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Del Monte Foods Company DEF 14A 2007 Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No.__) Filed by the Registrant þ
Filed by a Party other than the Registrant o Check the
appropriate box:
Del Monte Foods Company
Payment of Filing Fee (Check the appropriate box)
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Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Del Monte Foods Company, a Delaware corporation (the
“Company”). The annual meeting will be held on
Thursday, September 27, 2007 at
10:00 a.m. Pacific Time at the Hyatt Regency
San Francisco, Five Embarcadero Center, San Francisco,
California 94111 for the following purposes:
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
NOMINEES AND IN FAVOR OF THE OTHER PROPOSALS OUTLINED IN
THE ACCOMPANYING PROXY STATEMENT.
The record date for the Annual Meeting of Stockholders is
August 2, 2007. Only stockholders of record at the close of
business on that date may vote at the annual meeting or any
adjournment thereof.
By Order of the Board of Directors,
James Potter
General Counsel and Secretary
San Francisco, California
August 8, 2007
You are invited to
attend the annual meeting in person. Whether or not you expect
to attend the annual meeting, please complete, date, sign and
return the enclosed proxy as promptly as possible in order to
ensure your representation at the annual meeting. A return
envelope (which is postage prepaid if mailed in the United
States) is enclosed for your convenience. Even if you have voted
by proxy, you may still vote in person if you attend the annual
meeting. Please note, however, that if your shares are held of
record by a broker, bank or other nominee and you wish to vote
at the annual meeting, you must obtain a proxy issued in your
name from the record holder of your shares.
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DEL
MONTE FOODS COMPANY
One Market @ The Landmark San Francisco, California 94105
PROXY
STATEMENT
FOR THE 2007 ANNUAL MEETING OF STOCKHOLDERS Questions and Answers about this Proxy Material and Voting
We sent you this proxy statement and the enclosed proxy card
because the Board of Directors of Del Monte Foods Company
(sometimes referred to as “we”, “us”,
“our”, “the Company” or “Del
Monte”) is soliciting your proxy to vote at the 2007 Annual
Meeting of Stockholders and at any adjournment or postponement
thereof. The annual meeting will be held on Thursday,
September 27, 2007 at 10:00 a.m. Pacific Time at
the Hyatt Regency San Francisco, Five Embarcadero Center,
San Francisco, California 94111. You are invited to attend
the annual meeting and we request that you vote on the proposals
described in this proxy statement. However, you do not need to
attend the annual meeting to vote your shares. Instead, you may
simply complete, sign and return the enclosed proxy card.
The Company intends to mail this proxy statement and
accompanying proxy card on or about August 9, 2007 to all
stockholders of record entitled to vote at the annual meeting.
Only stockholders of record at the close of business on
August 2, 2007 will be entitled to vote at the annual
meeting. On this record date, there were 202,529,176 shares
of common stock outstanding and entitled to vote.
If on August 2, 2007 your shares were registered directly
in your name with the Company’s transfer agent, The Bank of
New York, then you are a stockholder of record. As a stockholder
of record, you may vote in person at the annual meeting or vote
by proxy. Whether or not you plan to attend the annual meeting,
we urge you to fill out and return the enclosed proxy card to
ensure your vote is counted.
If on August 2, 2007 your shares were held in an account at
a brokerage firm, bank, dealer, or other similar organization,
then you are the beneficial owner of shares held in “street
name” and these proxy materials are being forwarded to you
by that organization. The organization holding your account is
considered the stockholder of record for purposes of voting at
the annual meeting. As a beneficial owner, you have the right to
direct your broker or other agent on how to vote the shares in
your account. You are also invited to attend the annual meeting.
However, since you are not the stockholder of record, you may
not vote your shares in person at the annual meeting unless you
request and obtain a valid proxy from your broker or other agent.
There are three matters scheduled for a vote:
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If you are a stockholder of record, you may vote in person at
the annual meeting or vote by proxy using the enclosed proxy
card. Whether or not you plan to attend the annual meeting, we
urge you to vote by proxy to ensure your vote is counted. You
may still attend the annual meeting and vote in person if you
have already voted by proxy.
If you are a beneficial owner of shares registered in the name
of your broker, bank, or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from Del Monte. Simply
complete and mail the proxy card to ensure that your vote is
counted. Alternatively, you may vote by telephone or over the
internet as instructed by your broker or bank. To vote in person
at the annual meeting, you must obtain a valid proxy from your
broker, bank, or other agent. Follow the instructions from your
broker, bank or other agent included with these proxy materials,
or contact your broker, bank or other agent to request a proxy
form.
On each matter to be voted upon, you have one vote for each
share of common stock you own as of August 2, 2007.
If you return a signed and dated proxy card without marking any
voting selections, your shares will be voted “For” the
election of all nominees for director, “For” the
approval of the amendment and restatement of the Del Monte Foods
2002 Stock Incentive Plan and “For” the ratification
of KPMG LLP, an independent registered public accounting firm,
as independent auditors of Del Monte for its fiscal year ending
April 27, 2008. The Company does not expect that any
matters other than the election of directors and other proposals
described herein will be brought before the annual meeting. If
any other matter is properly presented at the annual meeting,
your proxy (one of the individuals named on your proxy card)
will vote your shares using his best judgment.
We will pay for the entire cost of soliciting proxies. In
addition to these mailed proxy materials, our directors and
employees may also solicit proxies in person, by telephone, or
by other means of communication. Directors and employees will
not be paid any additional compensation for soliciting proxies.
We may retain the services of Georgeson Inc. in connection with
soliciting proxies for the Annual Meeting of Stockholders for an
estimated fee of $12,500 to $15,000, plus appropriate
out-of-pocket expenses. We may also reimburse brokerage firms,
banks and other agents for the cost of forwarding proxy
materials to beneficial owners.
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If you receive more than one proxy card, your shares are
registered in more than one name or are registered in different
accounts. Please complete, sign and return each proxy card to
ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final
vote at the annual meeting. You may revoke your proxy in any one
of three ways:
Please note that to be effective, your new proxy card or written
notice of revocation must be received by the Corporate Secretary
prior to the annual meeting.
To be considered for inclusion in the Company’s proxy
statement and form of proxy for next year’s annual meeting,
your stockholder proposal must be submitted in writing by
April 11, 2008 to the Corporate Secretary, Del Monte Foods
Company, P.O. Box 193575, San Francisco,
California
94119-3575.
In accordance with the Company’s Bylaws, if you wish to
submit a proposal for consideration at next year’s annual
meeting that is not to be included in next year’s proxy
materials or wish to nominate a candidate for election to the
Board of Directors at next year’s annual meeting, your
proposal or nomination must be submitted in writing and received
by the Corporate Secretary not less than 90 days nor more
than 120 days before the date designated for the 2008
annual meeting or, if the 2008 annual meeting date has not been
designated at least 105 days before such annual meeting,
then no later than 15 days after the designation of the
annual meeting date. The Company currently anticipates that the
2008 Annual Meeting of Stockholders will be held on
September 25, 2008 and accordingly such proposals or
nominations must be received by the Corporate Secretary no later
than June 27, 2008 and no earlier than May 28, 2008.
Without limiting the Company’s ability to apply the advance
notice provisions in the Company’s Bylaws with respect to
the procedures which must be followed for a matter to be
properly presented at an annual meeting of stockholders, the
Company’s management will have discretionary authority to
vote all shares for which it has proxies using its best judgment
with respect to any matter received after June 27, 2008,
which may be in opposition to the matter.
A submission by a Del Monte stockholder must contain the
specific information required in Del Monte’s Bylaws. If you
would like a copy of Del Monte’s current Bylaws, please
write to the Corporate Secretary, Del Monte Foods Company,
P.O. Box 193575, San Francisco, California
94119-3575.
Del Monte’s current Bylaws may also be found on the
Company’s web site at www.delmonte.com.
Votes will be counted by the inspector of election appointed for
the annual meeting, who will separately count “For”
and “Against” votes, abstentions and broker non-votes.
A “broker non-vote” occurs when a nominee holding
shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting
power with respect to that proposal and has not received
instructions with respect to that proposal from the beneficial
owner (despite voting on at least one other proposal for which
it does have discretionary authority or for which it has
received instructions). Discretionary authority is allowed for
both Proposal 1 and Proposal 3. Discretionary
authority is not allowed for Proposal 2. Broker non-votes
have no
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effect and will not be counted towards the vote total for any
proposal. For Proposal 1, abstentions will have no effect.
For Proposal 2 and Proposal 3, abstentions will be
counted towards the vote total and will have the same effect as
“Against” votes.
A quorum of stockholders is necessary to hold a valid annual
meeting. A quorum will be present if at least a majority of the
outstanding shares are represented by proxy or by stockholders
present and entitled to vote at the annual meeting. On the
record date, there were 202,529,176 shares outstanding and
entitled to vote. Thus, 101,264,589 shares must be
represented by proxy or by stockholders present and entitled to
vote at the annual meeting to have a quorum.
Your shares will be counted towards the quorum only if you
submit a valid proxy (or one is submitted on your behalf by your
broker or bank) or if you vote in person at the annual meeting.
Abstentions and broker non-votes will be counted towards the
quorum requirement. If there is no quorum, the chairman of the
annual meeting or holders of a majority of the votes present at
the annual meeting may adjourn the annual meeting to another
time or date.
Preliminary voting results will be announced at the annual
meeting. Final voting results will be published in Del
Monte’s Quarterly Report on
Form 10-Q
for the second quarter of its 2008 fiscal year.
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Proposal 1
Del Monte’s Board of Directors is divided into three
classes. Each class consists, as nearly as possible, of
one-third of the total number of directors, and each class has a
three-year term. Vacancies on the Board of Directors may be
filled by persons elected by a majority of the remaining
directors. A director elected by the Board of Directors to fill
a vacancy in a class shall serve for the remainder of the full
term of that class, and until such director’s successor is
elected and qualified or until such director’s death,
resignation or removal. This includes vacancies created by an
increase in the number of directors.
The Board of Directors presently has eight members. There are
three directors in Class I, which is the class whose term
of office expires in 2007. Each of the nominees for election to
this class is currently a director of the Company and was
selected by the Board of Directors as a nominee in accordance
with the recommendation of the Nominating and Corporate
Governance Committee. Mr. Lund was appointed to the Board
of Directors in March 2005 to fill a vacancy. Mr. Lund was
appointed by the Board of Directors upon the recommendation of
the Nominating and Corporate Governance Committee following a
director search in which the Committee engaged the services of a
third-party search firm. The third-party search firm identified
and recommended Mr. Lund. Messrs. Morgan and Williams
have been members of the Board of Directors since they were
first appointed in December 2002. Both Mr. Morgan and
Mr. Williams were re-elected to the Board of Directors by
the stockholders at the 2004 Annual Meeting of Stockholders. If
elected at the annual meeting, each of the nominees would serve
until the 2010 annual meeting and until his successor is elected
and has qualified, or until such director’s death,
resignation or removal.
There is currently a vacancy among the Class II directors
of the Company. The Board of Directors expects to fill the
vacancy after the 2007 Annual Meeting of Stockholders based upon
a recommendation from the Nominating and Corporate Governance
Committee of the Board of Directors. The Nominating and
Corporate Governance Committee has engaged a third-party search
firm and is in the process of identifying candidates to
recommend to the Board in accordance with the Committee’s
Process for Identifying, Evaluating and Recommending Director
Nominees.
On June 4, 2007, the Board of Directors amended our bylaws
to provide that in an uncontested election directors shall be
elected by the vote of a majority of the votes cast by shares
present in person or represented by proxy and entitled to vote
at the meeting. Under our bylaws, an uncontested election is an
election in which the number of nominees is not greater than the
number of directors to be elected, as of the date that is
14 days in advance of the day we file our definitive proxy
statement with the Securities and Exchange Commission. In
contested elections, directors will be elected by plurality. In
other words, the nominees with the most votes (whether or not a
majority) will be elected.
The election of directors at the 2007 Annual Meeting of
Stockholders is an uncontested election. Therefore, for
Proposal 1, election of directors, a nominee will be
elected if the number of votes cast “For” that
director exceeds the number of votes cast “Against”
that director. Abstentions and broker non-votes will have no
effect.
Prior to an uncontested election, each incumbent director
nominee will submit to the Board of Directors an irrevocable
written offer to resign following the election in the event the
director fails to receive a majority of the votes cast in
connection with his reelection. Messrs. Lund, Morgan and
Williams have submitted such offers to the Board in connection
with the election of directors at the 2007 Annual Meeting of
Stockholders.
If an incumbent director fails to receive a majority of the
votes cast in connection with his reelection, the Nominating and
Corporate Governance Committee of the Board (excluding any
director who has failed to receive a majority of the votes
cast), will consider such director’s offer to resign and
make its recommendation to the Board within 60 days
following certification of the election results. In the event a
majority of the members of the Nominating and Corporate
Governance Committee are nominees who do not receive a majority
of the votes cast in connection with their reelection, the
independent members of the Board not so affected will consider
the offer to resign and make a recommendation or, in the
alternative, such independent
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members of the Board may designate a committee of independent
directors to perform the evaluation. The Board will consider the
Nominating and Corporate Governance Committee’s or
independent directors’ recommendation within 90 days
following certification of the election results. We will
publicly disclose the Board’s determination with respect to
any resignation offered under these circumstances by filing a
Current Report on
Form 8-K
with the Securities and Exchange Commission.
The following is a brief biography of each nominee and each
current director, including each director whose term will
continue after the 2007 Annual Meeting of Stockholders.
Nominees
for Election for Three-year Terms Expiring at the 2010 Annual
Meeting
Mr. Lund became a director of Del Monte in March 2005.
Mr. Lund served as Vice-Chairman of Albertson’s, Inc.,
a food and drug retailer, from June 1999 until June 2002.
Mr. Lund served as Chairman of the Board and Chief
Executive Officer of American Stores Company prior to its
acquisition by Albertson’s in June 1999. He also served as
President of American Stores Company from 1992 until 1995. Prior
to joining American Stores Company in 1977, Mr. Lund was a
practicing certified public accountant. Most recently, from May
2002 to December 2004, Mr. Lund served as the non-executive
Chairman of the Board of Mariner Health Care, Inc. a long-term
health care services company. In December 2006 Mr. Lund was
elected non-executive Chairman of Demand Tec, a demand
forecasting software company. Mr. Lund also currently
serves on the boards of Borders Group, Inc., Delta Air Lines,
NCR Corporation and Service Corporation International.
Mr. Lund is 59.
Mr. Morgan became a director of Del Monte in December 2002.
Mr. Morgan has been a baseball broadcaster and analyst for
ABC, NBC and ESPN since 1985. From 1987 to 1998, he was
President and Chief Executive Officer of Joe Morgan Beverage
Company. Mr. Morgan was an Owner-Operator of three
Wendy’s franchises from 1985 to 1988. In 1963,
Mr. Morgan began his professional baseball career which
culminated in his election to the Baseball Hall of Fame in 1990,
five years after his retirement as a player. Mr. Morgan is
63.
Mr. Williams became a director of Del Monte in December
2002 and was Executive Vice President of H.J. Heinz Company from
July 2002 to September 2002. Prior to such time, he was
Heinz’s Executive Vice President and President and Chief
Executive Officer-Heinz Europe, Middle East, Africa and India,
from August 2000 to July 2002 and Executive Vice President-Asia
from June 1996 to August 2000. Mr. Williams, a former
director of Heinz, retired from the Heinz board of directors in
September 2002. In March 2006, Mr. Williams became
Executive Chairman of MW Brands SAS, a privately-held French
company in the seafood business, and in September 2005 became
Chairman of Bapco Closures Ltd., a privately-held U.K. company
in the innovative packaging business. Mr. Williams also
serves on the board of KCRS Inc. and on the European Mergers and
Acquisitions Advisory Board of Lehman Brothers.
Mr. Williams is 64.
The
Board Of Directors Recommends
A
Vote In Favor Of Each Named Nominee.
