DEL MONTE FOODS CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].

For the fiscal year ended June 30, 1998
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER 33-36374-01

DEL MONTE FOODS COMPANY
(Exact name of registrant as specified in its charter)

Delaware 13-3542950
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

ONE MARKET, SAN FRANCISCO, CALIFORNIA 94105
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: (415) 247-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
NONE NONE

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The common stock of the registrant is not publicly traded. Therefore,
the aggregate market value is not readily determinable.

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----

As of August 31, 1998, 35,495,054 shares of Common Stock,
par value $.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

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TABLE OF CONTENTS

PART I

Item 1. Business

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures

PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report under the captions "Business",
"Selected Financial Data", Management's Discussion and Analysis of Financial
Condition and Results of Operations", Financial Statements and Supplementary
Data" and elsewhere constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the
Company, or industry results, to differ materially from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such risks and uncertainties and other important factors include
among others; general economic and business conditions; weather conditions; crop
yields; industry trends; competition; raw material costs and availability; the
loss of significant customers; changes in business strategy or development
plans; availability, terms and deployment of capital; Year 2000 compliance;
availability of qualified personnel; changes in, or failure or inability to
comply with, governmental regulations, including, without limitation,
environmental regulations; industry trends and capacity and other factors
referenced in this Annual Report. These forward-looking statements speak only as
of the date of the Annual Report. The Company expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.

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As used throughout this Annual Report, unless the context otherwise
requires "DMC" means Del Monte Corporation, a New York corporation, "DMFC" means
Del Monte Foods Company, a Delaware corporation and the parent of DMC, and the
"Company" or "Del Monte" means DMC and DMFC, together with each of their direct
and indirect subsidiaries. Unless otherwise indicated, references herein to U.S.
market share data are to case volume sold through retail grocery stores
(excluding warehouse clubs and supermarkets) with at least $2 million in sales
and are based upon data provided to the Company by A.C. Nielsen & Co
(ACNielsen), an independent market research firm. Market share data for canned
vegetables and solid tomato products include only those categories in which the
Company competes. Such data for canned fruit include those categories in which
the Company competes other than the "specialty" category which is an
insignificant portion of the Company's operations. See "Business--General."
Market share data for canned solid tomato products is pro forma for both Del
Monte and Contadina (as defined herein) sales. With respect to market share data
used herein, the term fiscal 1998 refers to the 52-week period ended June 27,
1998.

PART I

ITEM 1. BUSINESS

GENERAL

The Company was originally incorporated in 1916 and remained a
publicly-traded company for over sixty years until its acquisition in 1979 by
the predecessor of RJR Nabisco, Inc. ("RJR Nabisco"). In December 1989, RJR
Nabisco sold the Company's fresh produce operations, Fresh Del Monte, to Polly
Peck International PLC. In January 1990, an investor group led by Merrill Lynch
& Co. purchased the Company and certain of its subsidiaries from RJR Nabisco for
$1.5 billion ("RJR Nabisco Sale"). Following such sale, the Company divested
several of its non-core businesses and all of its foreign operations. In April
1997, the Company was recapitalized with an equity infusion from TPG Partners,
L.P. ("TPG"), its affiliates and other investors.

The Company, a branded marketer of premium quality, nutritious food
products, is the largest producer and distributor of canned vegetables and
canned fruit in the United States, with net sales to its customers in excess of
$1.3 billion in fiscal 1998. Management believes that the Company's principal
brand, Del Monte, which has been in existence since 1892, has the highest
unaided brand awareness of any canned food brand in the United States. Del Monte
brand products are found in substantially all national grocery chains and
independent grocery stores throughout the United States. As the brand leader in
three major processed food categories (canned vegetables, fruit and solid tomato
products), the Company has a full-line, multi-category presence that management
believes provides it with a competitive advantage in selling to the retail
grocery industry. The Contadina Acquisition (as defined herein) contributes
another established brand and positions the Company as the branded market leader
in the high margin canned solid tomato products category and establishes a
strong presence for the Company in the branded paste-based tomato products
category. See "-- Company Products."

The Company's primary domestic channel of distribution is retail
outlets, which accounted for approximately $1.0 billion (or 77%) of the
Company's fiscal 1998 sales. In fiscal 1998, the Company had market shares of
19.7% of all canned vegetable products and 42.3% of all canned major fruit
products in the United States. The Company's market share in vegetables is
larger than the market share of the Company's two largest branded competitors
combined and its market share of canned fruit is larger than the fruit market
share of all other branded competitors combined. In addition, the Company enjoys
strong market shares in various solid tomato product categories.

The Company sells its products to national grocery chains and
wholesalers through a nationwide sales network consisting primarily of
independent food brokers. The Company's direct sales force also

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sells Del Monte products to warehouse club stores, selected mass merchandisers,
such as Wal-Mart and Kmart, and larger mass merchandising outlets that include
full grocery sections, such as Wal-Mart Supercenters and Kmart's SuperKs. In
addition, the Company sells its products to the foodservice industry, food
processors and the military through different independent food brokers. The
Company also exports a small percentage of its products to certain foreign
countries directly and through independent exporters based in the United States.
See "-- Sales, Marketing and Distribution."

The Company operates 15 production facilities in California, the
Midwest, Washington and Texas, as well as six strategically located distribution
centers. The Company has over 2,500 contracts to purchase vegetables and fruit
from individual growers and cooperatives located in various geographic regions
of the United States, principally California, the Midwest, the Northwest and
Texas. This diversity of sourcing helps insulate the Company from localized
disruptions during the growing season, such as weather conditions, that can
affect the price and supply of vegetables, fruit and tomatoes. See "-- Supply
and Production."

The Company owns a number of registered and unregistered trademarks that
it uses in conjunction with its business, including the trademarks Del Monte,
Contadina, Fruit Cup, Fruit Naturals, Orchard Select, and Del Monte Lite. In
connection with and subsequent to the RJR Nabisco Sale, the Company granted
various perpetual, exclusive royalty-free licenses for the use of the Del Monte
name and trademark, as well as the use of certain copyrights, patents and trade
secrets, generally outside of the United States. The licensees of the Del Monte
name and trademark include Fresh Del Monte and its affiliates (which succeeded
to Polly Peck as the owner of the Company's former fresh produce operations),
Del Monte International, Kikkoman Corporation, affiliates of RJR Nabisco, and
Yorkshire Food Group. None of the licensees is an affiliate of the Company,
other than a subsidiary of Yorkshire Food Group with respect to which the
Company owns 20% of the common stock. See "-- Recent Developments" and "--
Intellectual Property."

In April 1997, the Company completed a recapitalization (the
"Recapitalization") as a result of which Texas Pacific Group, a private
investment group, obtained a controlling interest in the Company. Under a new
senior management team introduced in connection with the Recapitalization, the
Company began implementing a new business strategy designed to increase sales
and improve operating margins by: (i) increasing market share and distribution
of high margin value-added products; (ii) introducing product and packaging
innovations; (iii) increasing penetration of high growth distribution channels,
such as supercenters and warehouse clubs; (iv) achieving cost savings through
investments in new and upgraded production equipment and plant consolidations;
and (v) completing strategic acquisitions.

DMC was incorporated under the laws of the State of New York in 1978.
DMFC, then known as DMPF Holdings Corp., was incorporated under the laws of the
State of Maryland in 1989 and was reincorporated under the laws of the State of
Delaware in 1998. Each of DMC and DMFC maintains its principal executive office
at One Market, San Francisco, California 94105, and their telephone number is
(415) 247-3000. DMC is a wholly owned subsidiary of DMFC.

RECENT DEVELOPMENTS

Contadina Acquisition. On December 19, 1997, the Company acquired the
Contadina canned tomato business ("Contadina"), including the Contadina
trademark worldwide, capital assets and inventory (the "Contadina Acquisition")
from Nestle USA, Inc. ("Nestle") and Contadina Services, Inc. for a total
purchase price of $197 million, comprised of a base price of $177 million and an
estimated net working capital adjustment of $20 million. The consideration was
paid solely in cash. The purchase price was subject to adjustment based on the
final calculation of net working capital as of the closing date. Nestle provided
its calculation of the net working capital which resulted in a payment to the
Company of $2 million, and therefore a reduction in the purchase price to a
total of $195 million. The Contadina Acquisition also included the assumption of
certain liabilities of approximately $5 million, consisting primarily of
liabilities in respect of reusable packaging materials, employee benefits and
product claims. In conjunction with the Contadina

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Acquisition, approximately $7 million of acquisition-related expenses were
incurred. The Contadina Acquisition was accounted for using the purchase method
of accounting.

Plant Consolidation. In the third quarter of fiscal 1998, management
committed to a plan to consolidate processing operations in order to enhance the
efficiency of its fruit and tomato processing operations and to better meet the
competitive challenges of the market. This plan will be implemented in a
specific sequence over the next three years. Management believes that because of
these sequenced activities, it is not likely that there will be any significant
changes to this plan.

Tomato production currently taking place at the Modesto plant is
expected to be transferred to the Company's newly acquired state-of-the-art
facility in Hanford in 1999. The Modesto location would then be converted to a
fruit processing plant allowing production currently processed at the San Jose
plant to be transferred to Modesto. At the end of the production season in 2000,
the Company is expected to close its Stockton fruit plant and transfer
production from that plant to Modesto. Considerations of plant age and location
were primary factors in the decision to close the 80-year-old San Jose plant and
the 70-year-old Stockton plant and transfer production closer to growing areas.
The Company plans an aggregate of approximately $136 million of capital spending
through 2001 to increase production efficiency and reduce costs. In connection
with this plant consolidation plan, the Company recorded charges of $7 million
during the third quarter of fiscal 1998. These costs relate to severance and
benefit costs for 433 employees to be terminated. The Company anticipates that
it will incur material additional charges as a result of these plant closures,
including the effects of adjusting the assets' remaining useful lives to
accelerate the depreciation thereof (a $3 million accelerated depreciation
charge was taken in the fourth quarter of fiscal 1998), the costs to remove and
dispose of those assets and ongoing fixed costs to be incurred during the
Modesto plant reconfiguration and until the sale of the San Jose and Stockton
properties.

In August 1998, management announced its intention to close the
Company's vegetable processing plant located in Arlington, Wisconsin after the
summer 1998 pack. See "Management Discussion and Analysis of Financial Condition
and Results of Operations -- General."

Public Offering. The Company filed a registration statement on Form S-1
with the Securities and Exchange Commission for the purpose of making a public
offering of shares of its Common Stock (the "Offering"). The Offering, which was
expected to close in July 1998, was postponed due to conditions in the equity
securities market.

Reincorporation. On May 1, 1998, in contemplation of the Offering, Del
Monte Foods Company merged with and into a newly created, wholly-owned
subsidiary incorporated under the laws of the State of Delaware to change Del
Monte Foods Company's state of incorporation from Maryland to Delaware. The
Certificate of Incorporation authorizes the issuance of an aggregate of
500,000,000 shares of Common Stock and an aggregate of 2,000,000 shares of
preferred stock.

Stock Split. On July 22, 1998, the Company declared, by way of a stock
dividend effective July 24, 1998, a 191.542-for-one stock split of all of the
Company's outstanding shares of Common Stock (the "Stock Split"). Accordingly,
all share and per share amounts for all periods presented herein have been
retroactively adjusted to give effect to the Stock Split.

South America Acquisition. On July 10, 1998, the Company entered into an
agreement with Nabisco, Inc. ("Nabisco") to reacquire rights to the Del Monte
brand in South America and to purchase Nabisco's canned fruit and vegetable
business in Venezuela, including a food processing plant in Venezuela (the
"South America Acquisition"). RJR Nabisco had retained ownership of the Del
Monte brand in South American and the Venezuela Del Monte business when it sold
other Del Monte businesses in 1990. The transaction closed on August 28, 1998.

