5. Certain Approvals and Agreements. All
governmental and third party approvals necessary
in connection with the Transactions, the
financings contemplated hereby and the
continuing operations of the business of the
Company and its subsidiaries shall have been
obtained and be in full force and effect, and
all applicable waiting periods shall have
expired without any action being taken or
threatened by any competent authority which
would restrain, prevent or otherwise impose
adverse conditions on the Transactions or the
financing thereof, in each case except for such
governmental and third party approvals which the
failure to obtain would not, individually or in
the aggregate, have a material adverse effect on
the condition (financial or otherwise),
business, assets, liabilities, properties,
results of operations or prospects of the
Company (a "Material Adverse Effect").
6. Security. The Collateral Agent, for the benefit
of Lenders, shall have been granted on the
Closing Date a perfected security interest in
all assets to the extent described above under
"Security".
7. No Material Adverse Change or Effect. Since
December 31, 1997, there shall have occurred no
material adverse change in the condition
(financial or otherwise), business, assets,
liabilities, properties, results of operations
or prospects of the Company. The Agents shall
have been promptly notified of any conditions or
events not previously disclosed to the Agents
and of any new information or additional
developments concerning conditions or events
previously disclosed to the Agents which is
reasonably likely to have a Material Adverse
Effect.
A-17
<PAGE> 18
8. Customary Closing Documents. All documents
required to be delivered under the Definitive
Financing Documents, including customary legal
opinions, corporate records and documents from
public officials and officers' certificates as
to solvency and other corporate and financial
matters, shall have been delivered.
9. Structure of Transactions. The structure of the
Transactions shall be reasonably satisfactory to
the Agents.
Borrowings: The conditions to all borrowings will include
requirements relating to prior written notice of
borrowing, the accuracy of representations and
warranties, and the absence of any default or potential
event of default, and will otherwise be customary and
appropriate for financings of this type.
III. MISCELLANEOUS
Syndication: Without limiting the respective commitments of BofA and
BTCo. in the Financing Letter, a syndicate of financial
institutions will be arranged by the Arranger to provide
the Facilities. Company shall cooperate with the
Arranger in the syndication of the Facilities
(including, but not limited to, participation in
meetings with Lenders and assisting in the preparation
of a Confidential Information Memorandum and other
materials to be used in connection with such
syndication) and shall provide and cause its advisors to
provide all information reasonably deemed necessary by
the Arranger to complete a successful syndication. The
Company also agrees to coordinate with the Arranger's
primary syndication efforts any other financings by the
Company.
The Lenders may assign all or, in an amount of not less
than $5 million or, if less, the remaining loans and/or
commitments under the revolving credit or any tranche of
term loans, any part of their share of the Facilities to
affiliates or one or more banks or other entities that
are eligible assignees (to be described in the loan
documentation) which are acceptable to the Arranger and
the Company, such consent not to be unreasonably
withheld, and upon such assignment, such affiliate, bank
or entity shall become a Lender for all purposes of the
loan documentation; provided that
A-18
<PAGE> 19
assignments made to affiliates and other Lenders shall
not be subject to the $5 million minimum assignment
requirement. Lenders will have the right to sell
participations, subject to customary limitations on
voting rights and other terms to be negotiated, in their
share of the Facilities. Participants will be entitled
to benefit from the provisions set forth below in
"Taxes, Reserve Requirements & Indemnities" to the same
extent as if a Lender, but the Company will not be
required to pay any amount in respect thereof to a
participant that is greater than the amount the Company
would have been required to pay had no participation
been sold.
Requisite Lenders: Lenders holding in the aggregate more than 50% of the
commitments under the Facilities.
Taxes, Reserve
Requirements &
Indemnities: All payments are to be made free and clear of any taxes
(other than franchise taxes and taxes on overall net
income), imposts, assessments, withholdings, or other
deductions whatsoever. Foreign Lenders (including
foreign transferees) shall furnish to Administrative
Agent (for delivery to the Company) appropriate
certificates or other evidence of exemption from U.S.
federal tax withholding.
The Company is to indemnify the Lenders against all
increased costs of capital resulting from reserve
requirements or otherwise imposed, in each case subject
to customary costs, capital adequacy and similar
provisions to the extent not taken into account in the
calculation of the Base Rate or the Euro-Dollar Rate.
Governing Law
and Jurisdiction: The Company will submit to the non-exclusive
jurisdiction and venue of the federal and state courts
of the State of New York and will waive any right to
trial by jury. New York law shall govern loan
documentation.