Directors
Continuing in Office Until the 2008 Annual Meeting
Mr. Bruer became a director of Del Monte in August 1997. In
March 2004, Mr. Bruer became Chief
Executive Officer of Shadewell Grove Foods, Inc., a marketer and distributor of premium cookies. Shadewell Grove Foods, Inc. is the successor company to Nonni’s Food Co., Inc., where he had served as Chief Executive Officer since December 1998. In April 2005, Mr. Bruer also began serving as Chief Executive Officer of Genisoy Food Co. Inc., a provider of soy protein products and sports nutrition. Mr. Bruer was
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President and Chief Executive Officer and a director of
Silverado Foods, Inc. from April 1997 to December 1998. From
1992 until 1997, he was Vice President and General Manager of
the Culinary Division of Nestle. Mr. Bruer is 50.
Ms. Henderson became a director of Del Monte in December
2002. Ms. Henderson serves as an independent consultant to
the consumer and packaged goods industries. She was Corporate
Vice President, Global Core Business Development for Bestfoods,
Inc. from 1999 until December 2000. Ms. Henderson
previously served as President of Bestfoods Grocery from 1997 to
1999, and President of Bestfoods Specialty Markets from 1993 to
1997. She also serves as a director of Royal Dutch Shell plc,
AXA Financial, Inc. and Pactiv Corporation. Ms. Henderson
is 57.
Directors
Continuing in Office Until the 2009 Annual Meeting
Mr. Armacost became a director of Del Monte in December
2002. Mr. Armacost has served as Chairman of the board of
directors of SRI International, formerly Stanford Research
Institute, an independent technology development and consulting
organization, since 1998. He was a Managing Director of Weiss,
Peck & Greer LLC from 1990 until 1998 and Managing
Director of Merrill Lynch Capital Markets from 1987 until 1990.
He was President, Director and Chief Executive Officer of
BankAmerica Corporation from 1981 until 1986. Mr. Armacost
also serves as a director of ChevronTexaco Corp., Exponent,
Inc., Callaway Golf Company and Franklin Resources, Inc.
Mr. Armacost is 68.
Mr. Martin became a director of Del Monte in December 2002.
Mr. Martin was Senior Vice President and Chief Financial
Officer of the Quaker Oats Company from 1998 until his
retirement in 2001. From 1995 to 1998, he was Executive Vice
President and Chief Financial Officer of General Signal
Corporation. Mr. Martin was Chief Financial Officer and
Member of the Executive Committee of American Cyanamid Company
from 1991 to 1995, and served as Treasurer from 1988 to 1991.
Mr. Martin is 64.
Mr. Wolford joined Del Monte as Chief Executive Officer and
a Director in April 1997. He was elected President of Del Monte
in February 1998 and was elected Chairman of the Board in May
2000. 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. Mr. Wolford is 62.
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Corporate
Governance
The Board of Directors has adopted Corporate Governance
Guidelines; the objective of the Corporate Governance Guidelines
is to describe certain processes and procedures intended to
provide reasonable assurance that directors, to whom the
stockholders entrust the direction and success of the Company,
act in the best interests of the Company and its stockholders.
The Corporate Governance Guidelines address issues relating to
the Board of Directors, such as membership, meetings and
procedures, and duties and responsibilities, as well as issues
relating to its committees, including charters, committee
meetings, board oversight, and duties and responsibilities. The
Corporate Governance Guidelines also provide for the appointment
of a lead independent director and address other matters,
including share ownership by directors under the Non-Employee
Director Ownership Guidelines. In general, under these Ownership
Guidelines, non-employee directors are encouraged to own shares
of common stock of the Company having a value, as described in
the Ownership Guidelines, equal to approximately three times the
annual cash retainer paid to the non-employee directors for
service on the Board.
The Corporate Governance Guidelines, the Non-Employee Director
Ownership Guidelines and the Charters of each of the Audit,
Compensation, and Nominating and Corporate Governance Committees
of the Board of Directors of the Company are available on the
Company’s website at www.delmonte.com. Printed copies of
these materials are also available to any stockholder upon
written request to the Corporate Secretary, Del Monte Foods
Company, P.O. Box 193575, San Francisco,
California
94119-3575.
Pursuant to the Company’s Corporate Governance Guidelines,
directors are expected to attend annual meetings of
stockholders. Eight directors, representing all of the
Company’s then directors, attended the 2006 Annual Meeting
of Stockholders.
Under the Company’s Corporate Governance Guidelines and in
accordance with the listing standards of the New York Stock
Exchange, a majority of the Board of Directors must qualify as
independent directors. A director is currently considered
“independent” if the Board of Directors affirmatively
determines that the director has no material relationship with
Del Monte (directly or as a partner, stockholder or officer of
an organization that has a relationship with Del Monte). The
Board of Directors has established the following guidelines to
assist its determination of independence:
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These guidelines are set forth in the Company’s Corporate
Governance Guidelines which are available on Del Monte’s
website at www.delmonte.com.
In September 2006, in connection with appointing directors to
the various committees of the Board, the Board applied the
then-applicable standards (which were similar to the standards
described above) to the eight directors who were then members of
the Board of Directors. Based upon such evaluations, the Board
affirmatively determined that each of Messrs. Armacost,
Bruer, Lund, Martin, Morgan, and Williams and Ms. Henderson
were “independent” within the Corporate Governance
Guidelines. Because Mr. Gerald E. Johnston resigned from
the Board in June 2006, his independence was not reviewed by the
Board in September 2006. However, when the Board last reviewed
director independence prior to Mr. Johnston’s
resignation (applying standards similar to those described
above), the Board also affirmatively determined that
Mr. Johnston was independent within the Corporate
Governance Guidelines.
In June 2007, in connection with the 2007 Annual Meeting of
Stockholders, the Board applied the standards set forth above to
the eight directors who were then members of the Board of
Directors. In addition, the Board considered
Mr. Williams’ current employment as the Executive
Chairman of MW Brands SAS, a privately-held French company in
the seafood business that holds the European trademark rights to
the StarKist brand but does not engage in any
transactions with Del Monte, as well as Mr. Williams’
former employment and service as an executive officer and
director of H.J. Heinz Company. Based upon such evaluations, the
Board affirmatively determined that each of
Messrs. Armacost, Bruer, Lund, Martin, Morgan, and Williams
and Ms. Henderson were “independent” within the
Corporate Governance Guidelines, applicable SEC rules and
applicable NYSE rules. Mr. Wolford is considered an
“inside” director because of his employment as
Chairman of the Board, President and Chief Executive Officer of
the Company. Questionnaires are sent periodically to the
directors regarding matters that might affect their independence
so that, if necessary, such changes in circumstance may be
evaluated by the Board of Directors.
As required under NYSE listing standards and the Company’s
Corporate Governance Guidelines, the Company’s independent
directors meet in regularly scheduled executive sessions at
which only such directors are present. Prior to September 2006,
Ms. Henderson, as the Chairperson of the Nominating and
Corporate
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Governance Committee, presided over these executive sessions. In
September 2006, Ms. Henderson was selected as Lead Director
by the other independent directors and since such appointment
has presided over these executive sessions as Lead Director. The
Lead Director may not serve more than two full consecutive
two-year terms unless otherwise determined by the Board of
Directors. During fiscal 2007, our independent directors met in
executive session five times.
The Company’s Board of Directors, including a majority of
the Company’s independent directors, has adopted a formal
process by which stockholders or other interested persons may
communicate with the Board or any of its directors. Persons
interested in communicating with the directors regarding
concerns or issues may address correspondence to a particular
director, to the Board, to the Lead Director or to the
independent directors generally, in care of Del Monte Foods
Company at P.O. Box 193575, San Francisco,
California
94119-3575.
If no particular director is named, letters will be forwarded,
as appropriate and depending on the subject matter, by the
office of the Corporate Secretary to the Lead Director, the
Chair of the Audit Committee, the Chair of the Compensation
Committee, or the Chair of the Nominating and Corporate
Governance Committee. Interested persons or stockholders, as
applicable, may also contact the Board of Directors, Lead
Director, Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee via telephone,
electronic mail or the Web, as further described on the
Company’s website at www.delmonte.com. The office of the
Corporate Secretary reviews such communications for spam (such
as junk mail or solicitations) or misdirected communications.
The Company has adopted Standards of Business Conduct that apply
to all Del Monte officers, directors and employees. The
Standards of Business Conduct encompass the Company’s code
of ethics applicable to its Chief Executive Officer, Chief
Financial Officer, and principal accounting officer and
controller. The Standards of Business Conduct are available on
the Company’s website at www.delmonte.com. A printed copy
of the Standards of Business Conduct is also available to any
stockholder upon written request to the Corporate Secretary, Del
Monte Foods Company, P.O. Box 193575,
San Francisco, California
94119-3575.
The Company intends to make any required disclosures regarding
any amendments of its Standards of Business Conduct or waivers
granted to any of its directors or executive officers on its web
site at www.delmonte.com.
The Nominating and Corporate Governance Committee of the Board
of Directors has adopted a Process for Identifying, Evaluating
and Recommending Director Nominees. This Process, as currently
in effect, is available on the Company’s website at
www.delmonte.com. The Nominating and Corporate Governance
Committee retains the right to modify the Process, including the
criteria for evaluating the qualifications of potential nominees
for election to the Board of Directors as set forth therein,
from time to time.
The Nominating and Corporate Governance Committee believes that
candidates for director should have certain minimum
qualifications, including strength of character, an inquiring
and independent mind, practical wisdom, and mature judgment. The
current criteria used by the Nominating and Corporate Governance
Committee in evaluating the qualifications of potential nominees
for election to the Board of Directors are set forth in the
Process and generally include whether the nominee:
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Candidates for director nominees are reviewed in the context of
the current composition of the Board. In conducting this
assessment, the Nominating and Corporate Governance Committee
considers diversity, skills, and such other factors as it deems
appropriate given the current needs of the Board and the
Company, to maintain a balance of knowledge, experience and
capability. The Nominating and Corporate Governance Committee
believes that, as a whole, the Board of Directors should have
competency in the following areas:
Additionally, the Committee endeavors to ensure that the Board
of Directors includes a number of financially literate directors
and at least one director who qualifies as a financial expert.
From time to time, the Nominating and Corporate Governance
Committee may retain the services of one or more third-party
search firms to assist it in identifying and evaluating
potential new members of the Board of Directors. Additionally,
the Lead Director and the Chair of the Board of Directors, who
is not a member of the Nominating and Corporate Governance
Committee, may assist in evaluating potential new members of the
Board of Directors, including interviewing such potential new
members.
In evaluating whether to nominate an incumbent director whose
term of office is set to expire, the Nominating and Corporate
Governance Committee also reviews such director’s overall
service to the Company during his or her term, including the
number of meetings attended, participation in and contributions
to the deliberations of the Board and its committees, and the
benefits of continuity among Board members. In the event such
incumbent director is a member of the Committee, such director
recuses himself or herself from that portion of the meeting.
Based on the foregoing process, the Nominating and Corporate
Governance Committee recommended that the Board of Directors
nominate Messrs. Lund, Morgan and Williams, each of which
is a current director, for election to the Board of Directors at
the 2007 Annual Meeting of Stockholders.
The Nominating and Corporate Governance Committee will consider
director candidates recommended by stockholders. The Nominating
and Corporate Governance Committee does not intend to alter the
manner in which it evaluates candidates, including its
qualification criteria, based on whether the candidate was
recommended or nominated by a stockholder or not. Stockholders
who wish to recommend candidates for consideration by the
Nominating and Corporate Governance Committee may do so by
delivering a written recommendation to: Chair of the Nominating
and Corporate Governance Committee, P.O. Box 193575,
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San Francisco, California
94119-3575.
The Nominating and Corporate Governance Committee may also be
contacted by electronic mail or other methods, as more fully
described on the Company’s website at www.delmonte.com.
Submissions should include the full name of the proposed
candidate, a description of the proposed candidate’s
business experience for at least the previous five years, a
description of the proposed candidate’s qualifications as a
director and a representation that the recommending stockholder
is a beneficial or record owner of the Company’s stock.
Stockholders who wish to nominate (rather than simply recommend)
a candidate for election at the Company’s annual meeting
must submit such nomination in writing to: Corporate Secretary,
Del Monte Foods Company, P.O. Box 193575,
San Francisco, California
94119-3575.
Such written nomination must be received by the Corporate
Secretary not less than 90 days nor more than 120 days
before the date designated for the applicable annual meeting or,
if such annual meeting date is not designated at least
105 days before the annual meeting, then no later than
15 days after the designation of the annual meeting date in
accordance with the Company’s Bylaws. A nomination by a Del
Monte stockholder must contain the specific information required
in Del Monte’s Bylaws, including without limitation,
(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 nomination, (iii) the class
and number of shares which are beneficially owned by such
stockholder on the date of such stockholder’s notice, and
(iv) not more than ten days after receipt by the nominating
stockholder of a written request from the Corporate Secretary,
such additional information as the Corporate Secretary may
reasonably require. Del Monte’s current Bylaws can be
obtained by sending a written request to the Corporate
Secretary; the Bylaws may also be found on the Company’s
web site at www.delmonte.com. To date, the Nominating and
Corporate Governance Committee has not rejected a timely
director nominee recommended by a stockholder or stockholders
holding more than five percent of our voting stock.
Our Standards of Business Conduct set forth our general policies
and procedures regarding how we will handle employee or director
conflicts of interest. As part of the written policies and
procedures regarding conflicts of interest set forth in our
Standards of Business Conduct, directors and executive officers
are required to complete a disclosure statement that sets forth
such officer’s or director’s relationships,
transactions, ventures, partnerships, employment, or
affiliations that could give rise to a conflict of interest.
Additionally, directors and executive officers are required to
submit an updated disclosure statement regarding any potential
related party transaction in advance of entering into the
transaction. Under the Standards of Business Conduct, the Audit
Committee must review and approve in advance any related party
transaction involving a Del Monte officer or director. The Del
Monte Law Department may be involved in determining whether a
particular transaction is a related person transaction requiring
review and approval by the Audit Committee.
In June 2007, the Board of Directors adopted a written Related
Persons Transaction Policy in order to establish more detailed
processes, procedures and standards regarding the review,
approval and ratification of related person transactions and to
provide greater specificity regarding what types of transactions
constitute related person transactions. All related person
transactions are prohibited unless approved or ratified by the
Audit Committee or, in certain circumstances, the Chair of the
Audit Committee.
The Related Persons Transaction Policy reminds directors and
executive officers of their obligation under our Standards of
Business Conduct to update their disclosure statement to reflect
any potential conflict of interest or related person
transaction. Additionally, the Policy confirms that each Del
Monte director and executive officer must annually complete a
questionnaire designed to elicit, among other things,
information about potential related person transactions. Each
director and executive officer must also promptly advise the Law
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Department or the Chair of the Audit Committee of any change to
the information contained in the last completed questionnaire
that could relate to the identification, review, approval or
ratification of transactions that may constitute related person
transactions.
The Del Monte Law Department reviews the information provided by
Del Monte’s directors and executive officers and gathers
the material facts and other information necessary to assess
whether a proposed transaction would constitute a related person
transaction for purposes of this Policy. If the Law Department
determines that a transaction would be a related person
transaction, the Law Department’s written assessment and
the material facts of the proposed transaction would be
submitted to the Audit Committee for consideration at its next
meeting. In the event the Law Department, in consultation with
Del Monte’s Chief Executive Officer, determines that it is
not practicable or desirable for Del Monte to delay until the
next Audit Committee meeting, such materials would instead be
submitted to the Chair of the Audit Committee.
The Audit Committee (or, as applicable, the Chair of the Audit
Committee) is expected to review the submitted materials and
consider all other relevant facts and circumstances reasonably
available to it including:
The Related Persons Transaction Policy provides that the Audit
Committee (or Chair of the Committee as applicable) shall only
approve those related person transactions that are in, or are
not inconsistent with, the best interests of Del Monte and its
stockholders. Similar procedures apply to the ratification of
related person transactions in the event a director, the Chief
Executive Officer, Chief Financial Officer or General Counsel
becomes aware of a related person transaction that has not been
previously approved or ratified. However, in such event:
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Under the Related Persons Transaction Policy, the Board of
Directors determined that transactions entered into in the
ordinary course of the Company’s business in which the
related person and his or her immediate family members are not
involved in the negotiation of the terms of the transaction with
the Company, do not receive any special benefits as a result of
the transaction, and the amount involved in the transaction
equals less than 2% of the annual net revenues of each of the
Company and the other entity that is a participant in the
transaction do not create a material direct or indirect interest
on behalf of a related person (as such term is defined in
applicable SEC rules) and accordingly are not related person
transactions (as such term is defined in applicable SEC rules).