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THE INDUSTRY

The Company believes that the domestic canned food industry is
characterized by relatively stable growth based on modest price and population
increases. Within the industry, however, the Company believes that certain
categories have been experiencing substantial growth. Over the last ten years,
the industry has experienced consolidation as competitors have disposed of
non-core business lines and made strategic acquisitions to complement category
positions, maximize economies of scale in raw material sourcing and production
and expand retail distribution. The Company also believes that sustaining strong
relationships with retailers has become a critical success factor for food
companies and is driving initiatives such as category management. Food companies
with category leadership positions and strong retail relationships appear to
have increasingly benefited from these initiatives as a way to maintain shelf
space and maximize distribution efficiencies.

Pricing and innovation in the canned food segments in which the Company
competes are typically led by branded food manufacturers. A majority of market
share in these categories is, however, attributable to private label
manufacturers based on statistical information compiled by ACNielsen. The
Company believes that the private label segment has historically been highly
fragmented among regional producers seeking to compete principally based on
price, although the aggregate market share of the manufacturers has remained
relatively stable over the past several years in each of the Company's principal
product categories. For the 52 weeks ended June 27, 1998, private label products
manufacturers as a group represented 44.1%, 39.5% and 30.9% of canned vegetable,
major fruit and cut solid tomato product sales, respectively. Recently, some
consolidation has occurred among private label manufacturers in the canned
vegetable category. The Company believes that this consolidation may result in
increasing rationalization of production capacity in the industry, which may in
turn result in higher price positioning by private label manufacturers of canned
vegetable products.

The Company increased vegetable and fruit prices in fiscal 1996 to cover
higher raw product costs and improve margins. Higher prices put the Company at a
significant price disadvantage in the marketplace as competition did not raise
prices until late in the fiscal year. As a result, the Company experienced an
anticipated volume loss and market share decline. In the case of its fruit
operations, however, the Company's significantly improved margins generally
offset the effects of the lower volume, and the Company's market share recovered
by year-end 1997 to achieve a higher level than that experienced prior to the
price increase. In the case of its vegetable operations, the Company's market
share has stabilized at a level lower than its share prior to the price
increases. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

COMPANY PRODUCTS

The Company has a full-line, multi-category presence with products in
four major processed food categories: canned vegetables, fruit, tomato and
pineapple products.

Vegetables

Based on internal estimates using data compiled by ACNielsen from
various industry and other sources, the Company believes that the canned
vegetable industry in the United States generated more than $3 billion in sales
in calendar 1997. The Company believes that the domestic canned vegetable
industry is a mature segment characterized by high household penetration.

The Company views the canned retail vegetable market as consisting of
three distinct segments: major, flanker, and specialty products. The Company
competes in each of these segments. The major segment consists of corn, green
beans and peas and represents the largest volume segment, accounting for $775
million or approximately 66% of fiscal 1998 canned vegetable supermarket case
sales. The flanker segment includes mixed vegetables, spinach, beets, carrots,
potatoes and sauerkraut, accounted for $236 million or approximately 17% of
fiscal 1998 canned vegetable supermarket case sales. The specialty

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segment is comprised of asparagus, zucchini, baby beets and a variety of corn
and bean offerings, represents $289 million or approximately 12% of fiscal 1998
canned vegetable supermarket case sales. Many of the Company's specialty
vegetable products are enhanced with flavors and seasonings, such as the
Company's zucchini in tomato sauce and its Fiesta corn, which is made with green
peppers and seasonings. The Company's specialty vegetables are priced at a
premium to its other vegetable products and carry higher margins. All of the
Company's vegetable products are offered to the retail market principally in
14-15 oz. sizes and to the foodservice market primarily in a larger commercial
size can. The Company produces six or eight can multi-packs primarily for its
club store customers. A cross-segment, buffet products, includes all of the
above varieties in smaller can sizes. The Company also offers a no-salt product
line across most of its core varieties. Within these segments, the Del Monte
brand accounted for $349 million in retail sales in fiscal 1998. During the 52
weeks ended June 27, 1998, Del Monte brand vegetable products enjoyed an average
premium of 20(cent) (43%) per item over private label products and the Company
held a 19.7% share of the canned vegetable market for that period.

The canned vegetable market is concentrated among a small universe of
branded manufacturers and a large, fragmented pool of private label competitors.
In the major vegetable market, the Company is the branded market share leader
and for the 52 weeks ended June 27, 1998, held a 23.5% market share in green
beans, a 18.9% market share in corn and a 16.4% market share in peas. The
Company also is the branded market share leader in the flanker segment and is
the overall market share leader in the buffet segment. Private label products
taken as a whole command the largest share of the canned vegetable market, but
their market share has remained relatively stable over the past decade. The
Company's primary branded competitors in the market include Green Giant
nationally, and regional brands such as Freshlike, Stokely and Libby's in
addition to private label producers.

The Company has relationships with approximately 900 vegetable growers
located primarily in Wisconsin, Illinois, Minnesota, Washington, and Texas.

Fruit

Based on internal estimates using data compiled by ACNielsen from
various industry and other sources, the Company believes that the canned fruit
industry in the United States generated more than $2 billion in sales in
calendar 1997. The Company believes the domestic canned fruit industry is a
mature segment characterized by high household penetration.

The Company is the largest processor of branded canned fruit in the
United States. The Company competes in three distinct segments of the canned
fruit industry: major, specialty, and pineapple products. These three distinct
segments account for over 59% of the canned fruit industry's total sales. The
major segment consists of cling peaches, pears and fruit cocktail/mixed fruit
and Fruit Cup products. The specialty segment includes apricots, freestone and
spiced peaches, mandarin oranges and cherries. The Company believes that the
major fruit and specialty fruit segments of the canned fruit market together
accounted for more than $1 billion of total canned fruit industry sales in
calendar 1997. The pineapple segment is discussed separately below.

Major fruit accounted for sales by retailers of $639 million in fiscal
1998. Sales by retailers of Del Monte brand major fruit products totaled $316
million in fiscal 1998. For the 52 weeks ended June 27, 1998, the Company was
the branded share leader in every major sub-segment of the major fruit category.
The Company's major fruit and fruit cup products are distributed in
substantially all grocery outlets.

The Company is the branded leader in the specialty category as a whole
and the market leader in apricots and freestone and spiced peaches. Specialty
fruits are higher margin, lower volume "niche" items, which benefit from the
Company's brand recognition. Del Monte apricots and freestone peaches are
distributed in over 73% and 64% of grocery outlets, respectively. Mandarin
oranges and cherries are distributed in 37% and 8% of grocery outlets,
respectively.

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The Company believes that it has substantial opportunities to leverage
the Del Monte brand name to increase sales of its existing high margin products,
such as its Fruit Cup line. The Company has also been developing new high margin
products designed to leverage the Company's presence in existing categories, to
capitalize on its existing manufacturing capabilities and to expand the
Company's presence in the market beyond the canned food aisle. For example,
following initial success in test markets, the Company is planning national
distribution of its Orchard Select, a premium fruit product packaged in glass.
An important focus of the Company's new product development efforts is the
production of high quality, convenient and nutritious products, particularly
snack-type products.

The Company competes in the canned fruit business on the basis of
product quality and category support to both the trade and consumers. On the
industry's highest volume can size (15-16 oz.), the Del Monte brand commanded an
average 9(cent) (9%) per item premium. The Company faces competition in the
canned fruit segment primarily from Tri-Valley Growers and Pacific Coast
Producers ("PCP"), both of which are grower co-operatives that produce private
label products. Tri-Valley Growers also packs the Libby's and S&W brands.

The Company has relationships with approximately 600 fruit growers
located in California, Oregon and Washington.

Tomato Products

Based on internal estimates using data compiled by ACNielsen from
various industry and other sources, the Company believes that processed tomato
products generated calendar 1997 industry-wide sales of more than $5 billion.
While total sales of tomato products have grown steadily in recent years, the
Company believes that the diced segment of the retail canned solid tomato
segment (which also includes chunky tomatoes and tomato wedges) has been growing
at a substantially greater rate than the category as a whole, as consumer
preferences have trended toward more convenient cut and seasoned tomato
products.

The processed tomato category can be separated into more than ten
distinct product segments which differ widely in terms of profitability, price
sensitivity and growth potential. Consumers use tomato products for a variety of
purposes ranging from ingredients to condiments, beverages and main dishes.

The Company's tomato product offerings consist of two major segments:
solid tomato products, which are differentiated primarily by cut style, with
varieties including stewed, crushed, diced, chunky and wedges, and paste-based
tomato products, such as ketchup, tomato sauce and tomato paste and value-added
products, including spaghetti, pasta and sloppy joe sauces.

The Company is the leading producer of canned solid tomato products,
which are generally higher margin tomato products and are the fastest growing
segment of the Company's tomato products. As a result of the Contadina
Acquisition, the Company extended its presence in this segment through the
addition of Contadina's share of the market for crushed tomato products. The
canned solid tomato segment has evolved to include additional value-added items,
such as flavored diced tomato products. The Company believes that there is
substantial opportunity to increase sales of solid tomato products, including
particularly cut tomato products, through similar line extensions that
capitalize on the Company's manufacturing and marketing expertise.

With the Contadina Acquisition, the Company has strengthened its
position in the branded paste-based tomato products categories in which it
competes. The Company markets its spaghetti, pasta and sloppy joe sauces, as
well as its ketchup products, under the Del Monte brand name using a "niche"
marketing strategy targeted toward value-conscious consumers seeking a branded,
high quality product. The Company's tomato paste products are marketed under the
Contadina brand name, which is an established national brand for Italian-style
food products. Contadina also targets the branded food service tomato market,
including small restaurants that use Contadina brand products, such as finished
spaghetti and pasta sauces. The Company plans to use this presence as a platform
to expand its branded foodservice

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business, including sales of Del Monte brand products to new and existing
Contadina foodservice customers.

The Company faces competition in the tomato product market from brand
name competitors including S&W and Hunt's in the solid tomato category; Heinz
and Hunt's in the ketchup category; and Hunt's, Campbell Soup's Prego and
Unilever's Ragu in the spaghetti sauce category. Hunt's is the Company's chief
competitor in the tomato paste segment. In addition, the Company faces
competition from private label products in all major categories. While the
Company has a small share of the overall tomato product market (with market
shares for the 52 weeks ended June 27, 1998 of 4.5% in spaghetti sauce and 15.2%
in tomato sauce), it is the largest branded competitor in the solid tomato
segment with a market share of 16.5% for the 52 weeks ended June 27, 1998.
Hunt's, the next largest branded processor, possessed a 11.3% share of the solid
tomato segment for this period. In other key categories, for the 52 weeks ended
June 27, 1998, Heinz was the market leader in ketchup with a 45.8% market share,
and Hunt's was the leader in tomato sauce with a 35.7% market share.

The Company has relationships with approximately 40 tomato growers
located primarily in California, where approximately 95% of domestic tomatoes
are produced.

Canned Pineapple

Based on internal estimates using data compiled by ACNielsen from
various industry and other sources, the Company believes that the canned
pineapple products industry in the United States generated more than $300
million in sales in fiscal 1998. The Company believes that the domestic
pineapple industry is a mature segment of the canned fruit industry that has
generated stable sales.

Individual pineapple items are differentiated by cut style, with
varieties including sliced, chunk, tidbits and crushed. Currently approximately
83% of pineapple product sold is packed in juice, with the remaining 17% packed
in heavy syrup. Size offerings include the 20 oz., which accounts for 76% of
category sales. Other sizes offered include the 8 oz. and 15 oz. varieties.