Counsel to Agents: Mayer, Brown & Platt.
A-19
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Level II Level III
Level I Greater than or equal Greater than or equal to
Greater than or to 3.50:1 but less than 3:00:1 but less than
Senior Debt to EBITDA Ratio(1/) equal to 4:00:1 4:00:1 3.50:1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Applicable Base Rate Margin 0.75% 0.50% 0.25%
Revolver/Tranche A
- ------------------------------------------------------------------------------------------------------
Applicable Euro-Dollar Rate 1.75% 1.50% 1.25%
Margin Revolver/Tranche A
- ------------------------------------------------------------------------------------------------------
Applicable Euro-Dollar Rate 2.000% 1.875% 1.875%
Margin Tranche B
- ------------------------------------------------------------------------------------------------------
L/C Fee Rate for Commercial 1.25% 1.00% 0.75%
Letters of Credit
- ------------------------------------------------------------------------------------------------------
L/C Fee Rate for Standby 1.75% 1.50% 1.25%
Letters of Credit
- ------------------------------------------------------------------------------------------------------
Revolver Commitment Fee Rate 0.500% 0.375% 0.375%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Level IV
Greater than or equal to
2.50:1 but less than Level V
Senior Debt to EBITDA Ratio(1/) 3:00:1 Less than 2.50:1
- -----------------------------------------------------------------------------
<S> <C> <C>
Applicable Base Rate Margin 0.00% 0.00%
Revolver/Tranche A
- -----------------------------------------------------------------------------
Applicable Euro-Dollar Rate 1.00% 0.75%
Margin Revolver/Tranche A
- -----------------------------------------------------------------------------
Applicable Euro-Dollar Rate 1.750% 1.750%
Margin Tranche B
- -----------------------------------------------------------------------------
L/C Fee Rate for Commercial 0.50% 0.25%
Letters of Credit
- -----------------------------------------------------------------------------
L/C Fee Rate for Standby 1.00% .75%
Letters of Credit
- -----------------------------------------------------------------------------
Revolver Commitment Fee Rate 0.300% 0.250%
- -----------------------------------------------------------------------------
</TABLE>
- --------
(1/) Utilizes average monthly senior debt under the Revolver.
A-20
<PAGE> 1
EXHIBIT 10.29
PROMISSORY NOTE
$175,000.00 February 6, 1998
I, Richard G. Wolford, for value received, promise to pay to DEL
MONTE FOODS COMPANY, a Maryland corporation (the "Company"), the principal
amount of $175,000.00, plus interest on the outstanding principal amount and any
accrued interest thereon, at the time or times set forth below. Interest on the
principal amount shall be compounded semiannually using a rate: (i) for the
period from the date hereof through July 31, 1998, equal to the Federal
short-term rate in effect under Section 1274(d) of the Internal Revenue Code of
1986 (the "Code") for January 1998 and (ii) for each six-month period
thereafter, equal to the Federal short-term rate in effect under Section 1274(d)
of the Code for the first month of such period.
Except as set forth in the following paragraph, the principal amount of
this Promissory Note and all accrued interest shall be fully due and payable on
the sixtieth day following the date that I cease to be an employee of the
Company or any of its affiliates for any reason (the "Due Date"), and may be
prepayed in whole or in part at any time at my election; provided, however, that
simultaneously with the sale (prior to the Due Date) of any shares of the common
stock of the Company, par value $.01 per share ("Common Stock"), owned by me and
pledged to secure my obligation under this Promissory Note, the principal amount
of this Promissory Note and all accrued interest thereon shall be due and
payable to the extent of the net cash proceeds (as defined below) from such sale
and such net cash proceeds shall be applied in full to the repayment of the
principal amount of this Promissory Note and all accrued interest thereon. Any
remaining principal amount of this Promissory Note and accrued interest thereon
remaining unpaid after the application of such net cash proceeds pursuant to the
immediately preceding sentence shall remain due and payable in accordance with
the terms of this Promissory Note. "Net cash proceeds" shall mean gross sales
proceeds less any sale commissions or withholding taxes.