In addition, transactions are not related person transactions
under the Related Persons Transaction Policy if they are
excluded from the SEC disclosure requirements regarding related
person transactions.
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The Board of Directors of Del Monte Foods Company held six
meetings during the fiscal year ended April 29, 2007. The
Board of Directors currently has a standing Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee.
During the fiscal year ended April 29, 2007, each incumbent
member of the Board of Directors attended 75% or more of the
aggregate of the meetings of the Board of Directors and of the
committees on which he or she served, held during the period for
which he or she was a director or committee member, respectively.
The following table provides a summary of the membership of each
of the standing committees of the Board of Directors as of
April 29, 2007.
The Company also has a stock option committee consisting of the
Company’s Chairman of the Board that may award stock
options to employees who hold positions below the level of
senior vice president. In addition, the Board of Directors may
from time to time establish special committees.
Audit
Committee
The Audit Committee of the Board of Directors assists the Board
in its oversight of the Company’s corporate accounting and
financial reporting process. For this purpose, the Audit
Committee performs several functions. The Audit Committee:
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The Audit Committee is also responsible for periodically
reviewing and approving updates to the Company’s Standards
of Business Conduct as well as reviewing the Company’s
performance relative to such Standards. The Audit Committee has
sole authority to grant waivers to directors and executive
officers relating to the Company’s Standards of Business
Conduct.
The Audit Committee is responsible for interacting directly with
and evaluating the Company’s independent auditors. With
respect to the independent auditors, the Audit Committee:
In connection with approving services by the Company’s
independent auditors as required by Section 202 of the
Sarbanes-Oxley Act of 2002, the Audit Committee has adopted a
Statement of Policy and Procedures regarding Pre-Approval of
Engagements for Audit and Non-Audit Services. See
“Proposal 3 – Ratification of Appointment of
Independent Auditors – Policies and Procedures
Relating to Approval of Services by Auditors” for a
discussion of this Statement.
The Audit Committee operates under a written charter adopted by
the Board of Directors. For additional information regarding the
Audit Committee’s duties and responsibilities, please refer
to the Audit Committee’s Charter, which is available on the
Company’s web site at www.delmonte.com. As required under
the Sarbanes-Oxley Act of 2002, the Audit Committees has in
place procedures to receive, retain and treat complaints
received regarding accounting, internal accounting controls or
auditing matters, including procedures for the confidential and
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
Three directors currently comprise the Audit Committee:
Messrs. Bruer, Martin, and Williams. Mr. Martin
currently serves as the Chair of the Audit Committee. The Audit
Committee consists entirely of directors who were determined by
the Board of Directors to meet the definition of
“independent” within the meaning of the Company’s
Corporate Governance Guidelines, the Audit Committee’s
Charter, Section 303A.02 of the NYSE listing standards and
Section 10A(m)(3) of the Securities Exchange Act of 1934,
as amended.
Each member of the Audit Committee is financially literate.
Additionally, the Board of Directors has determined that
Mr. Martin qualifies as an “audit committee financial
expert” as such term is defined in Item 407(d)(5) of
the Securities and Exchange Commission’s
Regulation S-K
and is “independent” within the meaning of
Section 303A.02 of the NYSE listing standards. Our
Corporate Governance Guidelines restrict Audit Committee members
from simultaneously serving on the audit committees of more than
three public companies (including Del Monte), without a specific
Board determination that such simultaneous service will not
impair the ability of such member to serve on the Audit
Committee. The members of our Audit Committee do not currently
serve on the audit committee of any other public company.
The Audit Committee met eight times during the fiscal year ended
April 29, 2007.
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Compensation
Committee
The Compensation Committee of the Board of Directors reviews and
approves the overall compensation strategy and policies for the
Company. In this regard, the Compensation Committee:
For a discussion of the Compensation Committee’s
processes and procedures for the consideration and determination
of executive compensation, please see “Executive
Compensation – Compensation Discussion and
Analysis.”
The Compensation Committee operates under a written charter
adopted by the Board of Directors. For additional information
regarding the Compensation Committee’s duties and
responsibilities, please refer to the Compensation
Committee’s Charter, which is available on the
Company’s web site at www.delmonte.com.
Three directors currently comprise the Compensation Committee:
Messrs. Armacost, Martin and Williams. Mr. Armacost
currently serves as the Chair of the Compensation Committee. The
Compensation Committee consists entirely of directors who were
determined by the Board of Directors to meet the definition of
“independent” within the Company’s Corporate
Governance Guidelines, the Compensation Committee’s Charter
and Section 303A.02 of the NYSE listing standards, as well
as the “non-employee director” standard within the
meaning of
Rule 16b-3
of the Securities Exchange Act of 1934, as amended, and the
“outside director” standard for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as
amended.
The Compensation Committee met six times during the fiscal year
ended April 29, 2007.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board
of Directors is responsible for overseeing the performance of
the Board of Directors and its committees and developing the
Company’s policies relating to corporate governance. In
this regard, the Nominating and Corporate Governance Committee:
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For a discussion of the Nominating and Corporate Governance
Committee’s processes and criteria used in evaluating and
recommending to the Board of Directors the slate of nominees for
directors to be elected by the Company’s stockholders (or,
in the event of a vacancy to be filled by the Board, appointed
to the Board), please see “Corporate Governance –
Nomination Process.” For a discussion of the Nominating and
Corporate Governance Committee’s processes and procedures
for the consideration and determination of non-employee director
compensation, please see “Director Compensation –
Discussion of Director Compensation –
Process.”
The Nominating and Corporate Governance Committee operates under
a written charter adopted by the Board of Directors. For
additional information regarding the Nominating and Corporate
Governance Committee’s duties and responsibilities, please
refer to the Nominating and Corporate Governance
Committee’s Charter, which is available on the
Company’s web site at www.delmonte.com.
Three directors currently comprise the Nominating and Corporate
Governance Committee: Messrs. Lund and Morgan and
Ms. Henderson. Ms. Henderson currently serves as the
Chair of the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee currently consists
entirely of directors who were determined by the Board of
Directors to meet the definition of “independent”
within the Company’s Corporate Governance Guidelines, the
Nominating and Corporate Governance Committee’s Charter and
Section 303A.02 of the NYSE listing standards.
The Nominating and Corporate Governance Committee met four times
during the fiscal year ended April 29, 2007.
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Director
Compensation
The following table sets forth compensation for the members of
the Board of Directors of Del Monte Foods Company for fiscal
2007. Mr. Wolford, the Company’s Chairman of the
Board, President and Chief Executive Officer, does not receive
any additional compensation for his service as a director.
Mr. Wolford’s compensation is reported in
“Executive Compensation” and accordingly
Mr. Wolford is not included in the following table.
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For further information regarding the Del Monte Foods Company
2005 Non-Employee Director Deferred Compensation Plan, see
“– Discussion of Director
Compensation – Del Monte Foods Company 2005
Non-Employee Director Deferred Compensation Plan” below.
The full grant date fair value of each September 21, 2006
grant of 7,719 restricted stock units is $76,563. The full grant
date fair value of each August 4, 2006 grant of
838 shares or deferred stock units is $8,816. Del Monte
calculates the fair value of stock awards under
SFAS No. 123 (revised 2004), “Share-Based
Payment” (“FAS 123R”) by multiplying the
average of the high and low prices of Del Monte’s common
stock on the date of grant by the number of shares subject to
such stock award. For stock awards that are not credited with
dividends during the vesting period, including the
September 21, 2006 grant of restricted stock units, Del
Monte reduces the fair value of the stock award by the present
value of the expected dividend stream during the vesting period
using the risk-free interest rate in accordance with
FAS 123R. Accordingly, to the extent holders of stock
awards are entitled to dividends during the vesting period,
dividends are factored into the FAS 123R fair value of the
stock awards. Del Monte assumes zero anticipated forfeitures in
connection with valuing stock awards for purposes of
FAS 123R.
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The full grant date fair value of Mr. Lund’s option to
purchase 15,000 shares is $67,520. The table below presents
the material valuation assumptions for the stock option.
Discussion
of Director Compensation
The Nominating and Corporate Governance Committee is responsible
for making recommendations to the Board of Directors regarding
the compensation of non-employee directors. The Committee may
not delegate this responsibility, which is set forth in its
Charter. The Nominating and Corporate Governance Committee
engages a compensation consultant, Hewitt Associates, Inc., to
conduct a review of director compensation every one to two
years. The review includes benchmark data from comparator
companies as well as market trends in director compensation. The
review completed in fiscal 2006 (the most recently completed
review) indicated that the Company’s non-employee director
compensation, which had not been adjusted since 2002, had fallen
below both the median and average total compensation of its peer
group and that certain compensation components were no longer
consistent with market practices. As a result, the Nominating
and Corporate Governance Committee recommended to the Board of
Directors certain amendments to non-employee director
compensation. At the request of the Nominating and Corporate
Governance Committee, Hewitt Associates assisted the Committee
in developing its recommendation to the Board by developing
various alternative compensation structures designed to address
the deficiencies identified during the review of non-employee
director compensation.
In light of the recommendation of the Nominating and Corporate
Governance Committee, on March 16, 2006, the Board of
Directors of Del Monte Foods Company amended and restated the
Del Monte Foods Company Non-Employee Director Compensation Plan,
effective immediately following the Company’s 2006 Annual
Meeting of Stockholders, which was held on September 21,
2006. Consequently, non-employee director compensation for the
second, third and fourth quarters of fiscal 2007 was based upon
the Del Monte Foods Company Non-Employee Director Compensation
Plan, as amended, while compensation for the first quarter of
fiscal 2007 was based upon the Plan prior to such amendment.
Del Monte executive officers play no role in recommending or
determining non-employee director compensation, except that
Mr. Wolford (as a member of the Board of Directors)
participates in the deliberations and actions of the Board
regarding the recommendations made by the Nominating and
Corporate Governance Committee.
All Del Monte directors other than Richard G. Wolford, the
Company’s Chief Executive Officer, are currently eligible
under the Del Monte Foods Company Non-Employee Director
Compensation Plan.
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Cash Retainers. Each eligible director earns
an annual retainer of $60,000 cash, which is paid in quarterly
installments in arrears. Certain additional annual retainers
(also paid in quarterly installments) are paid in cash as
follows:
Meeting Fees. In addition, each eligible
director earns a meeting fee for each meeting attended as
follows:
Such fees are paid quarterly in cash in arrears.
Equity Compensation. Each eligible director
annually receives $80,000 worth of restricted Del Monte common
stock or restricted stock units. These restricted stock or
restricted stock units are granted promptly after each annual
meeting of stockholders and vest over three years from the date
of grant (it being understood that in the event the date of the
third regularly scheduled annual meeting is less than three full
calendar years from the date of grant, such shares of restricted
stock or such restricted stock units shall nevertheless vest
immediately prior to such annual meeting). The number of shares
of restricted stock or number of restricted stock units issued
is calculated by dividing the $80,000 by the average of the high
and low prices of Del Monte’s common stock on the date
of grant. These equity awards are issued under the
Del Monte Foods Company 2002 Stock Incentive Plan.
The Del Monte Foods Company Non-Employee Director Compensation
Plan, as amended, no longer provides for option grants to
non-employee directors.
Other. The Del Monte Foods Company
Non-Employee Director Compensation Plan, as amended, also
provides for travel reimbursement, requires that 100% of the
“profit shares” attributable to option exercises be
held for one year, and confirms the ability of non-employee
directors to defer certain compensation pursuant to the Del
Monte Foods Company 2005 Non-Employee Director Deferred
Compensation Plan (which was not affected by the amendment to
the Non-Employee Director Compensation Plan). “Profit
shares” are the option profit, net of taxes, expressed as a
number of shares.
Cash and Stock Retainer. Under the Del Monte
Foods Company Non-Employee Director Compensation Plan, prior to
its amendment effective immediately following the 2006 Annual
Meeting of Stockholders, each eligible director earned an annual
retainer consisting of $35,000 cash, paid in quarterly
installments, and $35,000 worth of Del Monte common stock,
issued (or deferred as deferred stock units) in quarterly
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installments under the Del Monte Foods Company 2002 Stock
Incentive Plan. The number of shares of Del Monte common
stock that was issued (or deferred) for each installment was
calculated by dividing the intended value of the stock to be
issued (or deferred) by the average of the high and low prices
of Del Monte’s common stock on the last trading day of
the applicable quarter.
Meeting Fees. In addition, each eligible
director earned a meeting fee for each meeting attended as
follows:
Such fees were paid quarterly in cash in arrears.
Equity Compensation. The Non-Employee
Director Compensation Plan also provided, prior to its
amendment, that each non-employee director would receive an
annual option grant to purchase 5,000 shares, which was
fully vested upon issuance. In general, the annual option grants
were made approximately when annual option grants were made to
eligible employees of the Company. No such options were granted
in fiscal 2007 because of the amendment of the Non-Employee
Director Compensation Plan.
Additionally, pursuant to the Non-Employee Director Compensation
Plan prior to its amendment, each non-employee director who was
a non-employee director on January 22, 2003 (the initial
effective date of the adoption of the Non-Employee Director
Compensation Plan) received an option on January 24, 2003
to purchase 15,000 shares of Del Monte common stock.
Non-employee directors who joined the Board after
January 22, 2003 received an initial option grant to
purchase 15,000 shares of Del Monte common stock upon
joining the Board. Each grant was issued under the Del Monte
Foods Company 2002 Stock Incentive Plan and had an exercise
price equal to the fair market value of Del Monte’s common
stock on the date of grant, which under the 2002 Stock Incentive
Plan is defined as the average of the high and low prices of Del
Monte’s common stock on the date of grant. Additionally,
each 15,000 share option grant vested in equal installments
over a three-year period. Accordingly, all such option grants
(except for the option grant made to Mr. Lund when he
joined the Board of Directors in March 2005) vested prior
to fiscal 2007 and Del Monte did not recognize any compensation
expense in fiscal 2007 with respect to such grants, other than
the $22,424 reported in the Fiscal 2007 Director
Compensation table above with respect to Mr. Lund. In
general, these option grants expire ten years from the date of
grant or, if earlier, 90 days from the termination of
service as a member of Del Monte’s Board of Directors
(other than due to death or disability).
Under the Del Monte Foods Company 2005 Non-Employee Director
Deferred Compensation Plan, non-employee directors may elect to
defer the receipt of 0%, 50% or 100% of either or both of the
cash and stock-based (other than options) components of their
annual compensation on the basis of four consecutive fiscal
quarters. The deferred amounts are converted into deferred stock
units, which are distributed upon termination of service on the
Board of Directors in the form of shares of Del Monte common
stock. Such distribution is made, at the participant’s
election with respect to each deferral period, either in a lump
sum or in equal annual installments over not more than fifteen
years. Deferred stock units issued in connection with deferrals
made under the 2005 Director Deferred Plan, as well as any
shares distributed in respect thereof, are issued under the Del
Monte Foods Company 2002 Stock Incentive Plan. Deferred stock
units issued pursuant to the terms of the 2005 Non-Employee
Director Deferred Compensation Plan are credited with dividends
in the form of
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additional deferred stock units. The number of additional
deferred stock units credited is determined by multiplying the
number of deferred stock units held by the director on the
applicable dividend record date by the per share cash dividend
declared, and then dividing such amount by the average of the
high and low prices of Del Monte’s common stock on the
applicable dividend payment date.
The Del Monte Foods Company 2005 Non-Employee Director Deferred
Compensation Plan was adopted by the Board of Directors
effective January 1, 2005. The 2005 Director Deferred
Plan is substantially similar to a prior plan permitting
deferral of director compensation. However, the
2005 Director Deferred Plan is intended to comply with the
American Jobs Creation Act of 2004 (“AJCA”).