The Company's retail pineapple line consists of sliced, chunk, crushed
and juice products in a variety of container sizes. In addition to sales by
retailers, which totaled $33 million in fiscal 1998, the Company sells a
significant amount of juice concentrate and crushed pineapple through the food
ingredients channel and also sells pineapple solids and juice products to
foodservice customers.

The Company is the second leading brand of canned pineapple with a 13.7%
market share for the 52 weeks ended June 27, 1998. Dole is the industry leader
with a market share of 46.0%. Private label and foreign pack brands comprise the
low-price segment of this category and hold market shares of 28.1% and 11.2%,
respectively. The five major foreign pack brands, Geisha, Libby's, Liberty Gold,
Empress, and 3-Diamond, have regional distribution and are supplied by Thai and
Indonesian packers.

The Company sources virtually 100% of its pineapple requirements from
its former subsidiary, Del Monte Philippines, under a long-term supply
agreement. The agreement provides for a guaranteed supply of quality pineapple
and a steady profit stream due to pricing based on fixed retail and foodservice
margins.

SUPPLY AND PRODUCTION

The Company owns virtually no agricultural land. Each year, the Company
buys over one million tons of fresh vegetables and fruits pursuant to over 2,500
contracts with individual growers and cooperatives located primarily in the
United States, many of which are long-term relationships. No supplier accounts
for more than 5% of the Company's raw product requirements, and the Company does
not consider its relationship with any particular supplier to be material to its
operations. The Company is exploring ways in which to extend its growing season.
For example, it has been planting green bean crops

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in Texas, which has a longer growing season than the Company's other bean
growing locations in the Midwest region. Like other processed vegetable, fruit
and tomato product manufacturers, the Company is subject to market-wide raw
product price fluctuations resulting from seasonal or other factors, although
its long-term relationships with growers help to ensure a consistent supply of
raw product.

The Company's vegetable growers are located in Wisconsin, Illinois,
Minnesota, Washington, Texas and Arizona. The Company provides the growers with
planting schedules, seeds, insecticide management and hauling capabilities and
actively participates in agricultural management and quality control with
respect to all sources of supply. The vegetable contracts are generally for a
one-year term and require delivery of a specified quantity. Prices are
renegotiated each year. The Company believes that one of its competitive
advantages in the canned vegetable category is due to the successful development
of its proprietary seed varieties. For example, the Company believes that its
"Del Monte Blue Lake Green Bean" variety is higher yielding than green bean
varieties used by the Company's competitors. In addition, the Company's green
bean production is primarily on irrigated fields, which facilitates production
of high quality, uniformly-sized beans.

The Company's fruit and tomato growers are located primarily in
California; pear growers are also located in Oregon and Washington. The
Company's fruit supply contracts range from one to ten years. See Note K to the
Company's consolidated financial statements for the year ended June 30, 1998.
Prices are generally negotiated with grower associations and are reset each
year. Contracts to purchase yellow cling peaches generally require the Company
to purchase all of the fruit produced by a particular orchard or block of trees.
Contracts for other fruits require delivery of specified quantities each year.
The Company actively participates in agricultural management and quality control
and provides insecticide management and hauling capabilities. Where appropriate,
the Company participates in the management of the growers' agricultural
practices.

Fifteen Company-owned plants, located throughout the United States,
process the Company's products. The Company produces the majority of its
products between June and October. Most of the Company's seasonal plants operate
at close to full capacity during the packing season.

The following table lists the Company's production facilities:

LOCATION PRIMARY PRODUCT LINE SQUARE FOOTAGE*
-------- -------------------- ---------------

Hanford, CA Solid and Paste-Based Tomato Products 651,000
Kingsburg, CA Peaches, Zucchini and Corn 229,000
Modesto, CA Solid and Paste-Based Tomato Products 220,000
San Jose, CA Apricots, Mixed Fruit and Pears 458,000
Stockton, CA Peaches, Cherries, Mixed Fruit and Fruit 446,000
Concentrate
Woodland, CA Bulk Paste and Bulk Diced Tomatoes 465,000
Mendota, IL Peas, Corn, Lima Beans, Mixed Vegetables, 246,000
Carrots and Peas & Carrots
Plymouth, IN Paste-Based Tomato Products and Pineapple 156,000
Juice
Sleepy Eye, MN Peas and Corn 230,000
Crystal City, TX Green Beans, Spinach, Carrots, Beets and 362,000
Potatoes
Toppenish, WA Asparagus, Corn, Lima Beans and Peas 228,000
Yakima, WA Cherries and Pears 214,000
Arlington, WI Peas, Corn and Sauerkraut 209,000
Markesan, WI Beans 299,000
Plover, WI Beans, Carrots, Beets and Potatoes 298,000

- ----------

* Includes owned manufacturing and on-site warehouse and storage capacity.

In January 1998, the Company announced a four-year plan to consolidate
its California production facilities in order to enhance the efficiency of its
fruit and tomato processing operations and to better meet

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11

the competitive challenges of the market. Tomato production currently taking
place at the Modesto plant is expected to be transferred to the Company's newly
acquired state-of-the-art facility in Hanford in 1999. The Modesto location
would then be converted to a fruit processing plant allowing production
currently processed at the San Jose plant to be transferred to Modesto. At the
end of the production season in 2000, the Company is also expected to close its
Stockton fruit plant and transfer production from that plant to Modesto.
Considerations of plant age and location were primary factors in the decision to
close the 80-year-old San Jose plant and the 70-year-old Stockton plant and
transfer production closer to growing areas. In August 1998, management
announced its intention to close the Company's vegetable processing plant
located in Arlington, Wisconsin after the summer 1998 pack. See "Management
Discussion and Analysis of Financial Condition and Results of Operations
- --General." The Company plans an aggregate of approximately $136 million of
capital spending through 2001 to increase production efficiency and reduce
costs. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- General" and "-- Liquidity and Capital Resources --
Investing Activities."

Co-packers are used for pickles and certain other non-core products and
to supplement supplies of certain canned vegetables, fruit and tomato products.

Prior to December 1993, the Company produced almost all of the cans used
to package its products in the United States at its nine can manufacturing
facilities located throughout the United States. In December 1993, the Company
sold substantially all the assets (and certain related liabilities) of the
Company's can manufacturing business to Silgan Container Corporation ("Silgan").
The transaction included the sale or lease of the Company's nine can
manufacturing facilities. In connection with this agreement, Silgan and the
Company entered into a ten-year supply agreement, with optional successive
five-year extensions under which the Company has agreed to purchase all of its
requirements for metal food and beverage containers in the United States from
Silgan. If Silgan is unable to supply all of such requirements for any reason,
the Company is entitled to purchase the excess from another supplier. In
addition, after September 1998, the Company is entitled to seek a competitive
bid for up to 50% of its requirements. Price levels were originally set based on
the Company's costs of self-manufactured containers. Price changes under the
contract reflect changes in the manufacturer's costs. The agreement may be
terminated by either party, without penalty, on notice given 12 months prior to
the end of the term of the agreement (or any extension). The Company's total
annual can usage is approximately two billion.

SALES, MARKETING AND DISTRIBUTION

Sales and Marketing. The Company's sales organization for retail
products is divided into three groups: (i) a retail broker network (which
consists of 100% independent broker representation at the market level, managed
by Company sales managers); (ii) an in-house sales force with responsibility for
warehouse stores, mass merchandisers and supercenters; and (iii) an in-house
team responsible for trade promotion. Retail brokers are independent,
commissioned sales organizations which represent multiple manufacturers and,
during fiscal 1998, accounted for 67% of the Company's total net sales. The
Company retains its brokers through a standardized retail grocery brokerage
agreement, and brokers are typically paid at a percentage of collected sales,
generally 2.5%, which percentage may be increased up to 3.0% based on the
broker's accomplishment of specified sales objectives. Such agreements may be
terminated on 30 days prior notice by either party. The Company's broker network
represents the Company to a broad range of grocery retailers. The Company's
warehouse club, mass merchandiser and supercenter group calls on these customers
directly (non-brokered) and is responsible for the development and
implementation of sales programs for non-grocery channels of distribution that
include Wal-Mart, PriceCostco, Kmart and Target. During fiscal 1998, this group
accounted for 12% of the Company's total net sales. Foodservice, food
ingredients, private label and military and other sales are accomplished through
both direct sales and brokers and, during fiscal 1998, accounted for 21% of the
Company's total net sales.

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12

The Company's marketing group directs product development, pricing
strategy, consumer promotion, advertising, publicity and package design.
Consumer advertising and promotion support are used, together with trade
spending, to support awareness of new items and initial trial by consumers and
to build recognition of the Del Monte and Contadina brand names.

The Company has been enhancing its sales and marketing efforts with
proprietary software applications, principally its Trade Wizard application and
applications designed to assist customers in managing product categories. The
Trade Wizard application assists the Company in implementing and managing the
timing and scope of its trade and consumer promotions. Customers using the
Company's category management software tools are able to more rapidly identify
sales levels for various product categories so as to achieve an optimal product
mix. A substantial majority of the Company's customers that have employed Del
Monte's category management system have increased the relative amount of shelf
space dedicated to the Company's products, particularly fruit products, as
compared to competing products. The Company also has proprietary tools that
allow it to manage its customers' inventory requirements for its products,
thereby reducing customers' inventory levels while enhancing the Company's
opportunities to sell its products.

Distribution. The Company's distribution organization is responsible for
the distribution of finished goods to over 2,400 customer destinations.
Customers can order products to be delivered via truck, rail or on a customer
pickup basis. Some of the Company's distribution centers provide, among other
services, casing, labeling, special packaging, cold storing and fleet trucking
services. Other services the Company provides to customers include One Purchase
Order/One Shipment, in which the Company's most popular products are listed on a
consolidated invoicing service; the UCS Electronic Data Interchange, a paperless
system of purchase orders and invoices; and the Store Order Load Option (SOLO),
in which products are shipped directly to stores.

The following table lists the Company's distribution centers:

LOCATION OWNED/LEASED SQUARE FOOTAGE
-------- ------------ --------------

Birmingham, AL Leased 292,000
Clearfield, UT Leased 80,000
Dallas, TX Leased 175,000
Rochelle, IL Owned 425,000
Stockton, CA Leased 512,000
Swedesboro, NJ Owned 267,000

FOREIGN OPERATIONS

At June 30, 1998, the Company conducted substantially all of its
business domestically. See "--Recent Developments."

CUSTOMERS

The Company's customer base is broad and diverse and no single customer
accounted for more than 10% of fiscal 1998 sales. The Company's 15 largest
customers during fiscal 1998 represented approximately 44.2% of the Company's
sales. These companies have all been Del Monte customers for at least ten years
and, in some cases, for 20 years or more. The Company has sought to establish
and strengthen its alliances with key customers by offering sophisticated
proprietary software applications to assist customers in managing inventories.
The Company plans to expand its promotion of these applications with its
customers.

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COMPETITION

The Company faces substantial competition throughout its product lines
from numerous well-established businesses operating nationally or regionally
with single or multiple branded product lines, as well as with private label
manufacturers. In general, the Company competes on the basis of quality, breadth
of product line and price. See "-- The Industry" and "-- Company Products."

INFORMATION SERVICES

In November 1992, the Company entered into an agreement with Electronic
Data Systems Corporation ("EDS") to provide services and administration to the
Company in support of its information services functions. Payments under the
terms of the agreement are based on scheduled monthly base charges subject to
various adjustments based on such factors as production levels and inflation.
The agreement expires in November 2002 with optional successive one-year
extensions. The Company periodically reviews its general information system
needs, including Year 2000 compliance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000."