So long as the provisions of Section 3(c) of the Stockholders' Agreement,
dated as of February 6, 1998, between me and the Company are in effect, any
principal amount of this Promissory Note and accrued interest thereon due and
payable upon the Due Date shall not be due and payable until the earlier of (1)
the last day of the period during which I have the right to sell shares of
Common Stock to the Company pursuant to Section 3(c) (if I have not given
written notice of my exercise of such right prior to that day) and (2) to the
extent of the net cash proceeds received therefrom, the date on which I sell
shares of Common Stock to the Company pursuant to Section 3(c).
Interest on this Promissory Note shall accrue from the date of issuance
until repayment of the principal and payment of all accrued interest in full.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
Payments of the principal amount of this Promissory Note and any interest
thereon shall be made in lawful money of the United States of America.
<PAGE> 2
This Promissory Note is non-transferable, except by operation of law.
I agree and covenant that the Company or any of its affiliates shall have
full recourse against me for the payment of the entire principal amount of this
Promissory Note and all accrued interest thereon.
I waive my right to presentment, protest and demand, notice of protest,
and notice of demand or dishonor or nonpayment of this Promissory Note.
I promise to pay all costs and expenses, including reasonable attorneys'
fees and disbursements, incurred by the Company or any of its affiliates in the
enforcement of my obligations hereunder.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of California, without reference to its principles
of conflicts of law.
IN WITNESS WHEREOF, I have caused this Promissory Note to be duly
executed, all as of the day and year first above written.
----------------------------
Richard G. Wolford
<PAGE> 3
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On the ____ day of March, nineteen hundred and ninety eight, before
me personally came Richard G. Wolford, to me known to be the individual
described in, and who executed, the foregoing instrument, and acknowledged that
he executed the same.
(SEAL) Notary Public
------------------------------
<PAGE> 1
EXHIBIT 10.30
PROMISSORY NOTE
$175,000.00 February 6, 1998
I, Wesley J. Smith, for value received, promise to pay to DEL MONTE
FOODS COMPANY, a Maryland corporation (the "Company"), the principal amount of
$175,000.00, plus interest on the outstanding principal amount and any accrued
interest thereon, at the time or times set forth below. Interest on the
principal amount shall be compounded semiannually using a rate: (i) for the
period from the date hereof through July 31, 1998, equal to the Federal
short-term rate in effect under Section 1274(d) of the Internal Revenue Code of
1986 (the "Code") for January 1998 and (ii) for each six-month period
thereafter, equal to the Federal short-term rate in effect under Section 1274(d)
of the Code for the first month of such period.
Except as set forth in the following paragraph, the principal amount of
this Promissory Note and all accrued interest shall be fully due and payable on
the sixtieth day following the date that I cease to be an employee of the
Company or any of its affiliates for any reason (the "Due Date"), and may be
prepayed in whole or in part at any time at my election; provided, however, that
simultaneously with the sale (prior to the Due Date) of any shares of the common
stock of the Company, par value $.01 per share ("Common Stock"), owned by me and
pledged to secure my obligation under this Promissory Note, the principal amount
of this Promissory Note and all accrued interest thereon shall be due and
payable to the extent of the net cash proceeds (as defined below) from such sale
and such net cash proceeds shall be applied in full to the repayment of the
principal amount of this Promissory Note and all accrued interest thereon. Any
remaining principal amount of this Promissory Note and accrued interest thereon
remaining unpaid after the application of such net cash proceeds pursuant to the
immediately preceding sentence shall remain due and payable in accordance with
the terms of this Promissory Note. "Net cash proceeds" shall mean gross sales
proceeds less any sale commissions or withholding taxes.
So long as the provisions of Section 3(c) of the Stockholders'
Agreement, dated as of February 6, 1998, between me and the Company are in
effect, any principal amount of this Promissory Note and accrued interest
thereon due and payable upon the Due Date shall not be due and payable until the
earlier of (1) the last day of the period during which I have the right to sell
shares of Common Stock to the Company pursuant to Section 3(c) (if I have not
given written notice of my exercise of such right prior to that day) and (2) to
the extent of the net cash proceeds received therefrom, the date on which I sell
shares of Common Stock to the Company pursuant to Section 3(c).
Interest on this Promissory Note shall accrue from the date of issuance
until repayment of the principal and payment of all accrued interest in full.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
Payments of the principal amount of this Promissory Note and any interest
thereon shall be made in lawful money of the United States of America.
<PAGE> 2
This Promissory Note is non-transferable, except by operation of law.
I agree and covenant that the Company or any of its affiliates shall have
full recourse against me for the payment of the entire principal amount of this
Promissory Note and all accrued interest thereon.