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Proposal 2
Approval
of the Amendment and Restatement of the
On August 3, 2007, the Board of Directors adopted the Del
Monte Foods Company 2002 Stock Incentive Plan, as amended and
restated effective August 6, 2007, subject to stockholder
approval (the “Amended Plan”). The Del Monte Foods
Company 2002 Stock Incentive Plan (the “2002 Plan”)
was originally adopted by the Board effective December 20,
2002 and was previously amended and restated by the Board
effective August 15, 2005. Both the original plan and the
August 15, 2005 amended and restated plan were previously
approved by our stockholders. Options and other stock awards
granted under the 2002 Plan prior to its August 6, 2007
amendment and restatement will continue to be subject to the
terms and conditions as set forth in the agreements evidencing
such options and other awards as well as the terms of the 2002
Plan prior to its August 6, 2007 amendment and restatement.
The total number of shares authorized for grant under the 2002
Plan prior to the August 6, 2007 amendment and restatement
was 26,165,813 shares of common stock. As of April 29,
2007, eligible employees,
non-employee
directors and others held 934,828 restricted stock units,
277,949 deferred stock units, 1,340,400 performance shares and
options to purchase 12,178,287 shares of common stock under
the 2002 Plan, representing an aggregate of
14,731,464 shares subject to outstanding awards under the
2002 Plan (which, if issued, would reduce the shares available
under the Plan by 16,330,351 shares due to the applicable
share multiple). Additionally, as of April 29, 2007,
2,211,717 shares had been issued under the 2002 Plan
(reducing the shares available under the 2002 Plan by
2,228,389 shares due to the applicable share multiple).
Accordingly, as of April 29, 2007, a total of 7,607,073
additional shares were available under the 2002 Plan to be
issued in connection with future awards.
Under the Amended Plan, the total number of shares authorized
for grant is 31,558,740. Accordingly, if the Amended Plan is
approved by the stockholders, a total of 13,000,000 shares
will be available under the Amended Plan to be used in
connection with future awards. This reflects a
5,392,927 share increase in the number of shares authorized
under the 2002 Plan. Shares of common stock issued pursuant to
equity incentives granted under the Amended Plan on or after
April 30, 2007 will reduce the Plan’s share reserve by
one share in the case of options and stock appreciation rights
with exercise prices at least equal to fair market value of the
Company’s common stock on the grant date and by
2.79 shares in the case of all other equity incentives
granted under the Amended Plan.
The approval of the Amended Plan will allow the Compensation
Committee to continue to grant stock options and a broad array
of other equity incentives at levels it determines appropriate.
The Company expects that the Compensation Committee will use
such equity incentives in order to secure, retain and provide
incentives to key Del Monte employees and consultants.
Additionally, shares available under the Amended Plan will also
be used to compensate our outside directors. The Company’s
current compensation of its outside directors is described in
greater detail in “Director Compensation.”
The Amended Plan, if approved by the stockholders, also will
make explicit that the Compensation Committee, when granting
awards, may provide for certain adjustments in calculating the
attainment of performance goals with respect to certain
performance-based awards. Section 162(m) of the Internal
Revenue Code denies a deduction to any public corporation for
certain compensation paid to “covered employees” in a
taxable year, to the extent that compensation exceeds
$1 million. However, some compensation, including qualified
“performance-based compensation,” is not subject to
this deduction limitation. The Amended Plan recognizes that the
Compensation Committee may exclude certain charges, exchange
rate effects and the effects of certain changes, adjustments and
other items when determining the attainment of performance goals
in connection with performance-based awards. Notwithstanding any
such adjustments, such performance-based awards will continue to
qualify as “performance-based compensation” under
Section 162(m) of the Code. Prior to its August 6,
2007 amendment and restatement, the 2002 Plan did not explicitly
provide for such adjustments.
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The Amended Plan, if approved by the stockholders, will expand
certain explicit prohibitions on repricing. In general, the
Amended Plan provides that, without stockholder approval, no
incentive award granted under the Plan will be repriced,
replaced or regranted through (a) cancellation and regrant
at a lower price, (b) lowering the exercise price of a
previously awarded option, (c) lowering the grant price of
a previously awarded stock appreciation right, or
(d) lowering the purchase price of a previously awarded
stock bonus or other incentive award. Prior to its
August 6, 2007 amendment and restatement, the 2002 Plan
only explicitly prohibited the repricing of options without
stockholder approval.
Finally, the Amended Plan includes certain provisions intended
to ensure compliance with Section 409A of the Internal
Revenue Code regarding certain deferred compensation
arrangements. These provisions are designed to exempt the awards
from Section 409A, to preserve the intended tax treatment
of the benefits provided with respect to the award under
Section 409A, and to otherwise ensure compliance with the
requirements of Section 409A (including requirements
regarding the timing of distribution of awards that may be
considered deferred compensation under Section 409A). Prior
to its August 6, 2007 amendment and restatement, the
2002 Plan did not specifically address the requirements of
Section 409A but was administered in good faith compliance
as permitted by the guidance under Section 409A.
Stockholders are requested in this Proposal 2 to approve
the Amended Plan. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy
and entitled to vote at the annual meeting will be required to
approve the Amended Plan. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes.
Broker non-votes are not counted for any purpose in determining
whether this matter has been approved and therefore will have no
effect.
A general description of the Amended Plan is set forth below.
However, this description is qualified in its entirety by
reference to the full text of the Amended Plan, a copy of which
is attached as Annex A to these proxy materials. The
following description also notes any key differences between the
Amended Plan and the 2002 Plan as in effect prior to its
August 6, 2007 amendment and restatement.
The
Board Of Directors Recommends
A Vote In Favor Of Proposal 2.
Description
of the Del Monte Foods Company 2002 Stock Incentive Plan, as
Amended and Restated Effective August 6, 2007
The Amended Plan provides for the grant of incentive stock
options, nonqualified stock options, stock appreciation rights,
stock bonus awards and other incentive awards that may involve
the issuance of Del Monte’s common stock
(collectively, “stock awards”). Incentive stock
options granted under the Amended Plan are intended to qualify
as “incentive stock options” within the meaning of
Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”). Nonqualified stock options
granted under the Amended Plan are not intended to qualify as
incentive stock options under the Code. See
“ – Federal Income Tax Information” below
for a discussion of the tax treatment of stock awards.
Pursuant to its terms, the Amended Plan is administered by a
committee of the Board (the “Committee”). Unless
otherwise determined by the Board, such Committee must consist
solely of two or more directors, each of whom is a
“non-employee director” within the meaning of
Rule 16b-3
of the Exchange Act and an “outside director” within
the meaning of Section 162(m) of the Code. Currently, the
Compensation Committee acts as the Committee administering the
Amended Plan.
Subject to the provisions of the Amended Plan, the Committee has
the authority to construe and interpret the Amended Plan and the
terms of awards granted under the Amended Plan. The Committee
also has the
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authority to delegate some or all of the administration of the
Amended Plan to one or more directors or management employees.
The Committee may accelerate the date on which any option or
stand-alone stock appreciation right granted under the Amended
Plan vests or becomes exercisable and may extend the term of
such stock awards.
Incentive stock options may be granted under the Amended Plan
only to employees of Del Monte and its subsidiaries. Employees
of and consultants to Del Monte and its subsidiaries, and
non-employee directors of Del Monte, are eligible to receive all
other types of stock awards under the Amended Plan. All of the
Company’s approximately 18,200 regular and seasonal
employees and consultants are eligible to participate in the
Amended Plan. Additionally, all 7 of the Company’s current
non-employee directors are eligible to participate in the
Amended Plan. In fiscal 2007, the Compensation Committee limited
employee participation in the 2002 Plan to employees at the
level of vice president and above and other key employees.
Accordingly, in fiscal 2007, 104 employees of Del Monte
received awards under the 2002 Plan.
No incentive stock option may be granted under the Amended Plan
to any person who, at the time of the grant, owns (or is deemed
to own) stock possessing more than 10% of the total combined
voting power of Del Monte or its subsidiaries, unless the
exercise price of such option is at least 110% of the fair
market value of the stock subject to the option on the date of
grant and the term of the option does not exceed five years from
the date of grant. In addition, the aggregate fair market value,
determined on the date of grant, of the shares of common stock
with respect to which incentive stock options are exercisable
for the first time by a participant during any calendar year
(under the Amended Plan and any other stock option plans of Del
Monte and its subsidiaries) may not exceed $100,000.
Under the Amended Plan, no person may be granted stock awards
covering more than 1,500,000 shares of common stock during
any fiscal year (the “Section 162(m) Limitation”).
A maximum of 31,558,740 shares of common stock are
available for issuance under the Amended Plan, which number,
based on award information as of April 29, 2007, consists
of 2,211,717 shares of common stock issued under the Plan
(reducing the shares available under the Amended Plan by
2,228,389 shares due to the 1.94 multiple discussed below)
, 14,731,464 shares subject to outstanding incentive awards
(which, if issued, would reduce the shares available under the
Amended Plan by 16,330,351 shares due to the 1.94 multiple
discussed below) and 13,000,000 shares available for future
incentive award grants. Prior to the August 6, 2007
amendment and restatement, the maximum number of shares of
common stock that were available for issuance under the 2002
Plan was 26,165,813 shares. Shares of common stock issued
under the Amended Plan may be either newly issued shares or
treasury shares, as determined by the Committee.
For awards granted on or after April 30, 2007, the number
of shares of common stock available for issuance under the
Amended Plan shall be reduced (i) by 1 share for each
share of common stock issued pursuant to an option or a stock
appreciation right with an exercise price of at least the fair
market value of a share of common stock on the grant date and
(ii) 2.79 shares for each share of common stock issued
pursuant to other stock awards; provided, however, that for such
other stock awards granted prior to April 30, 2007 but on
or after May 2, 2005, the reduction shall be
1.94 shares instead of 2.79 shares. Furthermore, for
all awards granted prior to May 2, 2005, the number of
shares of common stock available for issuance under the Amended
Plan shall be reduced by 1 share for each share of common
stock issued. By contrast, prior to the August 6, 2007
amendment and restatement, the number of shares of common stock
available for issuance under the 2002 Plan was reduced
(i) by 1 share for each share of common stock issued
pursuant to an option or a stock appreciation right with an
exercise price of at least the fair market value of a share of
common stock on the grant date and (ii) 1.94 shares
for each share of common stock issued pursuant to other stock
awards; provided, however, that for such other stock awards
granted prior to May 2, 2005, the reduction was
1 share instead of 1.94 shares.
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If a stock award granted under the Amended Plan expires or
otherwise terminates without being exercised or settled in full,
or if any shares of common stock issued pursuant to a stock
award are forfeited to or repurchased by Del Monte, including,
but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the
vesting of such shares, then the shares of common stock not
issued under such stock award, or forfeited to or repurchased by
Del Monte shall revert to and again become available for
issuance under the Amended Plan. Awards that are terminated,
forfeited or repurchased shall result in an increase in the
share reserve of the Amended Plan corresponding to the reduction
originally made in respect of the award.
Shares of common stock shall not be considered to have been
issued under the Amended Plan with respect to any portion of a
stock award (other than a stock appreciation right that may be
settled in shares of common stock or cash) that is settled in
cash. Shares withheld in satisfaction of tax withholding
obligations shall not again become available for issuance under
the Amended Plan. Upon payment in shares of common stock
pursuant to the exercise of a stock appreciation right, the
number of shares available for issuance under the Amended Plan
shall be reduced by the gross number of shares for which such
stock award is exercised. If the exercise price of an option is
paid by shares of common stock owned by the participant, the
number of shares available for issuance under the Amended Plan
shall be reduced by the gross number of shares for which the
option is exercised. Shares of common stock may be issued
pursuant to stock awards in connection with certain corporate
acquisitions and mergers, and any such issuance shall not reduce
the number of shares of common stock available for issuance
under the Amended Plan.
The aggregate maximum number of shares of common stock that may
be issued under the Amended Plan pursuant to the exercise of
incentive stock options is 31,558,740 shares.
Subject to the overall limitation on the number of shares of
Common Stock that may be issued under the Amended Plan, the
Committee may, in addition to granting stock awards under the
Amended Plan, use available shares of common stock as the form
of payment for compensation, grants or rights earned or due
under any other compensation plans or arrangements of Del Monte,
including those of any entity acquired by Del Monte.
Options may be granted under the Amended Plan pursuant to stock
option agreements. The following is a description of the
permissible terms of options under the Amended Plan. Individual
stock option agreements may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price. The exercise price of
incentive stock options may not be less than 100% of the fair
market value of the stock subject to the option on the date of
grant and, in some cases (as described in
“– Eligibility” above), may not be
less than 110% of such fair market value. The exercise price of
nonqualified stock options may not be less than 100% of the fair
market value of the stock on the date of grant. As of
August 2, 2007, the closing price of Del Monte’s
common stock as reported on the NYSE was $11.80 per share.
Consideration. The exercise price of options
granted under the Amended Plan must be paid, to the extent
permitted by applicable law and at the discretion of the
Committee, (i) by cash or check, (ii) pursuant to a
broker-assisted cashless exercise, (iii) by delivery of
other common stock of Del Monte, or (iv) in any other form
of legal consideration acceptable to the Committee.
Vesting. Options granted under the Amended
Plan may become exercisable in cumulative increments, or
“vest,” as determined by the Committee and set forth
in the applicable option agreement. Vesting typically will occur
during the optionholder’s employment with Del Monte or a
subsidiary. If an optionholder’s employment is terminated
by the optionholder on account of retirement (as defined in the
Amended Plan) or, for optionholders who are vice presidents or
above upon termination, if the optionholder is terminated by
Del Monte or a subsidiary without cause (as defined in the
Amended Plan) or if the optionholder terminates his employment
for good reason (as defined in the optionholder’s
employment contract or, if included therein, the applicable
executive severance plan), then the option will vest on a pro
rata basis in accordance with
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Del Monte’s policy in effect at the time of such
termination. Moreover, if an optionholder’s employment is
terminated on account of death or disability (as defined in the
Amended Plan), then all of the shares subject to the option will
vest and become exercisable as of the time of such termination.
Shares covered by different options granted under the Amended
Plan may be subject to different vesting terms. The Committee
has the authority to accelerate the time during which an option
may vest or be exercised.
Tax Withholding. To the extent provided by
the terms of a stock option agreement, an optionholder may
satisfy any federal, state or local tax withholding obligation
relating to the exercise of the option by a cash payment upon
exercise, by authorizing Del Monte to withhold a portion of the
stock otherwise issuable to the optionholder or by delivering
already-owned common stock of Del Monte.
Term. The maximum term of options granted
under the Amended Plan is 10 years, except that in certain
cases (as described in “– Eligibility”
above) the maximum term is five years.
Termination of Employment. Under the Amended
Plan, in the event that an optionholder’s employment
terminates (other than for cause or due to the
optionholder’s disability, death or retirement), his or her
options may be exercised (to the extent the options were
exercisable at the time of the termination of employment) at any
time within 3 months following termination. By contrast,
prior to the August 6, 2007 amendment and restatement, the
2002 Plan provided that such options may be exercised (to the
extent the options were exercisable at the time of such
termination) at any time within 90 days following such
termination. If termination is for cause, options will expire
and be canceled upon termination. If termination is due to the
optionholder’s retirement (as defined in the Amended Plan),
disability (as defined in the Amended Plan) or death, options
(to the extent exercisable at the time of termination) may be
exercised until the expiration of their original terms. If an
optionholder dies within 3 months following an involuntary
termination of employment without cause, options may be
exercised (to the extent the options were exercisable at the
time of the termination of employment) until the expiration of
their original terms or, if sooner, for one year after the
optionholder’s death. In no event, however, may an option
be exercised beyond the expiration of its original term.
Restrictions on Transfer. Unless provided
otherwise in an option agreement, an optionholder may not
transfer an option other than by will or by the laws of descent
and distribution. During the lifetime of the optionholder, only
the optionholder (or the transferee pursuant to a domestic
relations order) may exercise an option. An optionholder may
also designate a beneficiary who may exercise an option
following the optionholder’s death.