RESEARCH AND DEVELOPMENT

The Company's research and development ("R&D") organization provides
product, packaging and process development and analytical and microbiological
services, as well as agricultural research and seed production. In fiscal 1996,
1997 and 1998, R&D expenditures (net of revenue for services to third parties)
were $6 million, $5 million and $5 million, respectively. The Company maintains
an R&D facility in Walnut Creek, California where it conducts research in a
number of areas related to its business.

EMPLOYEES

At June 30, 1998, the Company had approximately 2,550 full-time
employees. In addition, approximately 10,900 individuals are hired on a
temporary basis during the pack season. The Company considers its relations with
its employees to be good. In the past several years, the Company has not
experienced any work stoppages or strikes.

The Company has ten collective bargaining agreements with seven unions
covering approximately 10,600 of its hourly and seasonal employees. One
collective bargaining agreement expires in calendar 1999. The remaining
agreements expire in calendar 2000, 2001 and 2002.

INTELLECTUAL PROPERTY

The Company owns a number of registered and unregistered trademarks for
use in connection with various food products, including the marks Del Monte,
Contadina, Fruit Cup, Fruit Naturals, Orchard Select, and Del Monte Lite. These
trademarks are important to the Company because brand name recognition is a key
factor in the success of the Company's products. The current registrations of
these trademarks in the United States and foreign countries are effective for
varying periods of time, and may be renewed periodically provided that the
Company, as the registered owner, and its licensees, where applicable, comply
with all applicable renewal requirements including, where necessary, the
continued use of the marks in connection with similar goods. The Company is not
aware of any material challenge to the ownership by the Company of its major
trademarks.

DMC owns approximately 12 issued U.S. patents covering machines used in
filling, cleaning, and sealing cans, food preservation methods, extracts and
colors, and peeling and coring devices. The patents expire between 2002 and 2014
and cannot be renewed. Patents are generally not material to the Company's
business.

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14

The Company claims copyright protection in its proprietary category
management software and vendor-managed inventory software. The Company's
customers receive reports generated by these software programs and provide data
to the Company for use in connection with the programs. The software itself,
however, is not currently licensed to the Company's customers. These copyrights
are not registered.

The Company has developed a number of proprietary vegetable seed
varieties which it protects against disclosure by restricting access and/or by
the use of non-disclosure agreements. There can be no assurance that the means
taken by the Company to protect the secrecy of its seed varieties will be
sufficient to protect their secrecy or that others will not independently
develop similar technology. The Company has obtained U.S. plant variety
protection certificates under the Plant Variety Protection Act on some of its
proprietary seed varieties. Under such a certificate, the breeder has the right,
among other rights, to exclude others from offering or selling the variety or
reproducing it in the United States. The protection afforded by a plant variety
protection certificate generally runs for 20 years from the date of its
issuance.

In connection with the RJR Nabisco Sale and the divestitures of the
Company's non-core and foreign operations subsequent to that sale, the Company
granted various perpetual, royalty-free licenses for use of the Del Monte name
and mark along with certain other trademarks, patents, copyrights and trade
secrets to the acquiring companies or their affiliates. Under such licenses, the
Company is generally entitled to reimbursement from the licensees of certain of
its expenses in maintaining the registrations relating to such intellectual
property. In particular, with respect to all food and beverage products other
than fresh fruits, vegetables and produce, affiliates of RJR Nabisco hold the
rights to use the Del Monte trademark in Canada; Kikkoman Corporation holds the
rights to use Del Monte trademarks in the Far East (excluding the Philippines);
Del Monte International holds the rights in Europe, Africa, the Middle East and
the Indian Subcontinent. On July 10, 1998, the Company entered into an agreement
with Nabisco to reacquire rights to the Del Monte brand in South America. See
Note Q to the financial statements for the year ended June 30, 1998) and "--
Recent Developments." Fresh Del Monte Produce holds the rights to use the Del
Monte name and trademark with respect to fresh fruit, vegetables and certain
chilled and frozen products related thereto throughout the world. With respect
to dried fruit and snack products, Yorkshire Food Group holds the rights to use
Del Monte trademarks in the United States, Mexico, Central America and the
Caribbean. In connection with agreements to sell Del Monte Latin America, an
affiliate of Hicks Muse acquired the right to use the Del Monte trademarks with
respect to all food and beverage products other than fresh fruits, vegetable and
produce in Mexico and Capital Universal Ltd. (an affiliate of Donald W.
Dickerson, Inc.) acquired similar rights in Central America and the Caribbean.
Dewey Limited (an affiliate of Del Monte International) owns the rights in the
Philippines to the Del Monte brand name.

The Company retains the right to review the quality of the licensee's
products under each of its license agreements. The Company generally may inspect
the licensees' facilities for quality and the licensees must periodically submit
samples to the Company for inspection. Licensees may grant sublicenses but all
sublicensees are bound by these quality control standards and other terms of the
license.

The Company has also granted various security and tangible interests in
its trademarks and related trade names, patents and trade secrets and other
intellectual property to its creditors in connection with the Bank Financing (as
defined herein), and to its licensees, to secure certain of the Company's
obligation under the license agreements.

GOVERNMENTAL REGULATION

As a manufacturer and marketer of food products, the Company's
operations are subject to extensive regulation by various federal governmental
agencies, including the Food and Drug Administration, the United States
Department of Agriculture and the FTC, as well as state and local agencies with
respect to production processes, product attributes, packaging and labeling,
storage and distribution. Under various statutes and regulations, such agencies
prescribe requirements and establish standards for safety, purity and labeling.
In addition, advertising of the Company's products is subject to

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regulation by the FTC, and the Company's operations are subject to certain
health and safety regulations, including those issued under the Occupational
Safety and Health Act. The Company's manufacturing facilities and products are
subject to periodic inspection by federal, state and local authorities. The
Company seeks to comply at all times with all such laws and regulations and is
not aware of any instances of material non-compliance. The Company maintains all
permits and licenses relating to its operations. The Company believes its
facilities and practices are sufficient to maintain compliance with applicable
governmental laws and regulations. Nevertheless, there can be no assurance that
the Company will be able to comply with any future laws and regulations. Failure
by the Company to comply with applicable laws and regulations could subject the
Company to civil remedies including fines, injunctions, recalls or seizures as
well as potential criminal sanctions.

PENSION CONTRIBUTIONS

As described more fully in Note I to the audited consolidated financial
statements of the Company for the year ended June 30, 1998, in fiscal 1997, the
Company's defined benefit pension plans were determined to be underfunded. In
connection with the Recapitalization, the Company entered into an agreement with
the U.S. Pension Benefit Guaranty Corporation dated April 7, 1997 whereby the
Company contributed $15 million within 30 days after the consummation of the
Recapitalization to its defined benefit pension plans. The Company will also
contribute a minimum of $15 million in calendar 1998 of which $10 million had
been paid by June 30, 1998, $9 million in calendar 1999, $8 million in calendar
2000 and $8 million in calendar 2001, for a total of $55 million. The
contributions required to be made in 1999, 2000 and 2001 have been secured by a
$20 million letter of credit. The contributions required to be made in 1998 will
be paid prior to any scheduled amortization under the Bank Financing in excess
of $1 million, and the Company has agreed not to make voluntary prepayments of
the loans under the Bank Financing prior to making the contributions required to
be made in 1998 or prior to obtaining the letter of credit.

ENVIRONMENTAL COMPLIANCE

As a result of its agricultural, food processing and canning activities,
the Company is subject to numerous environmental laws and regulations. Many of
these laws and regulations are becoming increasingly stringent and compliance
with them is becoming increasingly expensive. The Company seeks to comply with
all such environmental laws and regulations and is not aware of any instances of
material non-compliance. The Company cannot predict the extent to which any
environmental law or regulation that may be enacted or enforced in the future
may affect its operations. The Company is engaged in a continuing program to
maintain its compliance with existing laws and regulations and to establish
compliance with anticipated future laws and regulations.

In connection with the sale of one of its facilities, the Company is
currently remediating conditions resulting from the release of petroleum from
underground storage tanks ("USTs"). The Company is also conducting a groundwater
investigation at one currently owned property for hydrocarbon contamination that
it believes resulted from the operations of an unaffiliated prior owner of the
property. At the present time, the Company is unable to predict the total cost
for the remediation or the extent to which it may obtain contribution from the
prior owner. Further, there can be no assurance that investigation and
remediation of environmental conditions will not be required at other properties
currently or formerly owned or operated by the Company. Nonetheless, the Company
does not expect that these and other such remediation costs will have a material
adverse effect on the Company's financial condition or results of operations.

The Company has been notified by governmental authorities and private
claimants that it is a potentially responsible party ("PRP") or may otherwise be
potentially responsible for environmental investigation and remediation costs at
certain contaminated sites under CERCLA or under similar state laws. With the
exception of one previously owned site, the Company has potential liability at
each site because it allegedly sent certain wastes from its operations to these
sites for disposal or recycling. These

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wastes consisted primarily of empty metal drums (which previously held raw
materials), used oils and solvents, solder dross and paint waste.

The Company is indemnified for any liability at two of these sites,
including the previously owned site. With respect to a majority of the sites at
which the Company has been identified as a PRP and is not indemnified by another
party, the Company has settled its liability with the responsible regulatory
agency. The Company believes that it has no liability for the remaining sites,
except with respect to one site at which it is a member of the PRP group. The
PRP group is conducting a Remedial Investigation and Feasibility Study to
analyze the nature and extent of the contamination and to evaluate remedial
alternatives for the site. Based upon the information currently available, the
Company does not expect that its liability for this site will be material. There
can be no assurance that the Company will not be identified as a PRP at
additional sites in the future.

The Company spent approximately $5 million on domestic environmental
expenditures from fiscal 1996 through fiscal 1998, primarily related to UST
remediation activities and upgrades to boilers and wastewater treatment systems.
The Company projects that it will spend an aggregate of approximately $4 million
in fiscal 1999 and 2000 on capital projects and other expenditures in connection
with environmental compliance, primarily for boiler upgrades, compliance costs
related to the consolidation of its fruit and tomato processing operations and
continued UST remediation activities. The Company believes that its CERCLA and
other environmental liabilities will not have a material adverse effect on the
Company's financial position or results of operations.

WORKING CAPITAL

The inventory position of the Company is seasonally affected by the
growing cycle of the vegetables, fruits and tomatoes it processes. Substantially
all inventories are produced during the harvesting and packing months of June
through October and depleted through the remaining seven months. The Company
maintains a revolving line of credit to fund its seasonal working capital needs.

BACKLOG

The Company does not experience significant backlog.

ITEM 2. PROPERTIES

As of June 30, 1998, the Company operated 15 production facilities and
six distribution centers. See "Business -- Sales, Marketing and Distribution"
and "-- Supply and Production." The Company's production facilities are owned
properties, while its distribution centers are owned or leased. The Company has
various warehousing and storage facilities, which are primarily leased
facilities. The Company's leases are generally long-term. Virtually all of the
Company's properties, whether owned or leased, are subject to liens or security
interests.

In fiscal 1998, management committed to a plan to consolidate processing
operations. See "Business -- Recent Developments -- Plant Consolidation."

The Company's principal administrative headquarters are located in
leased office space in San Francisco, California. The Company owns its primary
research and development facility in Walnut Creek, California.

The Company periodically disposes of excess land and facilities through
sales. Management considers its facilities to be suitable and adequate for its
business and to have sufficient production capacity for the purposes for which
they are currently intended.