I waive my right to presentment, protest and demand, notice of protest,
and notice of demand or dishonor or nonpayment of this Promissory Note.
I promise to pay all costs and expenses, including reasonable attorneys'
fees and disbursements, incurred by the Company or any of its affiliates in the
enforcement of my obligations hereunder.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of California, without reference to its principles
of conflicts of law.
IN WITNESS WHEREOF, I have caused this Promissory Note to be duly
executed, all as of the day and year first above written.
----------------------
Wesley J. Smith
<PAGE> 3
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On the ____ day of March, nineteen hundred and ninety eight, before
me personally came Wesley J. Smith, to me known to be the individual described
in, and who executed, the foregoing instrument, and acknowledged that he
executed the same.
(SEAL) Notary Public
------------------------------
<PAGE> 1
EXHIBIT 10.31
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture"),
dated as of December 19, 1997, as made by and among DEL MONTE CORPORATION, a
New York corporation (the "Company"), DEL MONTE FOODS COMPANY, a Maryland
corporation, as Guarantor (the "Holdings"), and MARINE MIDLAND BANK, a New York
state banking corporation and trust company, as Trustee (the "Trustee"), to
amend that certain Indenture dated April 18, 1997 pursuant to which the
Company issued $150,000,000 12-1/4% Senior Subordinated Notes due 2007 and
Series B 12-1/4% Senior Subordinated Noted due 2007.
Recitals:
WHEREAS, the parties hereto entered into that certain Indenture dated as
of April 18, 1997 (the "Indenture") pursuant to which the Company issued those
certain 12-1/4% Senior Subordinated Notes due 2007 and Series B 12-1/4% Senior
Subordinated Notes due 2007; and
WHEREAS, the parties hereto now wish to make certain changes to the
Indenture as hereinafter set forth:
NOW, THEREFORE, in consideration of the premises, mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto agree
as follows:
1. Consolidated Net Income. Line 24 of the definition of "Consolidated
Net Income" in Section 1.01 of the Indenture shall be, and hereby is, amended
by (a) deleting the word "or" and inserting a comma after the word
"amortization" therein and (b) inserting the words "or non-cash charge" after
the word depreciation."
2. Ratification of Indenture. As amended by this First Supplemental
Indenture, the Indenture and the Notes are in all respects ratified and
confirmed and the Indenture as so amended by this First Supplemental Indenture
shall be read, taken and construed as one and the same instrument.
3. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for the correctness of the recitals of fact herein, all of which are
made by the Company, and the Trustee shall not be responsible or accountable in
any manner whatsoever for or with respect to the validity or sufficiency of
this First Supplemental Indenture (other than for its due execution hereof) or
of the due execution hereof by the Company.
-1-
<PAGE> 2
4. Miscellaneous.
(a) This First Supplemental Indenture may be executed in any number of
counterparts and by each of the parties hereto on separate counterparts, each of
which, once executed and delivered, shall be deemed to be an original and all of
which taken together shall constitute but one and same instrument.
(b) This First Supplemental Indenture shall be governed and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
DEL MONTE CORPORATION
By /s/ DAVID L. MEYERS
-------------------------------------
David L. Meyers
Executive Vice President,
Administration & Chief
Financial Officer
DEL MONTE FOODS COMPANY,
as Guarantor
By /s/ DAVID L. MEYERS
-------------------------------------
David L. Meyers
Executive Vice President,
Administration & Chief
Financial Officer
MARINE MIDLAND BANK,
as Trustee
By /s/ METIN CANER
-------------------------------------
Metin Caner
Vice President
-2-
<PAGE> 1
EXHIBIT 11.1
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER WEIGHTED AVERAGE COMMON SHARE(a)
(In Millions, Except Share Data)
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Basic and fully diluted
Earnings:
Net income (loss) $ 5 $ 88 $ (56)
Preferred stock dividends (71) (82) (70)
-------- ------- ---------
Net income (loss) attributable to common shares $ (66) $ 6 $ (126)
======== ======= =========
Shares:
Weighted average number of common shares outstanding 400,285 391,806 6,991,111
======== ======= =========
Basic and fully diluted
earnings per common share $(163.69) $ 14.87 $ (18.01)
======== ======= =========
</TABLE>
(a) See accompanying notes to June 30, 1995, 1996, and 1997 consolidated
financial statements.