Stock appreciation rights may be granted under the Amended Plan
pursuant to stock appreciation rights agreements, either as a
tandem stock appreciation right in connection with an option (a
“tandem SAR”) or as a stand-alone stock appreciation
right (a “stand-alone SAR”).
Exercise. Each stock appreciation right is
denominated in shares of common stock equivalents. Upon exercise
of a stock appreciation right, Del Monte will pay the
participant an amount equal to the excess of (i) the
aggregate fair market value of Del Monte’s common stock on
the date of exercise, over (ii) the exercise price
determined by the Committee on the date of grant. The exercise
price of a stock appreciation right may not be less than 100% of
the fair market value of the stock on the date of grant.
Settlement of Awards. The appreciation
distribution upon exercise of a stock appreciation right may be
paid in cash, shares of Del Monte’s common stock, or a
combination of cash and shares, as determined by the Committee.
Vesting. Stock appreciation rights vest and
become exercisable at the rate specified in the stock
appreciation right agreement as determined by the Committee.
Vesting typically will occur during the participant’s
employment with Del Monte or a subsidiary. If a
participant’s employment is terminated by the participant
on account of retirement (as defined in the Amended Plan) or,
for participants who are vice presidents or above upon
termination, if the participant is terminated by Del Monte or a
subsidiary without cause (as defined in
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the Amended Plan) or if the participant terminates his
employment for good reason (as defined in the participant’s
employment contract or, if included therein, the applicable
executive severance plan), then the stock appreciation right
will vest on a pro rata basis in accordance with Del
Monte’s policy in effect at the time of such termination.
Moreover, if a participant’s employment is terminated on
account of death or disability (as defined in the Amended Plan),
then all of the shares subject to the stock appreciation right
will vest and become exercisable as of the time of such
termination. Shares covered by different stock appreciation
rights granted under the Amended Plan may be subject to
different vesting terms. The Committee has the authority to
accelerate the time during which a stock appreciation right may
vest or be exercised.
Term. The maximum term of stock appreciation
rights granted under the Amended Plan is 10 years.
Termination of Employment. The exercise of an
option, or the cancellation, termination or expiration of an
option with respect to a number of shares of common stock will
cause the automatic and immediate cancellation of its related
tandem SAR to the extent that the number of shares of common
stock subject to such option after such exercise, cancellation,
termination or expiration is less than the number of shares
subject to such tandem SAR. Under the Amended Plan, in the event
that a participant’s employment terminates (other than for
cause or due to the participant’s disability, death or
retirement), his or her
stand-alone
SARs may be exercised (to the extent the stand-alone SARs were
exercisable at the time of the termination of employment) at any
time within 3 months following termination. By contrast,
prior to the August 6, 2007 amendment and restatement, the
2002 Plan provided that such stand-alone SARs may be exercised
(to the extent the stand-alone SARs were exercisable at the time
of such termination) at any time within 90 days following
such termination. If termination is for cause, stand-alone SARs
will expire and be canceled upon termination. If termination is
due to the participant’s retirement (as defined in the
Amended Plan), disability (as defined in the Amended Plan) or
death, stand-alone SARs (to the extent exercisable at the time
of termination) may be exercised until the expiration of their
original terms. If a participant dies within 3 months
following an involuntary termination of employment without
cause, stand-alone SARs may be exercised (to the extent the
stand-alone SARs were exercisable at the time of the termination
of employment) until the expiration of their original terms or,
if sooner, for one year after the participant’s death. In
no event, however, may a stand-alone SAR be exercised beyond the
expiration of its original term.
Restrictions on Transfer. Stock appreciation
rights may be transferred only upon such terms and conditions as
determined by the Committee.
Stock bonus awards may be granted under the Amended Plan
pursuant to terms and conditions determined by the Committee at
the time of grant. The Committee may also or in the alternative
grant other stock awards which are not restricted to any
specified form or structure and may include, without limitation,
restricted stock, restricted stock units, stock purchase
warrants, performance units or performance shares. In addition,
performance units may be in the form of cash awards that are not
tied to the value of Del Monte common stock.
The Amended Plan specifically provides that dividend equivalents
may be credited with respect to shares covered by deferred stock
units, as determined by the Committee and provided in the
applicable award agreement. At the discretion of the Committee,
such dividend equivalents may be converted into additional
shares of common stock covered by the deferred stock units. Any
such additional shares will be subject to all the terms and
conditions of the underlying award agreement. Prior to the
August 6, 2007 amendment and restatement, the 2002 Plan did
not explicitly provide for dividend equivalents with respect to
deferred stock units; dividend equivalents were provided
pursuant to the terms of awards relating to deferred director
and executive compensation.
Under the Amended Plan, a stock award or a cash award may be
based upon certain service conditions or upon the attainment
during a certain period of time of certain performance goals.
The length of any
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performance period, the performance goals to be achieved during
the performance period, and the measure of whether and to what
degree such performance goals have been attained shall be
determined by the Committee. The maximum number of shares of
common stock that may be granted to any individual in any fiscal
year attributable to such performance-based stock awards may not
exceed the Section 162(m) Limitation described above
(1,500,000 shares of common stock). The maximum value of
performance-based cash awards payable for any one fiscal year to
any individual is $2,000,000.
In granting a performance-based stock award or a
performance-based cash award, the Committee will set a period of
time (a “performance period”) over which the
attainment of one or more goals (“performance goals”)
will be measured for the purpose of determining whether the
award recipient has a vested right in or to such award. The
Committee shall designate in writing not later than 90 days
following the beginning of a performance period the target
bonus, performance criteria and factors (reflecting targets for
such criteria and relative weighting). The Committee may, in its
discretion, direct that any performance award be reduced on
account of individual performance below the amount calculated on
the basis of one or more of the following performance criteria
and related factors.
Under the Amended Plan, at the time of the grant of any
performance-based award, the Committee may determine whether,
when calculating the attainment of performance goals for a
performance period, to exclude one or more of the following:
(i) restructuring
and/or other
nonrecurring charges; (ii) exchange rate effects, as
applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) the
effects of changes to generally accepted accounting standards
required by the Financial Accounting Standards Board;
(iv) the effects of any statutory adjustments to corporate
tax rates; and (v) the effects of any “extraordinary
items” as determined under generally accepted accounting
principles. Prior to the August 6, 2007 amendment and
restatement, the 2002 Plan did not explicitly provide for such
adjustments.
Performance goals under the Amended Plan shall be determined by
the Committee, based on one or more of the following performance
criteria: (i) cash flow, (ii) earnings per share,
(iii) return on equity, (iv) total stockholder return,
(v) return on capital, (vi) return on assets or net
assets, (vii) revenue, (viii) income or net income,
(ix) operating income or net operating income,
(x) operating profit or net operating profit,
(xi) operating margin, (xii) return on operating
revenue, (xiii) market share, (xiv) earnings before
interest, taxes, depreciation, and amortization (EBITDA), and
(xv) return on invested capital (ROIC), and (xvi) any
other objective and measurable criterion tied Del Monte’s
performance.
If any change is made to the outstanding shares of Del
Monte’s common stock by reason of any stock dividend or
split, recapitalization, merger, consolidation, combination or
exchange of shares or similar corporate change, the maximum
aggregate number of shares of common stock with respect to which
the Committee may grant stock awards will be appropriately
adjusted by the Committee. In the event of any change in the
number of shares of common stock outstanding by reason of any
other event or transaction, the Committee may, but need not,
make such adjustments in the number and class of shares of
common stock with respect to which stock awards may be granted
as the Committee may deem appropriate.
Subject to any required action by the stockholders 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
without receipt or payment of consideration by Del Monte,
or change in the capitalization of Del Monte, the Committee will
proportionally adjust the number of shares of common stock
subject to each outstanding stock award, and the applicable
exercise price per share of common stock of each such award to
prevent dilution or the enlargement of rights.
Upon the occurrence of certain events constituting a change of
control of Del Monte (as defined in the Amended Plan) (a
“Change of Control”), all outstanding awards will vest
and become immediately
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exercisable. The Committee in its discretion will determine
whether outstanding awards will vest and become automatically
exercisable in the event of a transaction other than a Change of
Control. Further, the Committee in its discretion will determine
whether any outstanding awards will, in the context of a Change
of Control or any other transaction, be converted into
comparable awards of a successor entity or redeemed for payment
in cash or kind or both.
The acceleration of vesting of a stock or cash award in the
event of a Change of Control under the Amended Plan may be
viewed as an anti-takeover provision, which may have the effect
of discouraging a proposal to acquire or otherwise obtain
control of Del Monte.
Section 409A
Effective as of January 1, 2005, to the extent that any
amount or benefit that constitutes “deferred
compensation” under Section 409A of the Code is
payable or distributable to a participant under the Amended Plan
solely by reason of the occurrence of a Change of Control or due
to the participant’s disability or “separation from
service” (as defined under Section 409A of the Code),
such amount or benefit will not be payable or distributable to
the participant unless the Committee determines that
(i) the circumstances giving rise to such Change of
Control, disability or separation from service meet the
applicable definitions in Section 409A of the Code, or
(ii) the payment or distribution of such amount or benefit
would be exempt from the application of Section 409A of the
Code. Any payment or distribution that otherwise would be made
to a participant who is a “specified employee” under
Section 409A of the Code on account of separation from
service may not be made until 6 months after the date of
such separation from service unless the payment or distribution
is otherwise exempt from Section 409A of the Code. To the
extent that the Committee determines that any incentive award
granted under the Amended Plan is subject to Section 409A
of the Code, the Committee may adopt such amendments to the
Amended Plan and the applicable incentive award agreement or
adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any
other actions that the Committee determines are necessary or
appropriate to (i) exempt the incentive award from
Section 409A of the Code
and/or
preserve the intended tax treatment of the benefits provided
with respect to the incentive award, or (ii) comply with
the requirements of Section 409A of the Code. Prior to the
August 6, 2007 amendment and restatement, the 2002 Plan did
not contain any specific provisions regarding Section 409A
of the Code but was administered in good faith compliance as
permitted by the guidance under Section 409A.
The Board may suspend or terminate the Amended Plan without
stockholder approval or ratification at any time. Under the
terms of the 2002 Plan, prior to the August 6, 2007
amendment and restatement, no incentive stock options could be
granted after August 14, 2015. However, under the terms of
the Amended Plan, no incentive stock options may be granted
after August 5, 2017.
The Board may amend or modify the Amended Plan at any time.
However, no amendment shall be effective unless approved by the
stockholders of Del Monte to the extent that the amendment
increases the number of shares that may be issued under the
Amended Plan. In addition, no amendment, suspension or
termination may impair rights and obligations under any stock
award granted prior to such action, except with the written
consent of the affected participant.
In general, the Amended Plan provides that, without the approval
of Del Monte’s stockholders, no option, tandem SAR,
stand-alone SAR, stock bonus or other incentive award granted
under the Plan will be repriced, replaced or regranted through
(a) cancellation and regrant at a lower price,
(b) lowering the exercise price of a previously awarded
option, (c) lowering the grant price of a previously
awarded stock appreciation right, or (d) lowering the
purchase price of a previously awarded stock bonus or other
incentive award. Prior to its August 6, 2007 amendment and
restatement, the 2002 Plan provided that, without the approval
of Del Monte’s stockholders, no
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options granted under the 2002 Plan would be repriced, whether
by lowering the exercise price of previously awarded options or
canceling previously awarded options and regranting them with a
lower exercise price.
The following is a summary of the principal United States
federal income taxation consequences to employees and Del Monte
with respect to participation in the Amended Plan. This summary
is not intended to be exhaustive, and does not discuss the
income tax laws of any city, state or foreign jurisdiction in
which a participant may reside. Plan participants should not
rely on this summary and should instead seek advice based on
their particular circumstances from an independent tax advisor.
Incentive Stock Options. Incentive stock
options granted under the Amended Plan are intended to be
eligible for the favorable federal income tax treatment accorded
“incentive stock options” under the Code. There
generally are no federal income tax consequences to the
participant or Del Monte by reason of the grant or exercise of
an incentive stock option. However, the exercise of an incentive
stock option may increase the participant’s alternative
minimum tax liability, if any.
If a participant holds stock acquired through exercise of an
incentive stock option for more than two years from the date on
which the option was granted and more than one year after the
date the option was exercised for those shares, any gain or loss
on a disposition of those shares (a “qualifying
disposition”) will be a
long-term
capital gain or loss. Upon such a qualifying disposition, Del
Monte will not be entitled to any income tax deduction.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a
“disqualifying disposition”), then at the time of
disposition the participant will realize taxable ordinary income
equal to the lesser of (i) the excess of the stock’s
fair market value on the date of exercise over the exercise
price, or (ii) the participant’s actual gain, if any,
on the purchase and sale. The participant’s additional gain
or any loss upon the disqualifying disposition will be a capital
gain or loss, which will be long-term or short-term depending on
whether the stock was held for more than one year.
To the extent the participant recognizes ordinary income by
reason of a disqualifying disposition, generally Del Monte will
be entitled (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code, and the
satisfaction of a tax reporting obligation) to a corresponding
income tax deduction in the tax year in which the disqualifying
disposition occurs.
Nonqualified Stock Options. No taxable income
is recognized by a participant upon the grant of a nonqualified
stock option. Upon exercise of a nonqualified stock option, the
participant will recognize ordinary income equal to the excess,
if any, of the fair market value of the purchased shares on the
exercise date over the exercise price paid for those shares.
Generally, Del Monte will be entitled (subject to the
requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the tax year in which such ordinary income is recognized by the
participant.
Upon disposition of the stock, the participant will recognize a
capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon acquisition (or
vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than
one year.
Stock Appreciation Rights. No taxable income
is realized upon the receipt of a stock appreciation right. Upon
exercise of the stock appreciation right, the fair market value
of the shares received is recognized as ordinary income to the
participant in the year of such exercise. Generally, with
respect to employees, Del Monte is required to withhold from the
payment made on exercise of the stock appreciation right or from
regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Subject to the requirement of
reasonableness, Section 162(m) of the Code and the
satisfaction of a reporting obligation, Del Monte will be
entitled to an income tax deduction equal to the amount of
ordinary income recognized by the participant.
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Stock Bonus Awards. Upon receipt of a stock
bonus award, the participant will recognize ordinary income
equal to the excess, if any, of the fair market value of the
shares on the date of issuance over the purchase price, if any,
paid for those shares. Del Monte will be entitled (subject to
the requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the tax year in which such ordinary income is recognized by the
participant.
However, if the shares issued upon the grant of a stock bonus
award are unvested and subject to repurchase by Del Monte in the
event of the participant’s termination of service prior to
vesting in those shares, the participant will not recognize any
taxable income at the time of issuance, but will have to report
as ordinary income, as and when Del Monte’s repurchase
right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right
lapses, over (ii) the purchase price, if any, paid for the
shares. The participant may, however, elect under
Section 83(b) of the Code to include as ordinary income in
the year of issuance an amount equal to the excess of
(x) the fair market value of the shares on the date of
issuance, over (y) the purchase price, if any, paid for
such shares. If the Section 83(b) election is made, the
participant will not recognize any additional income as and when
the repurchase right lapses.
Upon disposition of the stock acquired upon the receipt of a
stock bonus award, the participant will recognize a capital gain
or loss equal to the difference between the selling price and
the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon issuance (or vesting) of the
stock. Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year.
Potential Limitation on Company
Deductions. Section 162(m) of the Code denies
a deduction to any publicly-held corporation for compensation
paid to certain “covered employees” in a taxable year
to the extent that compensation to such covered employee exceeds
$1 million. It is possible that compensation attributable
to awards under the Amended Plan, when combined with all other
types of compensation received by a covered employee from Del
Monte, may cause this limitation to be exceeded in any
particular year.
Certain kinds of compensation, including qualified
“performance-based compensation,” are disregarded for
purposes of the deduction limitation. In accordance with
Treasury Regulations issued under Section 162(m) of the
Code, compensation attributable to stock options and stock
appreciation rights will qualify as
performance-based
compensation if such awards are approved by a compensation
committee comprised solely of “outside directors” and
the plan contains a per-employee limitation on the number of
shares for which such awards may be granted during a specified
period, the per-employee limitation is approved by the
stockholders, and the exercise or strike price of the award is
no less than the fair market value of the stock on the date of
grant.