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ITEM 3. LEGAL PROCEEDINGS

The Company is involved from time to time in various legal proceedings
incidental to its business, including claims with respect to product liability,
worker's compensation and other employee claims, tort and other general
liability, for which the Company carries insurance or is self-insured, as well
as trademark, copyright and related litigation. The Company believes that no
such legal proceedings will have a material adverse effect on the results of
operations, cash flow, liquidity or financial condition of the Company. See
"Business -- Environmental Compliance" for a description of certain
environmental matters to which the Company is involved.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On April 2, 1998, a Special Meeting of Stockholders of Del Monte Foods
Company was held to consider the merger of the Company with and into a newly
formed, wholly-owned subsidiary, also called Del Monte Foods Company, for the
purpose of changing the Company's state of incorporation from Maryland to
Delaware. At the meeting, 30,802,827 of Common Stock were represented in person
or by proxy at the meeting. The merger was approved by an unanimous vote of all
shares represented at the meeting.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY SECURITIES AND RELATED
STOCKHOLDER MATTERS

There is no established public market for any class of DMFC capital
stock. See "Security Ownership of Certain Beneficial Owners and Management" for
a discussion of the ownership of DMFC.

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth historical consolidated financial
information of the Company. The statement of operations data for each of the
fiscal years in the three-year period ended June 30, 1996 and the balance sheet
data as of June 30, 1994, 1995 and 1996 have been derived from consolidated
financial statements of the Company audited by Ernst & Young LLP, independent
auditors. The statements of operations data for each of the two fiscal years in
the two-year period ended June 30, 1998 and the balance sheet data as of June
30, 1997 and 1998 have been derived from consolidated financial statements of
the Company audited by KPMG Peat Marwick LLP, independent auditors. The table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the consolidated financial
statements of the Company and related notes and other financial information
included elsewhere in this Annual Report on Form 10-K.

FISCAL YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
(RESTATED) (RESTATED)
(IN MILLIONS, EXCEPT SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales ......................... $ 1,500 $ 1,527 $ 1,305 $ 1,217 $ 1,313
Cost of products sold ............. 1,208 1,183 984 819 898
Selling, administrative and general
expense(a) ...................... 225 264 239 327 316
Special charges related to plant
consolidation .................. -- -- -- -- 10
Acquisition expense ............... -- -- -- -- 7
------------ ------------ ------------ ------------ ------------

Operating income (loss) ........... 67 80 82 71 82
Interest expense .................. 61 76 67 52 77
Loss (gain) on sale of divested
assets(b) ....................... (13) -- (123) 5 --
Other (income) expense(c) ......... 8 (11) 3 30 (1)
------------ ------------ ------------ ------------ ------------

Income (loss) before income taxes,
minority interest, extraordinary
item and cumulative effect of
accounting change ............... 11 15 135 (16) 6
Provision for income taxes ........ 3 2 11 -- 1
Minority interest in earnings of
subsidiary ...................... 5 1 3 -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary
item and cumulative effect of
accounting change ............... 3 12 121 (16) 5
Extraordinary loss(d) ............ -- 7 10 42 --
Cumulative effect of accounting
change(e) ....................... -- -- 7 -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) ................ $ 3 $ 5 $ 104 $ (58) $ 5
============ ============ ============ ============ ============

Net income (loss) attributable to
common shares ................... $ (58) $ (66) $ 22 $ (128) $ --

Net income (loss) per common
share(f) ........................ $ (0.75) $ (0.85) $ 0.29 $ (2.07) $ 0.01
Weighted average number of shares
outstanding(g) .................. 77,915,263 76,671,294 75,047,353 61,703,436 31,619,642

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FISCAL YEAR ENDED JUNE 30,
---------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ----- ----- -----
(RESTATED) (RESTATED)
(IN MILLIONS)

OTHER DATA:
Adjusted EBITDA:(h)
EBIT ............................... $ 72 $ 91 $ 202 $ 36 $ 83
Depreciation and amortization(i) .. 35 35 26 24 29
EBITDA of Divested Operations ...... (39) (35) (22) -- --
Asset write-down/impairment(j) ..... 1 -- -- 7 --
Loss (gain) on sale of Divested
Operations(b) .................... (13) -- (123) 5 --
Terminated transactions(k) ......... 1 (22) -- -- --
Benefit costs(l) ................... 6 7 -- -- 3
Headcount reduction and
relocation(m) .................... -- -- 9 -- --
Recapitalization expenses(a)(c) .... -- -- -- 47 --
Special charges related to plant
consolidation .................... -- -- -- -- 10
Expenses of Contadina Acquisition(n) -- -- -- -- 7
Contadina inventory write-up(n) .... -- -- -- -- 3
---- ---- ----- ----- -----
Adjusted EBITDA .................. $ 63 $ 76 $ 92 $ 119 $ 135
==== ==== ===== ===== =====
Adjusted EBITDA margin(h) ............ 5.7% 6.9% 8.6% 10.2% 10.3%
Cash flows provided by operating
activities ......................... $ 28 $ 63 $ 60 $ 25 $ 97
Cash flows provided by (used in)
investing activities ............... 55 (21) 170 37 (222)
Cash flows provided by (used in)
financing activities ............... (83) (44) (224) (63) 127
Capital expenditures ................. 36 24 16 20 32
SELECTED RATIOS:
Ratio of earnings to fixed
charges(o) ....................... 1.2x 1.2x 2.8x -- 1.1x
Deficiency of earnings to cover
fixed charges(o) ................. -- -- -- $ 16 --

JUNE 30,
---------------------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
(RESTATED) (RESTATED)
(IN MILLIONS)

BALANCE SHEET DATA:
Working capital .............. $ 88 $ 99 $ 209 $ 118 $ 210
Total assets ................. 936 960 736 667 845
Total debt ................... 569 576 373 610 709
Redeemable preferred stock ... 215 215 213 32 33
Stockholders' equity (deficit) (384) (393) (288) (398) (350)

Note: Financial data under the columns marked "restated" reflect the information
from the Company's restated financial statements.

- ----------------------

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(a) In connection with the Recapitalization, which was consummated on April 18,
1997, expenses of approximately $25 million were incurred primarily for
management incentive payments and, in part, for severance payments.

(b) The Company sold its can manufacturing operations in the fiscal quarter
ended December 31, 1993 and recognized a $13 million gain. In November
1995, the Company sold its pudding business for $89 million, net of $4
million of related transaction fees. The sale resulted in a gain of $71
million. In March 1996, the Company sold its 50.1% ownership interest in
Del Monte Philippines for $100 million, net of $2 million of related
transaction fees. The sale resulted in a gain of $52 million. In the fiscal
quarter ended December 1996, the Company sold Del Monte Latin America. The
combined sales price of $50 million, reduced by $2 million of related
transaction expenses, resulted in a loss of $5 million.

(c) In fiscal 1995, other income reflects the Company's receipt of proceeds of
a $30 million letter of credit, reduced by $4 million of related
transaction expenses, as a result of the termination of a merger agreement
with Grupo Empacador de Mexico, S.A. de C.V. In fiscal 1997, $22 million of
expenses were incurred in conjunction with the Recapitalization, primarily
for legal, investment advisory and management fees.

(d) In June 1995, the Company refinanced its then-outstanding revolving credit
facility, term loan and senior secured floating rate notes. In conjunction
with this debt retirement, capitalized debt issue costs of $7 million were
written off and accounted for as an extraordinary loss. In December 1995
and April 1996, the Company prepaid part of its term loan and senior
secured notes. In conjunction with the early debt retirement, the Company
recorded an extraordinary loss of $10 million for the early retirement of
debt. The extraordinary loss consisted of a $5 million prepayment premium
and a $5 million write-off of capitalized debt issue costs related to the
early retirement of debt. In fiscal 1997, $42 million of expenses related
to the early retirement of debt due to the exchange of PIK Notes (as
defined herein) and to the Recapitalization was charged to net income. In
September 1996, the Company repurchased PIK Notes and, concurrently,
exchanged essentially all remaining PIK Notes for 1996 PIK Notes (as
defined herein). In conjunction with this repurchase and exchange,
capitalized debt issue costs of $4 million, net of a discount on the PIK
Notes, were written off and accounted for as an extraordinary loss. In
conjunction with the refinancing of debt that occurred at the time of the
Recapitalization, the Company recorded a $38 million extraordinary loss
related to the early retirement of debt. The $38 million consisted of
previously capitalized debt issue costs of approximately $19 million and a
1996 PIK Note premium payment and a term loan make-whole payment
aggregating $19 million.

(e) Effective July 1, 1995, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The cumulative effect of adopting SFAS No. 121 resulted in a
charge to fiscal 1996 net earnings of $7 million.

(f) Net income (loss) attributable to the shares of Common Stock is computed as
net income (loss) reduced by the cash and in-kind dividends for the period
on redeemable preferred stock.

(g) For each period, the weighted average number of shares outstanding reflects
the 191.542-for-one stock split.

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(h) Adjusted EBITDA represents EBITDA (income (loss) before provision for
income taxes, minority interest, extraordinary item, cumulative effect of
accounting change and depreciation and amortization expense, plus interest
expense) before special charges and other one-time and non-cash charges,
less gains (losses) on sales of assets and the results of the Divested
Operations. Adjusted EBITDA should not be considered in isolation from, and
is not presented as an alternative measure of, operating income or cash
flow from operations (as determined in accordance with GAAP). Adjusted
EBITDA as presented may not be comparable to similarly titled measures
reported by other companies. Since the Company has undergone significant
structural changes during the periods presented, management believes that
this measure provides a meaningful measure of operating cash flow (without
the effects of working capital changes) for the core and continuing
business of the Company by normalizing the effects of operations that have
been divested and one-time charges or credits. Adjusted EBITDA margin is
calculated as Adjusted EBITDA as a percentage of net sales (excluding net
sales of Divested Operations of $399 million, $417 million, $233 million
and $48 million for the years ended June 30, 1994, 1995, 1996 and 1997,
respectively).

(i) Depreciation and amortization exclude amortization of $5 million, $5
million, $5 million, $5 million and $3 million of deferred debt issuance
costs for fiscal 1994, 1995, 1996, 1997 and 1998, respectively. In
addition, in fiscal 1998, depreciation and amortization exclude $3 million
of accelerated depreciation which is included in the caption "Special
charges related to plant consolidation."

(j) In fiscal 1994 and fiscal 1997, non-cash charges include $1 million related
to write-offs of labels due to new labeling laws and $7 million related to
the recognition of an other than temporary impairment of a long-term equity
investment, respectively.

(k) In fiscal 1994, one-time charges of $1 million relate to a terminated
transaction. In fiscal 1995, one-time charges and credits include $26
million received in connection with a terminated transaction and $4 million
paid by the Company to terminate its alliance with PCP.

(l) In fiscal 1994 and 1995, one-time and non-cash charges include $6 million
of benefit plan charges and $7 million related to the termination of a
management equity plan, respectively. In fiscal 1998, one-time and non-cash
charges include $3 million of stock compensation and related benefit
expense.

(m) In fiscal 1996, other one-time charges include $3 million for relocation
costs and $6 million of costs associated with a significant headcount
reduction.

(n) In fiscal 1998, one-time charges include $7 million of acquisition-related
expenses incurred in connection with the Contadina Acquisition and $3
million of inventory step-up due to the purchase price allocation related
to the Contadina Acquisition.

(o) For purposes of determining the ratio of earnings to fixed charges and the
deficiency of earnings to cover fixed charges, earnings are defined as
income (loss) before extraordinary item, cumulative effect of accounting
change and provision for income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization of
deferred debt issue costs) and the interest component of rent expense.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity of the Company
during the three-year period ended June 30, 1998. This discussion should be read
in conjunction with the audited consolidated financial statements of the Company
for the three-year period ended June 30, 1998 and notes thereto included
elsewhere in this Annual Report on Form 10-K.