<PAGE> 1
EXHIBIT 12.1
DEL MONTE FOODS COMPANY AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
Pro Forma Pro forma
Year Year Year Year Year Year Nine Months Nine Months
Ended Ended Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30, March 31, March 31,
1993 1994 1995 1996 1997 1997 1998 1998
-------- -------- -------- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated pre-tax income
(loss)....................... $(142) $ 11 $ 15 $119 $(14) $(67) $ 2 $(16)
Interest expense............... 68 61 76 67 52 93 58 72
Interest portion of rent
expense...................... 9 9 11 9 11 11 9 9
----- ---- ---- ---- ---- ---- --- ----
Earnings............... $ (65) $ 81 $102 $195 $ 49 $ 37 $ 69 $ 65
===== ==== ==== ==== ==== ==== === ====
Interest expense............... $ 68 $ 61 $ 76 $ 67 $ 52 $ 93 $ 58 $ 72
Interest portion of rent
expense(a)................... 9 9 11 9 11 11 9 9
----- ---- ---- ---- ---- ---- --- ----
Fixed charges.......... $ 77 $ 70 $ 87 $ 76 $ 63 $104 $ 67 $ 81
===== ==== ==== ==== ==== ==== === ====
Ratio of earnings to fixed
charges...................... N/A 1.2x 1.2x 2.6x N/A N/A 1.0x N/A
Surplus (deficiency) of
earnings available to
cover fixed charges.......... $(142) $ 11 $ 15 $119 $(14) $(67) $ 2 $(16)
</TABLE>
(a) Interest portion of rent expense is assumed equal to 33% of operating lease
and rental expense for the period.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF DEL MONTE FOODS COMPANY
Subsidiary Jurisdiction
- ---------- ------------
Del Monte Corporation New York
Mike Mac IHC, Inc. Delaware
Hi Continental Corporation California
Oak Grove Trucking Company California
Contadina Foods, Inc. Delaware
All subsidiaries are wholly owned, directly or indirectly, by Del Monte Foods
Company.
<PAGE> 1
EXHIBIT 23.1
Conformed Copy
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated August 29, 1996, in Amendment No. 1 to the
Registration Statement (Form S-1 No. 333-48235) and related Prospectus of Del
Monte Foods Company for the registration of 20,202,702 shares of its common
stock.
/S/ ERNST & YOUNG LLP
San Francisco, California
May 15, 1998
<PAGE> 1
EXHIBIT 23.2
Conformed Copy
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Del Monte Foods Company:
We consent to the use of our reports dated May 1, 1998 with respect to Del Monte
Foods Company included herein and to the reference to our firm under the heading
"Experts" in the Registration Statement (Form S-1) and related Prospectus of Del
Monte Foods Company. Such reports state that we expect to issue our reports upon
the effectiveness of the stock split for which the financial statements are
adjusted.
/s/ KPMG Peat Marwick LLP
San Francisco, California
May 15, 1998
<PAGE> 1
Exhibit 23.3
Conformed Copy
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Del Monte Foods Company
We consent to the inclusion in the registration statement on Form S-1 of
Del Monte Foods Company of our report dated March 16, 1998, with respect to the
combined balance sheets of Contadina (a division of Nestle USA, Inc.) as of
December 18, 1997 and December 31, 1996, and the related statements of
operations, divisional equity, and cash flows for the period January 1, 1997 to
December 18, 1997 and for the year ended December 31, 1996, which report appears
in the Form 8-K/A of Del Monte Foods Company dated March 19, 1998.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
May 15, 1998
<PAGE> 1
EXHIBIT NO. 23.5
Conformed Copy
CONSENT OF A. C. NIELSEN COMPANY
We hereby consent to the use of our name in the Prospectus constituting
part of the Registration Statement on Form S-1 of Del Monte Foods Company
(Registration No. 333-48235) in connection with the presentation of market share
data contained therein as to which we or our data compilations are identified as
the source and to the use of such market share data.
This consent to the use of our name and data are conditioned upon your
accurate representation of the data as provided by ACNielsen.
We also consent to the filing of this consent as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
are "experts" within the meaning of the Securities Act of 1933, as amended, or
the rules and regulations of the Securities and Exchange Commission issued
thereunder with respect to any part of the Registration Statement, including
this exhibit.
A.C. Nielsen Company
By /s/
----------------------------------
Name: [ILLEGIBLE]
-------------------------------
Title: ASST. SECRETARY
------------------------------
May 15, 1998