Compensation attributable to stock bonus awards and cash bonus
awards will qualify as performance-based compensation, provided
that: (i) the award is approved by a compensation committee
comprised solely of “outside directors,” (ii) the
award is granted (or exercisable) only upon the achievement of
an objective performance goal established in writing by the
compensation committee while the outcome is substantially
uncertain, (iii) such compensation committee certifies in
writing prior to the granting (or exercisability) of the award
that the performance goal has been satisfied, and
(iv) prior to the granting (or exercisability) of the
award, stockholders have approved the material terms of the
award (including the class of employees eligible for such award,
the business criteria on which the performance goal is based,
and the maximum amount, or formula used to calculate the amount,
payable upon attainment of the performance goal).
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Fiscal
2007 Awards under the 2002 Plan
The following table sets forth the incentive awards under the
2002 Plan that were issued or became outstanding in fiscal 2007.
Total
Awards Granted under the 2002 Plan
The following table reflects all awards under the 2002 Plan that
were issued or became outstanding on or prior to April 29,
2007. From time to time, in accordance with the terms of the
awards, some of the awards (or a portion thereof) have been
cancelled, expired or exercised and are no longer outstanding.
Additionally, stock issued (as opposed to deferred) to the
Company’s non-employee directors as part of their
compensation are not reflected elsewhere in this proxy statement
as outstanding awards because such shares are issued immediately
upon grant. Accordingly, the following table does not reflect
the number of currently outstanding awards. As of April 29,
2007, eligible employees, non-employee directors and others held
934,828 restricted stock units, 277,949 deferred stock units,
1,340,400 performance shares and options to purchase
12,178,287 shares of common stock under the 2002 Plan.
For information regarding outstanding awards held by our
directors and named executive officers, please see
“Director Compensation” and “Executive
Compensation – Outstanding Equity Awards at Fiscal
2007 Year End.”
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Proposal 3
The Audit Committee of the Board of Directors has selected KPMG
LLP as the Company’s independent auditors for the fiscal
year ending April 27, 2008, and the Board of Directors has
directed that management submit the appointment of independent
auditors for ratification by the stockholders at the annual
meeting. KPMG LLP served as Del Monte’s independent
auditors in fiscal 2007, 2006, 2005 and 2004 and is an
independent registered public accounting firm. A representative
of KPMG LLP is expected to be present at the annual meeting. He
or she will have an opportunity to make a statement at the
annual meeting and will be available to respond to appropriate
questions.
Neither the Company’s Bylaws nor other governing documents
or law require stockholder ratification of the appointment of
KPMG LLP as the Company’s independent auditors. However,
the Audit Committee of the Board of Directors recommended, and
the Board of Directors is, submitting the appointment of KPMG
LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the
appointment, the Audit Committee will reconsider whether or not
to retain that firm. Even if the appointment is ratified, the
Audit Committee in its discretion may direct the appointment of
different independent auditors at any time if they determine
that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote
at the annual meeting will be required to ratify the appointment
of KPMG LLP. Abstentions will be counted toward the tabulation
of votes cast on proposals presented to the stockholders and
will have the same effect as negative votes.
With respect to the fiscal years ended April 29, 2007 and
April 30, 2006, the aggregate fees billed by KPMG LLP are
as follows:
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The Audit Committee determined that the non-audit services
provided by KPMG LLP during the fiscal year ended April 29,
2007 were compatible with maintaining the independence of KPMG
LLP.
Consistent with SEC rules regarding auditor independence, the
Audit Committee has responsibility for appointing, as well as
setting the compensation and overseeing the work of, the
independent registered public accounting firm. In recognition of
this responsibility, the Audit Committee has adopted policies
and procedures for the approval in advance, or
“pre-approval,” of audit and non-audit services
rendered by our independent auditors, KPMG LLP. All services
provided by KPMG LLP during fiscal 2007, as described above,
were approved by the Audit Committee in advance of KPMG LLP
providing such services.
Pursuant to the Statement of Policy and Procedures regarding
Pre-Approval of Engagements for Audit and Non-Audit Services, to
the extent particular services may be identifiable prior to or
at the beginning of the Company’s fiscal year, the Audit
Committee encourages management to submit proposals regarding
such services prior to or at the beginning of such year.
Typically, the Audit Committee considers such services at its
June meeting. In connection with approving such annually
identifiable services, the Audit Committee reviews a brief
description of each such service as well as an estimate of the
expected fees associated with each such service. As necessary,
the Audit Committee or, as described below, the Chair of the
Audit Committee considers other services on an individual
case-by-case
basis before the independent auditor is engaged to provide each
service, generally based on a brief description of the proposed
service and an estimate of the expected fees associated with
such service. Additional information must be provided to the
Committee or Chair of the Audit Committee in connection with the
approval of permitted tax services.
To ensure prompt handling of matters between meetings of the
Audit Committee, authority to approve services between Audit
Committee meetings has been delegated to the Chair of the Audit
Committee, provided that the expected fees for each service
approved by the Chair does not exceed $50,000 and that the
aggregate expected fees for all services so approved from one
meeting of the Audit Committee to the next does not exceed
$150,000. The Chair must report all services approved under this
delegated authority to the Audit Committee at its next scheduled
meeting. A copy of the Statement of Policy and Procedures
regarding Pre-Approval of Engagements for Audit and Non-Audit
Services is available on the Company’s website at
www.delmonte.com.
The
Board Of Directors Recommends
A
Vote In Favor Of Proposal 3.
The primary role of the Audit Committee, as more fully described
in its Charter, is to assist the Board of Directors in its
oversight of Del Monte’s corporate accounting and financial
reporting process and to interact directly with and evaluate the
performance of Del Monte’s independent auditors.
In the performance of its oversight function, the Audit
Committee has reviewed Del Monte’s audited financial
statements for the fiscal year ended April 29, 2007 and has
met with both management and Del Monte’s independent
auditors, KPMG LLP, to discuss those financial statements. The
Audit Committee has discussed with KPMG LLP those matters
related to the conduct of the audit that are required to be
communicated by the independent auditors to the Audit Committee,
including, as set forth in Statements of Auditing Standards
No. 61, as amended (as adopted by the Public Company
Accounting Oversight Board (“PCAOB”) in
Rule 3200T), KPMG LLP’s judgments as to the quality,
not just the acceptability, of Del Monte’s accounting
principles. In addition, the Audit Committee has reviewed and
discussed with both management and KPMG LLP
1) management’s assessment of the effectiveness of Del
Monte’s internal control over financial reporting, as well
as 2) KPMG LLP’s evaluation of the effectiveness of
Del Monte’s internal control over financial reporting.
The Audit Committee discussed with Del Monte’s internal and
independent auditors the overall scope and plans for their
respective audits. The Audit Committee met separately with the
independent auditors, without
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management present, to discuss the results of their audits,
their evaluations of Del Monte’s internal controls and the
overall quality of Del Monte’s financial reporting.
The Audit Committee has received from KPMG LLP the required
written disclosures and letter regarding its independence from
Del Monte, as set forth by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees)(as
adopted by the PCAOB in Rule 3600T), and has discussed with
KPMG LLP its independence. The Audit Committee has also reviewed
and considered whether the provision of other non-audit services
by KPMG LLP is compatible with maintaining the auditors’
independence.
Based on these reviews and discussions, the Audit Committee
recommended to the Board of Directors, and the Board of
Directors approved, that the audited financial statements of Del
Monte for the fiscal year ended April 29, 2007 be included
in Del Monte’s Annual Report on
Form 10-K,
which was filed with the Securities and Exchange Commission on
June 27, 2007.
It is not the duty of the Audit Committee to conduct audits, to
independently verify management’s representations or to
determine that Del Monte’s financial statements are
complete and accurate, prepared in accordance with United States
generally accepted accounting principles or fairly present the
financial condition, results of operations and cash flows of Del
Monte; that is the responsibility of management and the
Company’s independent auditors. In giving its
recommendation to the Board of Directors, the Audit Committee
has expressly relied on (i) management’s
representation that such financial statements have been prepared
in conformity with United States generally accepted accounting
principles and (ii) the report of the Company’s
independent auditors, an independent registered public
accounting firm, with respect to such financial statements.
The Audit Committee
Terence D. Martin, Chairman
Timothy G. Bruer David R. Williams
The foregoing Report is not soliciting material, is not
deemed filed with the SEC and is not to be incorporated by
reference in any filing of the Company under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
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Ownership
of Del Monte Foods Company Common Stock
The following table sets forth information regarding beneficial
ownership of Del Monte common stock as of May 4, 2007, the
most recent practicable date, (1) by each person or entity
who is known by Del Monte to own beneficially more than 5% of
Del Monte common stock; (2) by each of Del Monte’s
current directors; (3) by each of the named executive
officers of Del Monte identified in the table set forth under
the heading “Executive Compensation – Fiscal
2007 Summary Compensation Table” and (4) by all of
Del Monte’s current executive officers and directors
as a group. Information with respect to beneficial ownership by
5% stockholders has been based on information filed with the
Securities and Exchange Commission pursuant to
Section 13(d) or Section 13(g) of the Securities
Exchange Act of 1934.
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Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company’s directors and executive
officers, and persons who own more than ten percent of a
registered class of the Company’s equity securities, to
file with the SEC initial reports of ownership and reports of
changes in ownership of common stock and other equity securities
of the Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended April 29, 2007, all Section 16(a)
filing requirements applicable to Del Monte’s executive
officers, directors and greater than ten percent beneficial
owners were complied with, except that a Form 3 filed on
July 11, 2006 with respect to Mr. Barry A. Shepard
(who is no longer an executive officer) inadvertently omitted
approximately 35 deferred stock units. A Form 3/A was filed
on October 3, 2006 upon discovery of such omission.
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The following table sets forth the name, age and positions, as
of August 8, 2007 (the date of this proxy statement), of
individuals who are currently executive officers of Del Monte
Foods Company. To the Company’s knowledge, there are no
family relationships between any director or executive officer
and any other director or executive officer of the Company.
These individuals hold the same positions with Del Monte
Corporation, the Company’s wholly-owned subsidiary.
Executive officers serve at the discretion of the Company’s
Board of Directors. Additionally, executive officers may be
elected to the Board of Directors. Mr. Wolford currently
serves as the Chairman of the Board of Directors.
Mr. Wolford joined Del Monte as Chief Executive Officer and
a Director in April 1997. He was elected President of Del Monte
in February 1998 and was elected Chairman of the Board of
Directors of Del Monte Foods Company in May 2000. 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.
Mr. Meyers joined Del Monte 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 Foods Company from
January 1994 until consummation of Del Monte’s
recapitalization in 1997. Prior to joining Del Monte,
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).
Mr. Cole joined Del Monte in September 2004. From 1979 to
September 2004, Mr. Cole held a variety of positions with
The Quaker Oats Company, now a unit of PepsiCo., Inc., where he
became Vice President of National Accounts for the United States.
Mr. Lommerin was appointed Executive Vice President,
Operations in July 2004. He joined Del Monte in March 2003 as
Executive Vice President, Human Resources. From March 1999 to
July 2002, he was with Oxford Health Plans, Inc., where he most
recently served as Executive Vice President, Operations and
Corporate Services. From November 1991 to February 1999,
Mr. Lommerin held a variety of senior Human Resources
positions with PepsiCo, Inc.
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Mr. Allen was appointed Senior Vice President, Supply Chain
Operations in June 2006, having served as a consultant to Del
Monte beginning in November 2005. Prior to that, Mr. Allen
was Chief Operating Officer of U.S. Foodservice, a division
of Royal Ahold, from 2004 to 2005 and Chief Executive Officer of
WorldChain, Inc., a supply chain services company, from 2001 to
2004. He served as Vice President, Worldwide Operations of Dell
Inc. from 1999 to 2000. From 1991 to 1999, Mr. Allen held a
variety of positions at Frito-Lay North America, a division of
Pepsico Inc., most recently as its Senior Vice President,
Operations. Mr. Allen also serves on the board of directors
of American Italian Pasta Company.
Mr. French joined Del Monte in 1980 and was elected to his
current position in May 1998. Mr. French was Vice President
and Chief Accounting Officer of Del Monte from August 1993
through May 1998 and has held a variety of positions within Del
Monte’s financial organization.
Mr. Mody was appointed Senior Vice President, Consumer
Products in July 2006, having served as Managing Director, Del
Monte Brands since December 2004. Mr. Mody joined Del Monte
in January 2002 in the Strategic Planning Group and served as
Vice President of Marketing for the Vegetable, Infant Feeding
and College Inn businesses from June 2002 to December 2004.
Prior to joining Del Monte, Mr. Mody was with
Divine/Whitman Hart from 2000 until 2001 where he was an
Associate Partner in the Business and Brand Strategy group. From
1994 to 2000, Mr. Mody held a variety of brand management
positions with Procter & Gamble.
Mr. Potter joined Del Monte in October 2001 and was elected
to his current position in September 2002. From December 1997 to
December 2000, he was Executive Vice President, General Counsel
and Secretary of Provident Mutual Life Insurance Company. From
1989 to November 1997, Mr. Potter was the Chief Legal
Officer of The Prudential Bank and Trust Company and The
Prudential Savings Bank, subsidiaries of The Prudential
Insurance Company of America.
Mr. Watters was appointed Senior Vice President, Del Monte
Pet Products in July 2006, having served as Managing Director,
Star-Kist Seafood since August 2004. He joined Del Monte from
Heinz in December 2002 as Vice President, Pet Snacks Marketing.
Mr. Watters joined Heinz in July 2000, where he most
recently served as its Vice President, Pet Snacks Marketing.
Prior to joining Heinz, Mr. Watters was with The Clorox
Company in brand management from 1995 to 2000. From 1988 to
1995, Mr. Watters was with Kraft Foods Inc. in sales and
customer marketing.
Mr. Berry joined Del Monte in March 2003 and was appointed
to his current position in August 2006. Prior to his current
position, Mr. Berry was Vice President, Strategic Planning
and Business Development for Del Monte. From September 1997 to
late 2002, Mr. Berry held a variety of consulting positions
with McKinsey and Company, a management consulting firm, most
recently as an Associate Principal.
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Executive
Compensation
Compensation
Discussion and Analysis
Compensation
Objectives, Principles and Process
The primary objective of Del Monte’s executive compensation
program is to attract and retain executives of exceptional
caliber who will provide strong, competitive leadership in the
food industry and drive shareholder value through superior
performance and align their interests with those of our
stockholders. Toward that end, executive compensation at Del
Monte is comprised of a portfolio of cash and stock-based
elements designed to reward both corporate and individual
performance, provide short and long-term incentives and
compensate our executives both currently and upon retirement.
The following compensation principles developed by our
Compensation Committee, approved by our Board of Directors and
described in the Committee’s Charter, supplement and
support the compensation objective described above:
We believe that our compensation program, which adheres to the
foregoing principles and objective, continues to assist Del
Monte in creating and retaining a strong executive team which
shares a common view of Del Monte’s business and works to
create and sustain stockholder value.
The Compensation Committee reviews and approves our overall
compensation strategy and policies and annually sets the
compensation of executive officers. The Committee makes
decisions regarding executive compensation with input from
management and Hewitt Associates, Inc., an executive
compensation consultant engaged directly by the Committee for
executive compensation purposes. From time to time, Hewitt
Associates may also perform some compensation-related projects
for the Company. At its meetings, the Committee regularly holds
executive sessions, which exclude management and, subject to the
Committee’s discretion, may include its executive
compensation consultant. As discussed further below, the
Committee employs a number of processes to ensure that the
executive compensation program is achieving its objectives,
including benchmarking, assessment of the compensation for
senior executives (by means of “tally sheets”), and
assessment of individual and Company performance.
Benchmarking. Each fiscal year the
Committee constructs direct compensation packages consisting of
base salaries, annual incentive award targets and long-term
incentive awards for Del Monte’s executive officers.