GENERAL

The Company reports its financial results on a July 1 to June 30 fiscal
year basis to coincide with its inventory production cycle, which is highly
seasonal. Raw product is harvested and packed primarily in the months of June
through October, during which time inventories rise to their highest levels. At
the same time, consumption of canned products drops, reflecting, in part, the
availability of fresh alternatives. This situation impacts operating results as
sales volumes, revenues and profitability decline during this period. Results
over the remainder of the fiscal year are impacted by many factors including
industry supply and the Company's share of that supply. See "-- Seasonality."

Consistent with the Company's strategy to generate growth through
acquisitions, the Company consummated the Contadina Acquisition in December 1997
and the South America Acquisition in August 1998. The Contadina Acquisition
contributes another established brand and positions the Company as the branded
market leader in the high margin canned solid tomato category. The Contadina
Acquisition also establishes a strong presence for the Company in the branded
paste-based tomato products category, which includes tomato paste, tomato sauce
and pizza sauce. The Company believes that Contadina's strong brand recognition,
particularly in paste-based tomato products, complements the Company's brand
leadership in canned solid tomato products and will enhance the Company's market
share and household penetration. With the South America Acquisition, the Company
has reacquired the rights to the Del Monte brand in South America. Additionally,
the South America Acquisition has opened a distribution channel in a new
geographic market for the Company.

In addition to diversifying further the Company's revenue base, the
Contadina Acquisition has expanded the Company's processing scale, which has
resulted in production cost efficiencies. Among the facilities acquired by the
Company in the Contadina Acquisition is a state-of-the-art manufacturing
facility at Hanford, California. As part of its efforts to consolidate
production, tomato production at the Company's Modesto, California facility is
expected to be transferred to Hanford following the summer 1998 pack. The
Modesto facility would then be converted to a fruit processing facility and
would assume the production currently conducted at the Company's San Jose and
Stockton facilities in California, which are expected to be closed after the
summer 1999 and 2000 packs, respectively. It is anticipated that these
properties will be sold in the year following closure. In connection with these
actions, the Company recorded charges of $7 million in the third quarter of
fiscal 1998, principally relating to severance. The Company anticipates that it
will incur material additional charges as a result of these plant closures,
including the effects of adjusting the assets' remaining useful lives to
accelerate the depreciation thereof (a $3 million accelerated depreciation
charge was taken in the fourth quarter of fiscal 1998), the costs to remove and
dispose of those assets and ongoing fixed costs to be incurred during the
Modesto plant reconfiguration and until the sale of the San Jose and Stockton
properties. See Note P to the consolidated financial statements for the year
ended June 30, 1998. In addition, in August 1998, management announced its
intention to close the Company's vegetable processing plant located in
Arlington, Wisconsin after the summer 1998 pack. Total costs to be incurred in
connection with this closure are expected to be approximately $4 million, to be
recorded in fiscal 1999, with the majority of these charges (approximately $3
million) relating to asset write-offs. In conjunction with the purchase price
allocation relating to the Contadina Acquisition, the Company has stepped-up the
value of the purchased inventory by approximately $6 million.

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23

Commencing in 1996, the Company sought to leverage its brand and price
leadership to improve sales and operating margins and, to that end, increased
prices for many of its fruit and vegetable products in that year. As a result,
the Company experienced an anticipated volume loss and market share decline. In
the case of its fruit operations, the Company lost 3.3 percentage points of
market share during fiscal 1996. However, the Company's significantly improved
margins generally offset the effects of the lower volume, and the Company's
market share recovered by year-end 1997 to achieve an increase of 5.0 percentage
points of market share during 1997 and an additional increase during 1998 of 1.7
percentage points, a level higher than that experienced prior to the price
increases. In the case of its vegetable operations, the Company lost 3.8
percentage points of market share during fiscal 1996, 0.1 of a percentage point
of market share during fiscal 1997 and 0.6 of a percentage point during 1998.
The Company coupled these price increases with a new marketing strategy that
emphasizes consumption-driven trade promotion programs, as well as
consumer-targeted promotions such as advertising and coupons, to encourage
retailers to use store advertisements, displays and consumer-targeted
promotions, rather than periodic price-only promotions. The Company plans to
continue to emphasize its status as a price leader and, in 1997, in connection
with the Recapitalization, began implementing a new business strategy designed
to improve sales and operating margins by: (i) increasing market share and
distribution of high margin value-added products; (ii) introducing product and
packaging innovations; (iii) increasing penetration of high growth distribution
channels, such as supercenters and warehouse clubs; (iv) achieving cost savings
through investments in new and upgraded production equipment and plant
consolidations; and (v) completing strategic acquisitions.

In fiscal 1995, Del Monte terminated an exclusive supply agreement with
Pacific Coast Producers, an unaffiliated grower co-operative ("PCP"), to
purchase substantially all of PCP's tomato and fruit production. Since
terminating the agreement with PCP, the Company on occasion buys from and sells
to PCP a limited amount of product on a spot basis. During fiscal 1996 and the
first half of fiscal 1997, the Company sold its pudding business, its 50.1%
interest in Del Monte Philippines and all of its interest in Del Monte Latin
America. At the end of fiscal 1997, a distribution agreement expired under which
Del Monte sold certain products for Yorkshire Dried Fruit and Nuts, Inc.
("Yorkshire") at cost. These events are collectively referred to as the
"Divested Operations."

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24

The following table sets forth the net proceeds received by the Company
in connection with the sale of the Divested Operations and, for the periods
indicated, the net sales generated by the Divested Operations prior to
disposition by the Company:

NET PROCEEDS NET SALES FROM DIVESTED
FISCAL YEAR FROM DISPOSITION/ OPERATIONS PRIOR TO
DIVESTED OPERATION ENDED JUNE 30, TERMINATION DISPOSITION/TERMINATION
------------------ -------------- ----------- -----------------------
(IN MILLIONS)

Del Monte pudding business 1996 $ 89 $ 15(a)
Del Monte Philippines 1996 100(b) 102(b)
Del Monte Latin America 1997 48(c) 17(c)
Del Monte Latin America 1996 -- 55
PCP 1996 -- 26(d)
Yorkshire 1997 --(e) 31(e)
Yorkshire 1996 -- 35

- ----------

(a) The Company divested its pudding business in November 1995.

(b) In connection with the sale which was consummated in March 1996, the Company
entered into an eight-year supply agreement with the acquirer.

(c) The Company divested its Latin American operations in the second quarter of
fiscal 1997.

(d) The Company entered into a consent decree with the U.S. Federal Trade
Commission (the "FTC") pursuant to which the Company agreed to terminate its
supply agreement with PCP. The Company terminated that supply agreement in
June 1995. The Company sold the remaining inventory during fiscal 1996.

(e) The Company's distribution agreement with Yorkshire expired in June 1997.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of operations, expressed as
percentages of the Company's net sales for such fiscal period:

FISCAL YEAR ENDED JUNE 30,
-----------------------------
1996 1997 1998
---- ---- ----
(restated)

Net sales 100% 100% 100%
Cost of products sold 76 67 69
Selling, administrative and general expense 18 27 24
Special charges related to plant consolidation -- -- 1
--- --- ---
Operating income 6% 6% 6%
=== === ===
Interest expense 5% 4% 6%
=== === ===

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The following table sets forth, for the periods indicated, the Company's
net sales by product categories, expressed in dollar amounts and as a percentage
of the Company's total net sales for such period:

FISCAL YEAR ENDED JUNE 30,
-------------------------------
1996 1997 1998
------ ------ ------
(IN MILLIONS)

NET SALES:
Canned vegetables(a) $ 402 $ 437 $ 466
Canned fruit(a) 367 431 456
Tomato products(a) 217 229 313
Canned pineapple(a) 72 65 70
Other(b) 89 41 8
------ ------ ------
Subtotal domestic 1,147 1,203 1,313
Latin America 55 17 --
Philippines 142 -- --
Intercompany sales (39) (3) --
------ ------ ------
Total Net Sales $1,305 $1,217 $1,313
====== ====== ======

AS A PERCENTAGE OF NET SALES:
Canned vegetables(a) 31% 36% 35%
Canned fruit(a) 28 35 35
Tomato products(a) 16 19 24
Canned pineapple(a) 6 5 5
Other(b) 7 4 1
------ ------ ------
Subtotal domestic 88 99 100
Latin America 4 1 --
Philippines 11 -- --
Intercompany sales (3) -- --
------ ------ ------
Total 100% 100% 100%
====== ====== ======

- ----------------------

(a) Includes sales of the entire product line across each channel of
distribution, including sales to grocery chains, Warehouse Clubs,
Supercenters, Mass Merchandisers and other grocery retailers, as well as
the Company's foodservice, food ingredients, export and vegetable private
label businesses and military sales.

(b) Includes dried fruit, gel and pudding cups, and certain other retail
products, as well as the Company's private label fruit and tomato
businesses which were discontinued in fiscal 1995 with the termination of
the alliance with PCP.

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26

SEASONALITY

The Company's quarterly operating results have varied in the past and
are likely to vary in the future based upon a number of factors. The Company's
historical net sales have exhibited seasonality, with the second and third
fiscal quarters having the highest net sales. These two quarters reflect
increased sales of the Company's products during the holiday period in the
United States extending from late November through December, as well as sales
associated with the Easter holiday. Net sales in the first fiscal quarter have
historically been affected by lower levels of promotional activity, the
availability of fresh produce and other factors. Quarterly gross profit
primarily reflects fluctuations in sales volumes and is also affected by the
overall product mix. The Company's fruit operations have a greater percentage of
annual sales and cost of products sold in the first fiscal quarter, as compared
to its vegetable and tomato operations, due principally to increased sales of
fruit cups during the "back to school" period. The Company's vegetable and fruit
operations have a greater percentage of annual sales and cost of products sold
in the second and third fiscal quarters, principally due to the year-end holiday
season in the United States, and sales of ketchup and related cost of products
sold typically increase in the fourth fiscal quarter. Selling, administrative
and general expense tends to be greater in the first half of the fiscal year,
reflecting promotional expenses relating to the "back to school" period and the
year-end holiday season, while Easter is the only major holiday in the second
half of the fiscal year.

During the early 1990s, the markets for the Company's principal canned
vegetables and fruit products were in a position of stable demand and excess
supply. This excess supply primarily resulted from overplanting and abundant
harvests of raw product, combined with processing over-capacity. During such
periods of industry oversupply, pressure was placed on absolute volumes and
gross margins. The Company, as well as certain of its competitors, implemented
vegetable plant closures in an attempt to reduce processing over-capacity. The
summer 1995 pack was below average for both vegetables and fruit due to flooding
in the Midwest and heavy rains in California during the winter and spring of
1995. As a result, inventory levels during fiscal 1996 were lower than in
previous years, leaving industry supply for vegetables and fruit in a
balanced-to-tight position. The summer 1996 pack was slightly below average for
fruit, while tomato production was slightly higher than expected. Vegetable
production during fiscal 1996 was above average. This, coupled with an industry
decrease in sales, resulted in higher than expected carry-in inventories
(inventories on hand at the start of the packing season) of vegetables. In
response, vegetable plantings were decreased for summer 1997 which resulted in
higher vegetable costs. In addition, cooler weather than normal resulted in late
plantings for some vegetables causing lower recoveries, while smaller fruit size
lowered raw product fruit recoveries. Due to the level of carry-in inventories
at the beginning of fiscal 1998, the Company believed that these carry-in
inventories and 1997 pack inventory would result in adequate product available
for sale and that any shortfalls from the summer 1997 harvest would have very
little impact on the Company's supply of product. However, sales of the
Company's fruit products exceeded expected levels during fiscal 1998 and by
fiscal year-end some shortages were experienced. In order to meet demand, the
Company incurred additional cost during the fourth quarter to secure additional
supply until the 1998 harvest becomes available.

