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NOTE 7. EMPLOYEE STOCK PLANS AIAP Deferred Compensation Plan On October 14, 1999, the Del Monte Corporation Annual Incentive Award Plan Deferred Compensation Plan was established under which certain employees are eligible to participate. Beginning in fiscal 2001, eligible employees may elect to defer from 5% to 100% of their annual incentive award. The Company provides a matching contribution of 25% of the employee’s deferral amount. The employee deferral and the Company match are converted to deferred stock units at the fair market value of Del Monte common stock on the day the incentive awards are paid. The participant is 100% vested in the employee deferral portion of their account. The Company’s matching contribution vests on a proportionate basis over three years. At the time of distribution, the employee’s deferral amount and any vested Company matching contribution will be paid out in whole shares of Del Monte common stock. Stock Option Incentive Plans On August 4, 1997, Del Monte adopted the 1997 Stock Incentive Plan (amended November 4, 1997) which allowed the granting of options to certain key employees. The plan allowed the granting of options for up to 1,821,181 shares of Del Monte’s common stock. Options could be granted as incentive stock options or as non-qualified options for purposes of the Internal Revenue Code. Options terminate ten years from the date of grant. Under the plan, 1,736,520 options were granted. As of June 30, 1999, eligible employees held options for 1,685,565 shares of common stock under the 1997 Plan. As of June 30, 2000, eligible employees held options for 1,524,670 shares of common stock under the 1997 Plan. The 1997 Stock Incentive Plan provides for different vesting schedules. The first provides for annual vesting on a proportionate basis over five years and the second provides for monthly vesting on a proportionate basis over four years. No additional options will be granted pursuant to this plan. Del Monte also adopted the Del Monte Foods Company Non-Employee Director and Independent Contractor 1997 Stock Incentive Plan. Under this plan, 151,701 shares were reserved of which 148,828 options were granted. These options terminate 10 years from the date of grant and vest monthly on a proportionate basis over four years. Del Monte does not anticipate granting any additional options under this plan. The Del Monte Foods Company 1998 Stock Incentive Plan (the “1998 Plan”) was adopted initially by the Board of Directors on April 24, 1998, was modified by the Board on September 23, 1998, and was approved by the stockholders on October 28, 1998. Under the 1998 Plan, grants of incentive and nonqualified stock options (“Options”), stock appreciation rights (“SARs”) and stock bonuses (together with Options and SARs, “Awards”) representing 3,317,047 shares of common stock may be made to certain employees of Del Monte. These shares represent 3,195,687 shares of common stock initially reserved under the 1998 Plan and any shares of common stock represented by awards granted under any prior plan which are forfeited, expired or canceled. The term of any Option or SAR may not be more than ten years from the date of its grant. Subject to certain limitations, the Compensation Committee of the Board has authority to grant Awards under the 1998 Plan and to set the terms of any Awards. The Chief Executive Officer also has limited authority to grant Awards. On December 4, 1998, Options for 1,824,433 shares were granted under the 1998 Stock Incentive Plan at an exercise price of $13.00 per share, which was determined to be fair value at that time. As of June 30, 1999, eligible employees held options for 1,842,344 shares of common stock under the 1998 Plan, and 1,356,216 additional shares were available for grant. As of June 30, 2000, eligible employees held options for 1,724,380 shares of common stock under the 1998 Plan, and 1,592,667 additional shares were available for grant. For each of these grants, 50% of the option shares vest annually on a proportionate basis over a four-year period and 50% of the option shares vest annually on a proportionate basis over a five-year period. Stock option activity and related information during the periods indicated was as follows:
At June 30, 2000, the range of exercise prices and weighted-average remaining contractual life of outstanding options was as follows:
Del Monte accounts for its stock option plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations, under which no compensation cost for stock options is recognized for stock option awards granted at or above fair market value. Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, “Accounting for Stock Issued to Employees,” and has been determined as if Del Monte had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for the years ended June 30, 2000, 1999 and 1998: dividend yield of 0% for all years; expected volatility of 0.43, 0.23 and 0.00 respectively; risk-free interest rates of 5.99%, 4.623% and 5.74%, respectively, and expected lives of 7 years for all years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because Del Monte’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The weighted average fair value per share of options granted during the year was $6.72, $4.43 and $2.78, for the years ended June 30, 2000, 1999 and 1998, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. Del Monte’s pro forma information as calculated in accordance with SFAS No. 123 is as follows:
Stock Purchase Plan Effective August 4, 1997, the Del Monte Foods Company Employee Stock Purchase Plan was established under which certain key employees are eligible to participate. A total of 957,710 shares of common stock of Del Monte were reserved for issuance under the Employee Stock Purchase Plan. At June 30, 2000, 454,137 shares of Del Monte’s common stock have been purchased by and issued to eligible employees. It is anticipated that no future shares will be issued pursuant to this plan. Total compensation expense recognized in connection with stock-based awards for the years ended June 30, 2000, 1999 and 1998 was $0.2, $0.5 and $1.8. |
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