Determinations of direct compensation levels begin with
management’s identification of the responsibilities,
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leadership competencies, technical skills and experience
required for the executive position. Once those key elements are
identified, the Committee employs a benchmarking process that
includes two different peer groups. As described further below,
one peer group was approved by the Committee to benchmark
overall direct compensation levels for executives. The second
comparator group was approved by the Committee specifically for
Del Monte’s performance accelerated restricted stock unit
(PARS) awards, which provide for accelerated vesting based on
the achievement of Total Shareholder Return (TSR) targets. Our
TSR comparator companies are discussed in more detail below
under the heading “How are amounts of long-term
incentive awards determined?” The benchmarking metrics
selected by the Committee are believed to be the best markers
for performance.
In order to provide competitive leadership for business
performance as we compete for customer programs and mindshare,
we believe that the caliber of our executives must compare
favorably to executives at other companies sharing our
competitive customer base, even if those companies are larger or
in a different category than us. Accordingly, we look to those
same companies as our competition for executive talent.
Consequently, our benchmarking objectives seek to provide a
total compensation package for our named executive officers that
is competitive and consistent with those provided by
(1) major branded food and consumer products companies that
are similar in size to Del Monte and require comparable
leadership competencies, skills, and experiences, and
(2) other organizations that operate in the global and
regional markets in which we compete for executive talent.
Working with Hewitt Associates, the Committee has approved a
peer group of publicly-traded and privately-held companies for
such comparison purposes. The Committee reviews the peer group
annually, making adjustments as it deems appropriate. In fiscal
2007, the peer group was comprised of the following companies:
The Committee implements this benchmarking based, in part, on
the competitive data, analysis and advice supplied by Hewitt
Associates. If no comparable position is identified in the peer
group, the Committee may look to other publicly available data
or survey data provided by Hewitt Associates, as well as
internal comparisons to other executives, to determine an
appropriate competitive compensation level. For example, a Del
Monte executive position may be mapped to a general industry
position with similar impact, scope and rank in the corporate
hierarchy.
Corporate and Individual Performance
Assessment. The Committee also considers an
executive officer’s individual performance, experience and
contribution to overall corporate success in adjusting base
salaries and establishing incentive compensation. Company
performance, while considered in adjusting base salaries and
granting equity awards, is more specifically reflected in annual
incentive award determinations as described in more detail below
in the discussion of our Annual Incentive Plan. As part of the
individual performance assessment, the Committee may review and
consider the prior year’s base salary adjustment, if any,
for each executive.
“Tally Sheet” Assessment of Compensation for
Senior Executives. In determining executive
officers’ compensation, the Committee evaluates the
cumulative effect of compensation decisions by an annual review
of tally sheets for each executive officer. Each tally sheet
details the value, earnings and accumulated potential payout of
each element of the executive’s compensation, including
equity awards. In addition, each tally sheet summarizes
retirement benefits and quantifies the benefits we are required
to provide under various employment termination scenarios,
including termination upon change of control.
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In fiscal 2007, 86% of our Chief Executive Officer’s direct
compensation was “at-risk” compensation in the form of
annual incentive award targets and long-term incentive awards.
In comparison, an average of 74% of our Executive Vice
Presidents’ direct compensation packages were allocated to
such at-risk compensation and our Senior Vice Presidents’
allocation averaged 62%. The Committee does not apply specific
targeted allocations between cash and stock-based compensation
or between short-term and long-term compensation when setting
each year’s direct compensation package. However, the
at-risk allocations approved for fiscal 2007 reflect the
Company’s objectives that a majority of the direct
compensation of Del Monte’s executives should be tied
directly to the Company’s performance and that at-risk
allocation should increase based on compensation and grade level.
Executive compensation is set by the Compensation Committee,
with important support provided by its compensation consultant
Hewitt Associates, the CEO and management. Both Hewitt
Associates and the CEO typically attend portions of all
regularly scheduled Committee meetings. The processes of
benchmarking, tally sheets and performance assessments described
above are used by each of them to evaluate the compensation of
our executive officers. Generally, this process begins with
management’s (including the CEO’s) identification of
the responsibilities, leadership competencies, technical skills
and experience required for each executive officer position.
These executive position descriptions are discussed with and
approved by the Committee. Hewitt Associates then compiles the
benchmarking and market survey data relevant to the executive
position descriptions provided by management and submits it to
the Committee for its consideration, typically at its regularly
scheduled September Committee meeting. The Committee determines
base salary and target levels of annual and long-term incentive
awards for each of the named executive officers after
considering the benchmarking data and other factors as discussed
further below in “Components of Executive
Compensation.” In connection with the Committee’s
determination, the CEO may provide the Committee with his
insights regarding these other factors that may impact base
salary, annual incentive and long-term incentive targets for
executive officers. However, the CEO’s base salary and
incentive compensation is determined during an executive session
where only the Committee members and Hewitt Associates are
present. The CEO’s annual base salary, target annual and
long-term incentive awards are further discussed with the
independent members of the Board of Directors. Beginning in
fiscal 2008, independent members of the Board of Directors will
formally review and approve the CEO’s annual base salary,
target annual and long-term incentive awards. Additionally,
prior to the end of each fiscal year, the Committee reviews the
terms and benefits of all employee benefit plans and programs
for salaried employees, including those directly related to
executive compensation.
Each year the Committee also approves individual objectives for
each executive officer, which, if achieved, will impact the
amount of the executive’s annual incentive compensation.
The CEO is significantly involved in establishing and evaluating
the individual objectives approved by the Committee for the
executive officers under the annual incentive plan. Annually,
the CEO submits to the Committee proposed individual performance
objectives for each of the Company’s executive officers,
including the named executive officers, which are reviewed and
approved by the Committee. At the end of the fiscal year, the
CEO provides his evaluation of each executive officer’s
performance against their individual objectives for the
Committee’s consideration and approval as part of his
recommendation for appropriate compensation levels under the
annual incentive plan.
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For fiscal 2007, executive officer compensation consisted
principally of the following elements, in addition to the
health, welfare and retirement plans and programs generally
available to all salaried employees:
Base salaries generally are benchmarked by position to the
median of our peer group, but individual salaries may be above
or below the benchmark to reflect the individual competencies,
skills, experience and sustained performance of the executive
holding this position, the position’s responsibilities, and
the position’s relative internal role within our
organizational structure. Base salaries enable us to attract and
retain executive talent by establishing a minimum compensation
upon which executives can rely. Base salaries for executives are
reviewed and, if necessary, adjusted in September of each year.
In September 2006, with the assistance of its compensation
consultant, the Committee reviewed all elements of direct pay
for the Company’s then eleven executive officers and
approved salary increases for six executive officers, four of
whom were named executive officers. Consistent with general
market increases and maintaining our desired position within our
peer group, the CEO received a 4.0% salary increase and the CFO
and Executive Vice President, Operations each received a 4.1%
salary increase. The Executive Vice President, Sales received a
9.3% salary increase to reflect the position’s broader
scope of responsibility and overall corporate impact compared to
other senior sales executives in our peer group.
Under the Del Monte Foods Company Annual Incentive Plan (AIP),
management employees, including named executive officers, may
earn cash incentive payments based on a fixed target percentage
of base salary during the fiscal year, if corporate, business
unit and individual performance objectives for the fiscal year
are attained. The AIP is designed to:
Named executive officers’ AIP awards are based on the
achievement of corporate and individual performance objectives.
Corporate performance objectives are based on measurable
financial metrics. Individual objectives are designed to reward
an executive’s execution against critical business
priorities and may include both financial and non-financial
objectives.
The Committee approves the corporate and individual performance
objectives and related targets within the first quarter of each
fiscal year. The Committee bases the targets for the corporate
performance objectives on
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the annual operating plan, which is reviewed prior to the
beginning of the fiscal year and approved by our Board of
Directors. The financial metrics selected from the annual
operating plan for AIP corporate performance objectives may
change from year to year based on the Committee’s
determination of which priorities are driving performance that
year. The Committee weights corporate objectives increasingly
higher than individual objectives for more senior executives.
The target percentage of an executive’s base pay also
increases with one’s scope of responsibility. Target award
amounts are benchmarked at the market median, but actual payouts
vary depending upon the extent to which corporate and individual
objectives are achieved and an executive’s unique
contributions. The Committee may also give consideration to
competitive pay opportunities and performance expectations in
setting target award percentages.
Following fiscal 2006, the Committee directed management and
Hewitt Associates to assess the scope of the AIP’s
corporate performance objectives. In the first quarter of fiscal
2007, the Committee established corporate objectives for the
fiscal year. At this time, with advice and input from management
and Hewitt Associates, the Committee approved two additional
financial performance objectives to compliment the
Company’s historical corporate objective of adjusted
earnings per share (EPS). These additional objectives were
adjusted cash flow and net sales. The Committee chose adjusted
EPS, adjusted cash flow and net sales as the fiscal 2007
corporate objectives because it believes that these metrics are
critical to Del Monte’s overall corporate and operational
performance, reinforce management focus on the annual business
plan and, together, drive long-term stockholder value creation.
The following table shows each named executive officers’
target award, which is expressed as a percentage of his base
salary. The target award is the projected amount the executive
would receive for scores of 100% for each of the corporate
performance objectives plus achieving a score of 100% for his
individual objectives. This table also includes the relative
weighting of each objective as a percentage of the total award.
Target
Annual Incentive Award Percentages and Relative Weight of
Objectives
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Corporate Performance Objective Scoring. When
setting corporate objective targets the Committee also
established threshold and maximum achievement levels, creating a
performance range for each component of the corporate objective
portion of the AIP. In 2007, the Committee approved the
performance range for adjusted EPS and adjusted cash flow at 85%
to 115% of target. The performance range for net sales was
approved at 96% to 104% of target. Actual performance below the
threshold results in no payout for that particular objective.
Further, the Company’s final adjusted EPS must meet or
exceed the adjusted EPS threshold before any AIP award can be
made, regardless of whether or not other thresholds or
individual objectives are achieved.
Potential scores for the corporate objectives range from 0% to
200% of the target award; provided that pursuant to the terms of
the AIP, no individual bonus payment can exceed $2 million.
The following graphs show the potential scores associated with
achieving the fiscal 2007 corporate performance objectives at
threshold, target and maximum:
Corporate
Performance Objectives
Overall, the Committee seeks to establish target corporate
objectives that are challenging yet attainable. The fiscal 2007
target corporate objectives were established for compensation
purposes only and, as such, the adjusted EPS and net sales
targets are intended to be more difficult to achieve than the
results expected by the Company as reflected in its published
guidance. Prior to fiscal 2007, adjusted EPS was the only
corporate objective. In fiscal 2004, 2005 and 2006, our
performance against this corporate objective resulted in scores
of 100%, 0% and 81.25%, respectively. With respect to fiscal
2005, the minimum threshold performance was not achieved
resulting in a corporate objective score of 0% and no AIP
payment was made. Generally, the Committee seeks to set the
threshold, target and maximum levels such that the relative
difficulty of achieving the target performance level is
consistent from year to year.
In June 2007, the Committee determined that the adjusted EPS,
adjusted cash flow and net sales thresholds were met and that
the corporate objective results corresponded to a total
corporate performance score, and therefore award, that exceeded
target.
Individual Objective Scoring. Like corporate
objectives, individual objectives are intended to challenge
executives with goals that improve Company performance. On a
Company-wide basis, on average, individual objective scores are
expected to track closely to performance on our corporate
objectives. The named executive officers’ individual
objectives included those within their areas of responsibility.
Mr. Wolford’s individual objectives included goals
related to restructuring, integration of acquired companies,
improving management capabilities and investor relations.
Mr. Meyers’ individual objectives included goals
related to integration of acquired companies, financial
operations and leadership and investor relations.
Mr. Cole’s individual objectives included goals
related to sales volume, in-market execution, customer
development, sales
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organization development and sales strategy.
Mr. Lommerin’s individual objectives included goals
related to plant operations, procurement, transportation,
restructuring and distribution center operations.
Mr. Allen’s individual objectives included goals
related to supply chain performance, procurement,
transportation, distribution center operations and leadership
development.
In accordance with the terms of the AIP, the Committee may also
consider each executive officer’s unique contributions
during the year, in addition to his pre-established individual
objectives, in evaluating and scoring such executive
officer’s achievement of individual objectives. In
considering unique contributions, the Committee is able to
reward an executive for unanticipated results or
accomplishments, typically related to an unexpected project or
opportunity that requires significant leadership to accomplish.
Mr. Allen was the only named executive officer who received
credit for unique contribution in the scoring of his individual
objectives for fiscal 2007. Mr. Allen received credit for
his unique contributions in connection with the recruitment and
promotion of five key executives to fill new supply chain team
positions during fiscal 2007. However, the impact of
Mr. Allen’s unique contribution score to his overall
individual score was not significant.
In June 2007, with input from the CEO, the Committee assessed
the named executive officers’ fiscal 2007 individual
performance against their individual objectives. Potential
scores for achievement of individual objectives range from 0% to
200%, with a minimum score of 75% required for the executive to
receive any award. The Committee determined that the named
executive officers generally exceeded their individual
performance objectives and approved individual objective scores,
and therefore awards, that exceeded target.
The Compensation Committee determined the payout of awards under
the Annual Incentive Plan with respect to fiscal 2007. Based on
weighting of the corporate and individual objective scores, the
named executive officers received overall AIP scores and awards
for fiscal 2007 as set forth below:
The dollar amounts of the actual AIP awards to the named
executive officers for fiscal 2007 are reported as Non-Equity
Incentive Plan Compensation in the “Fiscal 2007 Summary
Compensation Table.”
For fiscal 2007, long-term incentives were provided to executive
officers through grants of three types of equity awards under
the Del Monte Foods Company 2002 Stock Incentive Plan, approved
by stockholders:
These three long-term equity compensation opportunities, taken
together, are designed to:
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Although the size of awards varies by position, the Committee
currently seeks a value mix for annual awards consisting of 50%
options, 20% PARS and 30% performance share units. These
long-term incentives are benchmarked above the market median
(50th-75th percentile)
of the peer group companies identified above, reflecting Del
Monte’s compensation philosophy’s emphasis on at-risk
compensation.
In determining the grant size of these option, PARS and
performance share awards, the Committee also considered each
executive officer’s level of responsibility and individual
performance, impact, potential, and existing awards, in addition
to long-term incentives available at our peer companies.
In addition to the annual long-term incentive awards, the
Committee typically awards “new hire” option grants to
executive officers. In fiscal 2007, Mr. Allen received a
new hire option grant of 350,000 shares. This option grant
was larger than typically awarded to Senior Vice Presidents,
reflecting Mr. Allen’s experience, potential and
leadership capabilities.
Stock Options. Stock options are priced at
the fair market value of our common stock on the date of grant,
typically vest 25% per year over four years and have ten-year
terms. Stock options granted to the named executive officers in
fiscal 2007 are listed in the table under “Fiscal 2007
Grants of Plan-Based Awards.” The costs recognized for
financial reporting purposes in connection with these options
and previously granted options (without giving effect to
anticipated forfeitures) are reported as Option Awards in the
“Fiscal 2007 Summary Compensation Table.”
The Committee generally grants stock options to current
executive officers and key employees annually at the time of the
Annual Meeting of Stockholders. The exercise price of all
options is the fair market value of our common stock on the
grant date, determined in accordance with the equity incentive
plans to be the average of the high and low prices of our common
stock on the New York Stock Exchange on such date. In addition,
the Committee typically grants options to newly-hired executive
officers effective concurrent with their start date, with the
exercise price determined in the same manner. For administrative
purposes, the Committee may approve a new-hire grant in advance
of the anticipated start date that is effective on the new
executive’s start date. Option grants to newly-hired vice
presidents and key employees who are not executive officers
generally occur on the first day of the fiscal quarter
subsequent to their start dates. Our CEO approves these grants
pursuant to authority delegated by the Committee within
specified guidelines. The Committee and the CEO have not granted
options which are priced on a date other than the grant date.
Option grants are made on the above-described schedule without
regard to announcements or anticipated announcements of
corporate events or any other material non-public information.