The weather conditions which existed during the summer of 1995 resulted
in reduced acreage yields and production recoveries of fruits and vegetables
which negatively impacted the Company's production costs in fiscal 1996. During
fiscal 1996, the Company's management developed a strategy to increase prices.
These price increases resulted in volume and market share decreases for the
Company during fiscal 1996 as competitors sold greater volume because their
prices remained below the Company's. Despite the reduced market share, the
Company's profitability was significantly higher in the fourth quarter of fiscal
1996 as a result of higher net selling prices. These price increases were
applied to all product lines in fiscal 1997. Although the Company's aggregate
volumes decreased in fiscal 1997 as compared to fiscal 1996, the Company
regained and exceeded prior year fruit market share while vegetable market share
was maintained and profitability growth continued due to these higher net
selling prices. Profitability growth and market share may be unfavorably
impacted in the future due to the market dynamics of available supply and
competitors' pricing.

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In the winter and spring of 1997-98, certain areas in California, one of
the Company's principal growing regions for tomatoes and fruit, experienced
substantial rainfall as a result of the "El Nino" phenomenon. The 1998
California fruit and tomato harvests and raw product recoveries are somewhat
reduced due to the El Nino weather conditions. Although these weather-related
conditions may result in slightly higher cost of products sold in fiscal 1999,
the Company believes that the overall effects of the El Nino phenomenon will not
be material to its financial condition and results of operations.

FISCAL 1997 VS. FISCAL 1998

Contadina Acquisition. On December 19, 1997, the Company completed the
Contadina Acquisition for a total purchase price of $197 million, comprised of a
base price of $177 million and an estimated net working capital adjustment of
$20 million. The consideration was paid solely in cash. The purchase price was
subject to adjustment based on the final calculation of net working capital as
of the closing date. Nestle provided its calculation of the net working capital
which resulted in a payment to the Company of $2 million, and therefore a
reduction in the purchase price to a total of $195 million. The Contadina
Acquisition also included the assumption of certain liabilities of approximately
$5 million, primarily consisting of liabilities in respect of reusable packaging
materials, employee benefits and product claims. In conjunction with the
Contadina Acquisition, approximately $7 million in acquisition-related expenses
were incurred. The Contadina Acquisition was accounted for using the purchase
method of accounting.

Plant Consolidation. In the third quarter of fiscal 1998, management
committed to a plan to consolidate processing operations. In connection with
this plan, the Company recorded charges of $7 million. These costs relate to
severance and benefit costs for 433 employees to be terminated. This plan will
be implemented in a specific sequence over the next three years. The plan
involves suspending operations at the Modesto facility for a year while that
facility is reconfigured to accommodate fruit processing which is currently
taking place at the San Jose and Stockton facilities (which sites will be
permanently closed). The tomato processing currently at the Modesto facility
will be moved to the Hanford facility. Management believes that because of these
sequenced activities, it is not likely that there will be any significant
changes to this plan. In addition, due to historically low turnover at the
affected plants, the Company can reasonably estimate the number of employees to
be terminated, and, due to the existence of union contracts, the Company can
reasonably estimate any related benefit exposure.

The Company anticipates that it will incur total charges of
approximately $36 million as a result of these plant closures. These expenses
include costs of $16 million representing accelerated depreciation resulting
from the effects of adjusting the assets' remaining useful lives to match the
period of use prior to the plant closure, $7 million in severance costs (as
described above) and various other costs totaling $13 million, such as costs to
remove and dispose of those assets and ongoing fixed costs to be incurred during
the Modesto plant reconfiguration and until the sale of the San Jose and
Stockton properties. Total charges relating to plant closures recorded in fiscal
1998 were $10 million (including depreciation expense of $3 million recorded in
the fourth quarter of fiscal 1998). These charges are expected to affect the
Company's results over the next four-year period as follows: $13 million in
fiscal 1999 (including depreciation expense of $9 million), $9 million in fiscal
2000 (including depreciation expense of $4 million), $3 million in fiscal 2001
and $1 million in fiscal 2002. This accelerated depreciation is included in
"Special charges related to plant consolidation."

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28

Net Sales. Consolidated net sales for fiscal 1998 increased by $96
million or 7.9% from fiscal 1997. This increase was attributable to higher sales
across all businesses and the Contadina Acquisition offset by the absence of the
Divested Operations of dried fruit and Latin America. Net sales were $1,237
million for fiscal 1998 before acquisitions as compared to net sales of $1,169
million for fiscal 1997 absent the Divested Operations. This represented an
increase of $68 million or 5.8% for fiscal 1998 versus fiscal 1997 on a
comparable basis. Fruit volume and net sales increased for the year ended June
30, 1998 as compared to the year ended June 30, 1997, primarily due to an
increase in retail fruit cup sales and sales of flavored fruits, which were
introduced in 1997. Due to competitive pricing pressures in the fruit
foodservice market, the gains in retail fruit sales were partially offset by
volume and sales declines in the foodservice business. Vegetable volume and net
sales increased for the year ended June 30, 1998 as compared to the year ended
June 30, 1997. Although competitive pricing pressures were experienced in the
vegetable market as well, an effective mix of targeted trade and consumer
promotions resulted in increased volumes leading to an overall increase in net
sales. In fiscal 1998, the Company's market share for Del Monte branded
vegetables, based on case volume, was 19.7% versus 20.3% in the previous year,
while the Company's market share for Del Monte branded fruit products was 42.3%
compared to 40.6% for the previous year.

Cost of Products Sold. Costs increased for fiscal 1998 as compared to
fiscal 1997 by $79 million (which includes $3 million of inventory step-up
resulting from the purchase price allocation related to the Contadina
Acquisition), with cost of products sold expressed as a percentage of net sales
of 67.3% in fiscal 1997 and 68.4% in fiscal 1998. Cost of products sold for
fiscal 1998 before acquisitions were $835 million versus $774 million in fiscal
1997 absent Divested Operations or, expressed as a percentage of net sales,
67.5% for fiscal 1998 compared to 66.2% for fiscal 1997. The increased costs in
fiscal 1998 were offset in part by a favorable sales mix of higher margin
products. Increased costs for the year ended June 30, 1998 reflect primarily an
increase in processing costs caused by a compressed harvesting season for fruit
which resulted in the increased use of cold storage until processing capacity
became available. Also affecting costs were reduced plantings for some
vegetables and lower fruit raw product recoveries due to adverse weather
conditions.

Selling, Administrative and General Expense. Selling, administrative and
general expense as a percentage of net sales was 26.9% and 25.1% in fiscal 1997
and 1998, respectively. Selling, administrative and general expense for fiscal
1997 was higher due to management incentive payments and, in part, severance
payments related to the Recapitalization of approximately $25 million.

Included in general and administrative expenses are research and
development costs of $5 million in each of fiscal 1997 and 1998. Research and
development spending remained focused on strategic spending to maintain and
enhance the existing business and to develop product line extensions.

Acquisition Expense. In connection with the Contadina Acquisition,
approximately $7 million of acquisition-related expenses were incurred.

Interest Expense. Interest expense increased 48% in fiscal 1998 compared
to fiscal 1997. This increase was due to the lower outstanding debt balances
during the first nine months of fiscal 1997 (before the Recapitalization) and
additional debt in fiscal 1998 due to the Contadina Acquisition.

Other (Income) Expense. Other expense for the fiscal 1998 decreased as
compared to fiscal 1997 due to the inclusion in 1997 of Recapitalization
expenses and the write-down of an investment. Other expense for fiscal 1997
represented $22 million of expenses incurred in the Recapitalization (primarily
legal, investment advisory and management fees). Also included in fiscal 1997
other expense was $7 million relating to the recognition of an other than
temporary impairment of a long-term equity investment.

Provision for Income Taxes. As of June 30, 1998, the Company had $77
million in net operating loss carryforwards for tax purposes, which will expire
between 2008 and 2012.

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29

Net Income. Net income for fiscal 1998 increased by $63 million compared
to the same period of prior year. The increase in net income is primarily due to
expenses related to the Recapitalization and extraordinary losses due to early
debt retirement included in the fiscal 1997 net loss offset in part by the plant
consolidation severance accrual and accelerated depreciation cost in fiscal
1998, as well as, Contadina Acquisition expenses, and the increase in interest
expense over the respective comparable period of the prior year.

FISCAL 1996 VS. FISCAL 1997

Net Sales. Consolidated net sales for fiscal 1997 decreased by $88
million or 7% from fiscal 1996. This decrease was attributable to the absence of
the Divested Operations. Net sales for the domestic operations, after adjusting
for the effect of Divested Operations, increased by $97 million from $1,072
million in fiscal 1996 to $1,169 million in fiscal 1997 due to higher prices
across all product lines. The retail vegetable and fruit businesses increased
prices in the second half of fiscal 1996. The export and foodservice businesses
each increased fruit prices at the beginning of fiscal 1997. Generally balanced
industry supplies of fruit and the Company's emphasis on consumer promotions
were contributing factors towards realizing the higher prices. Volume increases
in the fruit business were more than offset by volume decreases in the vegetable
and tomato businesses. The volume decrease in the Company's vegetable business
reflects, in part, an overall decline in canned vegetable consumption. In fiscal
1997, the Company's market share for Del Monte branded vegetables, based on case
volume, was 20.3% versus 20.4% in the previous year, while the Company's market
share for Del Monte branded fruit was 40.6% compared to 35.6% for the previous
year.

Del Monte Philippines' net sales for the first nine months of fiscal
1996, until the Company's sale of its interest in this joint venture, accounted
for 8% of consolidated net sales for the year ended June 30, 1996. Del Monte
Latin America's net sales for fiscal 1996 (4% of consolidated sales in fiscal
1996) decreased $10 million or 15% even though volumes were at approximately the
same level as the prior year period. This decrease was primarily due to the
significant Mexican peso devaluation.

Cost of Products Sold. Cost of products sold decreased by $165 million
in fiscal 1997 as compared to fiscal 1996. Cost of products sold (absent
Divested Operations in both years) decreased by $15 million from $789 in fiscal
1996 to $774 in fiscal 1997 with cost of products sold expressed as a percentage
of net sales of 73.7% in fiscal 1996 and 66.2% in fiscal 1997. The decrease in
costs as a percent of net sales in fiscal 1997 was primarily due to higher net
sales resulting from higher selling prices across all product lines.

Selling, Administrative and General Expense. Selling, administrative and
general expense as a percentage of net sales (excluding the Divested Operations)
was 19.8% and 27.5% in fiscal 1996 and 1997, respectively. Selling,
administrative and general expense for fiscal 1997 increased significantly due
to the Recapitalization and the change in marketing strategy. Expenses incurred
primarily for management incentive payments and, in part, for severance payments
incurred related to the Recapitalization were approximately $25 million.
Marketing spending increased as the Company placed more emphasis on consumer
promotion programs versus discounts off of retailers' list prices than in prior
year.

Included in general and administrative expenses are research and
development costs of $6 million and $5 million for fiscal 1996 and 1997,
respectively. Research and development spending in fiscal 1996 and 1997 remained
focused on strategic spending to maintain the existing business and to develop
product line extensions.