The Committee believes that these practices for granting options
provide for regular, predictable periods of option grants and
are consistent with its compensation philosophy and principles.
Performance Accelerated Restricted Stock Units
(PARS). PARS are restricted stock units that vest
on the fifth anniversary of the grant date. PARS are granted as
units and shares are not issued until vesting. Vesting may be
accelerated at the end of the fiscal year of either the third or
fourth anniversary of the grant date based on the achievement of
total shareholder return (TSR) performance targets. TSR is
defined as stock price appreciation and dividends paid during
the measurement period. Currently, we measure the achievement of
our TSR targets against a group of twenty (20) comparable
companies in our business sector, which are included in the
Merrill Lynch Mid/Large Cap Food Composite Index. The Committee
established a TSR comparator group that is different than the
peer group used for benchmarking compensation because it
believes that the TSR comparator group will provide a more
consistent and reasonable representation for comparison of
relative stock price performance over a defined period of time.
In contrast, generally the compensation peer group includes
branded consumer product companies within a reasonable size
range that are intended to provide an acceptable comparison for
market pay practices and to represent the type of company to or
from which our
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executive talent is often sourced, including companies which
have a customer base similar to Del Monte. Our TSR comparator
companies, nine of which are also included in our compensation
peer group, are listed below:
In June 2006, upon consultation with Hewitt Associates, the
Committee adopted the broader Merrill Lynch Food Composite Index
of the 20 mid-cap and large-cap companies identified above in
order to measure achievement of the TSR targets for PARS granted
in fiscal 2007 and afterwards. The TSR targets for PARS granted
prior to fiscal 2007 are measured against the Merrill Lynch
Mid-Cap Food Composite index, which consists of eight comparable
companies in our sector (all of which are included in the
current TSR peer group). The Committee decided to broaden the
TSR peer group for the fiscal 2007 PARS grant because it
believes that a larger comparator group provides a more stable
comparison over time, is less susceptible to volatility related
to merger and acquisition activity or changes in the comparator
group due to consolidation, is less susceptible to significant
performance swings of individual companies, and more accurately
reflects the markets in which the Company competes. The
Committee determines whether TSR performance targets are
achieved as of the relevant measurement date.
PARS granted in fiscal 2007 to the named executive officers are
included in the amounts reported as All Other Stock Awards in
the table under “Fiscal 2007 Grants of Plan-Based
Awards.” The costs recognized for financial reporting
purposes in connection with these awards and those previously
granted and still outstanding are included in the amounts
reported as Stock Awards in the “Fiscal 2007 Summary
Compensation Table.” PARS were first granted in fiscal
2003, but no TSR targets have been achieved; as such, there has
been no accelerated vesting of any PARS award.
Performance Share Units. Performance shares
are granted as units of restricted stock that vest upon the
achievement of certain predetermined corporate financial goals
established at the time of grant by the Committee over a
five-year period, with 25% eligible to vest in connection with
year three, 25% in connection with year four and 50% in
connection with year five. These awards are not issued as shares
until they vest. Unlike PARS, if the requisite performance
(which is currently measured by the Company’s return on
invested capital (ROIC)) is not achieved, the awards are
permanently forfeited. Our ROIC, as used in connection with the
performance share grant, is essentially an adjusted number that,
like our corporate objectives under the AIP, excludes the impact
of transformation, integration and purchase accounting.
Generally, ROIC targets are established based on our long-range
business plan. The annual operating plans relating to the years
covered by that long-range plan may differ from the long-range
plan. For the performance share awards granted in fiscal 2005
and fiscal 2006, the ROIC targets have proven to be higher than
the ROIC estimates set forth in the Company’s applicable
annual business plan. The Committee believes that this serves to
further align the goals of management with those of our
stockholders and reinforce the principles of pay for performance.
Performance share units were first granted in fiscal 2005. None
have vested yet. In addition, in fiscal 2006, Del Monte
concluded that the ROIC targets established in connection with
the fiscal 2005 performance share grant were unlikely to be
achieved and therefore we no longer record expense in connection
with such awards. In the event of, and to reflect, certain
corporate events, the Committee has the authority to adjust ROIC
targets. In fiscal 2007, the Committee adjusted the ROIC targets
for the fiscal 2005 and fiscal 2006 performance share grants to
account for the fiscal 2007 Milk-Bone and Meow Mix acquisitions
and the sale of the soup and infant feeding business, which
materially increased Del Monte’s Invested Capital through
the addition of over $1 billion of intangible and other
assets. The original fiscal 2005 and fiscal 2006 performance
share grants contemplated that the Committee could make such an
adjustment and the Committee believed
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that the adjustment was appropriate in order to avoid penalizing
employees for completing transactions determined to be in the
best long-term interests of the Company. Fiscal 2007 was the
first performance measurement period for the fiscal 2005 grant.
The adjusted ROIC target for fiscal 2007 was not achieved and
thus 25% of this grant was permanently forfeited upon the filing
of the Company’s Annual Report on
Form 10-K
for fiscal 2007. Further, Del Monte concluded that the adjusted
ROIC targets for the remaining measurement periods for the
fiscal 2005 grant were unlikely to be achieved and therefore
reaffirmed the decision to no longer record expense in
connection with such awards.
Potential future payouts with respect to performance shares
granted in fiscal 2007 are reported in the table under
“Fiscal 2007 Grants of Plan-Based Awards” as
Estimated Future Payouts Under Equity Incentive Plan Awards.
Additional information regarding the vesting terms of
outstanding performance shares is included in “Outstanding
Equity Awards at Fiscal 2007 Year End.”
Yes. However, in-kind perquisites (benefits such as car
allowance, auto insurance, financial and tax planning, and
health and country club membership fees) have been replaced with
a cash allowance. This program is part of a total compensation
package consistent with those provided by peer companies.
Consistent with the Committee’s compensation principles,
the cash allowance and the limited remaining in-kind perquisites
are a very limited component of the Company’s overall
compensation package. Moreover, cash perquisite allowances are
not considered a part of an executive’s fiscal year
earnings when calculating annual incentive awards or other
benefits.
Executives at the vice president level and above are eligible to
participate in the perquisite plan. These cash allowances are
based on the following multi-tiered approach for named executive
officers:
In addition to the cash allowances described above, the Company
provides supplemental group health care benefits to the CEO and
CFO and their covered dependents through its Executive Medical
Reimbursement Plan (EMRP). The EMRP originally was implemented
by a predecessor parent company for key executives. In fiscal
2007, the total premiums associated with the EMRP benefit
amounted to $31,920 and are reflected in the “Fiscal
2007 Summary Compensation Table” under All Other
Compensation.
Yes. In order to attract and retain employees, we believe
it is important to provide employees with some level of income
replacement during retirement.
Del Monte’s executives participate in two of the
Company’s qualified retirement programs: the Del Monte
Corporation Retirement Plan for Salaried Employees (pension
plan) and the Del Monte Savings Plan (401(k) plan). The
pension plan is discussed in detail under “Fiscal 2007
Pension Benefits – Discussion of Fiscal 2007 Pension
Benefits – Del Monte Corporation Retirement Plan for
Salaried Employees.” Company matching contributions
provided under the 401(k) plan is included in the
“Fiscal 2007 Summary Compensation Table” under
All Other Compensation. All full-time, salaried employees are
eligible to participate in the pension and 401(k) plans after a
one-year waiting period.
Yes. In addition to qualified plan retirement benefits,
executive officers also are eligible to participate in excess
and supplemental executive retirement programs. These executive
retirement benefits, taken together, are intended to be
competitive.
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Additional Benefits Plan. The Additional
Benefits Plan provides executive officers with benefits that may
not be provided under our qualified pension plan or 401(k) plan
because of the limits on compensation and benefits imposed by
the Internal Revenue Code. These Additional Benefits Plan
benefits are intended to supplement the benefits under our
qualified retirement plan, so that each executive officer
receives the full benefit commitment that Del Monte intended.
The Additional Benefits Plan is discussed in detail under
“Fiscal 2007 Pension Benefits – Discussion of
Fiscal 2007 Pension Benefits” and “Fiscal 2007
Nonqualified Deferred Compensation – Discussion of
Fiscal 2007 Nonqualified Deferred Compensation.”
Supplemental Executive Retirement Plan. Del
Monte’s Supplemental Executive Retirement Plan (SERP)
provides a defined retirement benefit for executives based on a
multiple of the executive’s final average compensation,
less the amount of any other accrued pension benefits. In
adopting the SERP, the Compensation Committee determined that it
would provide executives with a value of benefits closer to its
total compensation philosophy of paying at the
50th percentile among our peer group. The Committee further
believes this lump sum retirement supplement is a necessary
incentive to retain and attract experienced executive talent.
Generally, SERP benefits vest after a minimum of 5 years of
service and attainment of age 55.
Del Monte first adopted the SERP as a mandatory condition of Del
Monte’s acquisition of certain former businesses of H.J.
Heinz Company in December 2002 in order to preserve vested and
unvested benefits for the former Heinz executives. In 2004, Del
Monte expanded the SERP to include legacy Del Monte executives.
We believed this expansion was appropriate and necessary in
order to harmonize benefits for all Del Monte executives.
Notwithstanding, otherwise eligible legacy Del Monte executives
were required to provide five (5) years of service from the
Heinz merger date (until December 21, 2007) before
they could vest in any SERP benefits. The SERP is discussed
further under “Fiscal 2007 Pension Benefits –
Discussion of Fiscal 2007 Pension Benefits – Del Monte
Corporation Supplemental Executive Retirement Plan.”
Yes. Under the Del Monte Corporation AIP Deferred
Compensation Plan, an executive may defer from 5% to 100% of the
amount of his or her Annual Incentive Plan (AIP) incentive award
payment. Del Monte matches 25% of the amount deferred, which
vests in equal installments over three (3) years. The
deferred amount and the matching contribution are converted to
Del Monte deferred stock units with final payment in shares of
Del Monte stock. We believe this deferred compensation benefit
reinforces our compensation principle of encouraging and
facilitating stock ownership and aligning the long-term
interests of executives with shareholders.
Yes. Executive officers are entitled to certain benefits in
the event of an employment termination or change in control of
the Company, as described more fully in “Potential
Payments Upon Employment Termination and Change-of-Control
Events.” The Committee believes these benefits are
competitive and assist in recruiting and retaining executive
officers. These benefits are included in an executive’s
employment agreement. If an executive is not a party to an
employment agreement the provisions of the Executive Severance
Plan apply. In addition, all outstanding equity awards that do
not vest in accordance with their normal terms will vest upon a
change of control of the Company.
Del Monte currently has employment agreements with nine
(9) executive officers, including four (4) named
executive officers, that define elements of their compensation,
severance and change of control benefits. Currently it is our
policy not to enter into employment agreements with newly-hired
or promoted executive officers. Accordingly, Mr. Allen, who
joined Del Monte in June 2006, does not have an employment
agreement.
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Yes. Consistent with Del Monte’s commitment to
aligning the interests of its executives and stockholders, the
Compensation Committee formalized stock ownership guidelines for
executive officers in 2004. Pursuant to these guidelines,
executives are encouraged, within five years of adoption of the
guidelines or their subsequent date of hire or promotion to an
executive position, to own shares of Del Monte common stock
generally equal in value to their annual base salary (three
times that amount in the case of the CFO and five times that
amount in the case of the CEO). The target compliance dates for
the named executive officers will occur in 2009 and 2011. These
guidelines also encourage executives to hold shares acquired
upon exercise of stock options or vesting of restricted stock,
equal to the profit (net of taxes), for one year after such
exercise or vesting. The Compensation Committee may consider an
executive’s achievement of the guideline stock ownership
targets in its award of further equity grants.
No. Del Monte does not have a specific policy for requiring the
recovery of incentive awards. However, Del Monte is subject
to the requirements of Section 304 of the Sarbanes-Oxley
Act of 2002 which may be enforced by the Securities and Exchange
Commission. Section 304 provides that if a company is
required to prepare an accounting restatement due to the
material noncompliance of the company, as a result of
misconduct, with any financial reporting requirement under the
securities laws, the CEO and CFO of the company shall reimburse
the company for (1) any bonus or other incentive-based or
equity-based compensation received by that person from the
company during the
12-month
period following the first public issuance or filing with the
Securities Exchange Commission (whichever first occurs) of the
financial document embodying such financial reporting
requirement; and (2) any profits realized from the sale of
securities of the company during that
12-month
period.
The Company’s ability to deduct compensation it pays to
each named executive officer is generally limited, under
Section 162(m) of the Internal Revenue Code, to
$1 million annually. However, compensation above
$1 million may be deducted if it meets certain technical
requirements to be classified as “performance-based
compensation.” The Annual Incentive Plan (AIP) was approved
by stockholders in September 2003 and awards under the AIP
generally satisfy the requirements to be classified as
“performance-based” compensation. The AIP, as approved
by stockholders, also provides the Compensation Committee with
the flexibility to establish individual objectives that, while
specific and important to Company performance, may not qualify
as performance-based for purposes of Section 162(m).
Additionally, as noted above, the AIP permits the Committee to
consider unique contributions, which by their nature also do not
qualify as performance based for purposes of
Section 162(m). Accordingly, for fiscal 2007, the portion
of the AIP payment relating to individual objectives generally
does not qualify as performance-based compensation under
Section 162(m) in light of the individual objectives
established and the manner in which unique contributions could
impact the individual objectives achievement score and therefore
the award. Stock options and certain other awards, such as the
performance shares granted in fiscal 2007, generally qualify as
performance-based compensation. While the Performance
Accelerated Restricted Stock grants have a performance element,
they generally do not qualify as performance-based compensation
under Section 162(m).
The Committee’s policy with respect to Section 162(m)
seeks to balance the interests of the Company in maintaining
flexible incentive plans and how the Company benefits from the
compensation package paid to any executive officer against the
possible loss of a tax deduction relating to such compensation.
Accordingly, the Committee has authorized, and will continue to
retain the authority to authorize, payments that may not be
deductible if the Committee believes that they are in the
Company’s best interests.
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The American Jobs Creation Act of 2004 (“AJCA”) added
Internal Revenue Code Section 409A
(“Section 409A”), which made significant changes
to deferred compensation arrangements effective as of
January 1, 2005. Under current guidance, deferred
compensation arrangements can be amended until December 31,
2007 to comply with Section 409A. Del Monte’s plans
are intended to comply with the AJCA and Del Monte amended its
deferred compensation plans and other non-qualified plan
arrangements in December 2006 in order to show good faith
compliance with Section 409A. Notwithstanding, Del Monte
plans to make further amendments to its deferred compensation
plans and arrangements in response to the release of
Section 409A final regulations in April 2007 and other
guidance that may be issued in 2007.
The Compensation committee has reviewed and discussed the
materials under the caption “Compensation Discussion and
Analysis” included in this proxy statement with the
management of Del Monte. Based on such review and discussion,
the Compensation Committee has recommended to the Board of
Directors that such Compensation Discussion and Analysis be
included in this proxy statement and in Del Monte’s Annual
Report on
Form 10-K
for the fiscal year ended April 29, 2007.
The Compensation Committee
Samuel H. Armacost, Chairman
Terence D. Martin David R. Williams
The foregoing Report is not soliciting material, is not
deemed filed with the SEC and is not to be incorporated by
reference in any filing of the Company under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
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Fiscal
2007 Summary Compensation Table
The following table sets forth compensation paid by Del Monte
for fiscal 2007 to:
These six individuals are collectively referred to as the
“named executive officers.”
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Del Monte matches 25% of the amounts deferred, in the form of
deferred stock units that vest over three years. The foregoing
table does not include the following deferred stock units issued
on July 6, 2007 as Company matching payments with respect
to the deferral of fiscal 2007 annual incentive award payments:
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There was no expense recognized in fiscal 2007 with respect to
these deferred stock units issued as Company matching payments.
The expense associated with these deferred stock units will be
reported in future proxy statements in the Stock Awards column
in the Summary Compensation Table as recognized over the
three-year vesting period.
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Fiscal
2007 Grants of Plan-Based Awards
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Outstanding
Equity Awards at Fiscal 2007 Year End
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