Interest Expense. Interest expense decreased 22% in fiscal 1997 compared
to fiscal 1996. This decrease was due to the lower outstanding debt balances
during the first nine months of fiscal 1997 (before the Recapitalization).

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30

Other (Income) Expense. Other expense for fiscal 1997 increased due to
$22 million of expenses incurred in the Recapitalization (primarily legal,
investment advisory and management fees). Also included in fiscal 1997 other
expense was $7 million relating to the recognition of an other than temporary
impairment of a long-term investment.

Provision for Income Taxes. There was no tax provision in fiscal 1997
compared to a provision of $11 million in fiscal 1996. This decrease was
primarily due to the expenses of the Recapitalization.

Extraordinary Loss. In conjunction with the 1996 Exchange Offer (as
defined herein), capitalized debt issue costs of approximately $4 million, net
of a discount on the PIK Notes, were charged to net income in fiscal 1997 and
accounted for as an extraordinary loss. In conjunction with the refinancing of
debt that occurred at the time of the Recapitalization, previously capitalized
debt issue costs of approximately $19 million and a 1996 PIK Note premium and a
term loan make-whole aggregating $19 million were charged to fiscal 1997 net
income and accounted for as an extraordinary loss. The net proceeds of the
pudding business sale and proceeds of the Del Monte Philippines sale were used
for the early retirement of debt. In conjunction with this early debt
retirement, in the second and fourth quarters of fiscal 1996, $5 million in
capitalized debt issue costs were written off and $5 million primarily related
to a prepayment premium were charged to income, both of which have been
accounted for as an extraordinary loss.

Cumulative Effect of Accounting Change. Effective July 1, 1995, the
Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The cumulative effect of
adopting SFAS No. 121 resulted in a charge to fiscal 1996 net earnings of $7
million.

Net Income. Net income for fiscal 1997 decreased by $162 million
compared to fiscal 1996 net income. The decrease in net income was primarily due
to expenses associated with the Recapitalization as of April 18, 1997 and the
loss on sale of Del Monte Latin America of $5 million in fiscal 1997 as compared
to a gain of $123 million from the sale of the pudding business and Del Monte
Philippines in fiscal 1996.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position ("SOP") No. 98-1 "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." The SOP provides guidance with
respect to the recognition, measurement and disclosure of costs of computer
software developed or obtained for internal use. SOP No. 98-1 is required to be
adopted for fiscal years beginning after December 15, 1997. The Company will
adopt SOP 98-1 in the first quarter of 1999 and, based on current circumstances,
does not believe the effect of adoption will be material.

The Financial Accounting Standards Board ("FASB") recently issued
Statement of Financial Accounting Standards ("SFAS") No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" and SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 132 is
required to be adopted for fiscal years beginning after December 15, 1997 and
amends only the disclosure requirements with respect to pensions and other
postretirement benefits. SFAS 133 is required to be adopted for all fiscal
quarters and fiscal years beginning after June 15, 1999 and relates to
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. The Company will adopt SFAS 132 in the first quarter
of 1999 and will implement SFAS 133 after December 15, 1999. The Company
believes the effect of adoption of these statements will not be material.

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31

YEAR 2000

In the first quarter of fiscal 1998, the Company contracted with its
information services outsourcing provider, EDS, to implement substantially all
of the Company's Year 2000 compliance project (see "Business -- Information
Services"). EDS maintains and operates most of the Company's software
applications and also owns and operates a significant portion of the related
hardware. The Company's compliance project includes both information technology
("IT") systems and non-IT systems which could be impacted by Year 2000 issues.

The Company's project to evaluate, modify, test and/or implement Year
2000 compliant systems is well underway and is scheduled to be substantially
completed by December 1998. The Company's compliance project (including customer
and supplier assessments) is expected to be completed by June 1999. The total
cost of the project is not material to the Company's expected cash outlays and
is being funded through operating cash flow. Costs incremental to the base
service contract provided by EDS to the Company are expected to total under $2
million (see Note K to the June 30, 1998 financial statements included herein).
The Company is expensing all costs associated with these system changes as the
costs are incurred.

The Company is conducting inquiries regarding the Year 2000 compliance
programs of its key suppliers and customers. No assurance can be given that the
Company's suppliers and customers will all be Year 2000 compliant. The failure
of the Company's suppliers and customers to address the Year 2000 issue
adequately, or the failure of any material aspect of the Company's Year 2000
compliance project with respect to its own systems, could result in disruption
to the Company's operations and have a significant adverse impact on its results
of operations, the extent of which the Company cannot yet determine.

Although management believes the Company's systems will be Year 2000
compliant, the Company has begun developing contingency plans to address
internal system failures that may result from Year 2000 "bugs" that may have
gone undetected during the Year 2000 compliance project.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements are to fund debt service,
finance seasonal working capital needs and make capital expenditures. Internally
generated funds and amounts available under its revolving credit and other
short-term borrowing facilities are the Company's primary sources of liquidity.

Management believes that cash flow from operations and availability
under the Revolving Credit Facility (as defined herein) will provide adequate
funds for the Company's working capital needs, planned capital expenditures and
debt service obligations for at least the next 12 months. The Revolving Credit
Facility is the Company's only revolving credit facility.

The Company's ability to fund its cash requirements and to remain in
compliance with all of the financial covenants under its debt agreements depends
on its future operating performance and cash flow, which, in turn, are subject
to prevailing economic conditions and to financial, business and other factors,
some of which are beyond its control. The Company actively considers various
means of reducing inventory levels to improve cash flow.

As part of its business strategy, the Company continuously reviews
acquisition opportunities. The Company believes that any acquisition would
likely require the incurrence of additional debt, which could exceed amounts
available under the Bank Financing. As a result, completion of any such
acquisition could require the consent of the lenders under the Bank Financing
and the amendment of the terms thereof, including for purposes of permitting the
Company's compliance with its covenants thereunder. There can be no assurance as
to whether, or the terms on which, the lenders under the Bank Financing would
grant such consent.

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32

Funding requirements for the South America Acquisition were satisfied
through borrowings under the Revolving Credit Facility.

Operating Activities

The working capital position of the Company is seasonally affected by
the growing cycle of the vegetables, fruit and tomatoes it processes.
Substantially all inventories are produced during the harvesting and packing
months of June through October and depleted through the remaining seven months.
Accordingly, working capital requirements fluctuate significantly. The Company
uses funds from its Revolving Credit Facility, which provides for a $350 million
line of credit, to finance the seasonal working capital needs of its operations.

In fiscal 1998, cash provided by operations increased by $72 million
primarily due to a decrease in inventories. In fiscal 1997, cash provided by
operations decreased by $35 million over fiscal 1996 primarily due to various
expenses associated with the Recapitalization, as well as an increase in
inventories due to lower sales volume during the year than anticipated.

Investing Activities

In fiscal 1998, there was a $259 million increase in cash used in
investing due to the purchase of Contadina and increased capital expenditures.
The decrease of $133 million in cash provided by investing activities in fiscal
1997 versus fiscal 1996 was principally due to net cash proceeds from the sale
of the Company's Pudding Business ($85 million) and the sale of the Company's
interest in Del Monte Philippines ($98 million) in fiscal 1996. The effect of
the fiscal 1996 divested asset sales was partially offset in fiscal 1997 by the
sale of the Company's Latin America subsidiaries ($48 million).

Capital expenditures for fiscal 1998 were $32 million including
approximately $1 million for environmental compliance as the Company continued
its implementation of a program which is intended to generate cost savings by
introducing new equipment that would result in general production efficiencies.
The Company also plans an aggregate of approximately $136 million of additional
capital expenditures through 2001, of which $54 million, $58 million and $24
million is expected to be spent in fiscal 1999, 2000 and 2001, respectively. In
fiscal 1999, the Company intends to spend approximately $28 million in
connection with its plans to consolidate processing operations and $6 million
for general manufacturing improvements. Of the anticipated capital expenditures
for fiscal 2000, the Company plans to spend approximately $32 million in
connection with its plans to consolidate processing operations. In addition to
the foregoing, the Company budgets certain amounts for ordinary repairs and
maintenance. The Company continually evaluates its capital expenditure
requirements, and such plans are subject to change depending on market
conditions, the Company's cash position, the availability of alternate means of
financing and other factors. Capital expenditures are expected to be funded from
internally generated cash flows and by borrowing from available financing
sources.

Financing Activities - 1998 Activity

Contadina Acquisition. In connection with the $195 million Contadina
Acquisition, Del Monte issued the senior discount notes (the "DMFC Notes") with
an aggregate principal amount at maturity of $230 million and received gross
proceeds of approximately $126 million. The DMFC Notes accrue interest at 12.50%
payable on each June 15 and December 15, which will be accreted through December
15, 2002, after which time interest is required to be paid in cash until
maturity. The DMFC Notes mature on December 15, 2007.

In connection with the Contadina Acquisition, the Company also amended
the Bank Financing and certain related debt covenants to permit additional
funding under the existing Term B loan in an amount of $50 million, thus
increasing the aggregate amount outstanding under the Term Loan Facility to $430
million. Amortization of such additional Term B loan amount is incremental to
the scheduled

32
33

amortization of the previously existing Term B loan. Such additional
amortization will begin on a quarterly basis in the second quarter of fiscal
1999 in the amount of $0.5 million on an annual basis with such amortization
increasing in the fourth quarter of fiscal 2004, through the third quarter of
fiscal 2005, to approximately $12 million per quarter.

Financing Activities - 1997 Activity

The Recapitalization. On February 21, 1997, DMFC entered into a Merger
Agreement which was amended and restated as of April 14, 1997, with TPG and
Shield. On April 18, 1997, DMFC was recapitalized through the merger of Shield
with and into DMFC with DMFC being the surviving corporation. By virtue of the
Recapitalization, shares of DMFC's preferred stock having an implied value of
approximately $14 million held by certain of DMFC's stockholders who remained
investors were canceled and were converted into the right to receive new DMFC
Common Stock. All other shares of DMFC stock were canceled and were converted
into the right to receive cash consideration. In connection with the
Recapitalization, Del Monte Corporation repaid substantially all of its funded
debt obligations existing immediately before the Recapitalization. In the
Recapitalization, the common stock and preferred stock of Shield was converted
into new shares of Common Stock and Preferred Stock, respectively, of DMFC.

Cash funding requirements for the Recapitalization totaled $809 million
and included repayment of $158 million of PIK Notes, $113 million of the
then-existing term loan, and $30 million of the then-existing revolving credit
facility. In addition, $422 million was paid to former shareholders as cash
consideration for their shares and approximately $86 million was paid in other
fees and expenses. These cash funding requirements were satisfied through the
following: (i) a cash equity investment by TPG and other investors of $126
million in common stock; (ii) a cash equity investment by TPG and other
investors of $35 million in shares of redeemable preferred stock and warrants to
purchase Common Stock; (iii) $380 million of borrowings under the Term Loan
facility; (iv) $119 million of borrowings under the revolving credit facility
(the "Revolving Credit Facility" and , together with the Term Loan Facility, the
"Bank Financing"); (v) $147 million from the net proceeds of the offering of the
DMC Notes; and (vi) $2 million of proceeds from the sale of a surplus property.

Bank Financing. Concurrent with the Recapitalization, the Company
entered into a credit agreement with respect to the Bank Financing. The Term
Loan Facility provides for term loans in the aggregate amount of $380 million,
consisting of Term Loan A of $200 million and Term Loan B of $180 million. The
Revolving Credit Facility provides for revolving loans in an aggregate amount of
$350 million, including a $70 million Letter of Credit subfacility.

Senior Subordinated Notes. In connection with the Recapitalization, on
April 18, 1997, the Company issued senior subordinated notes (the "DMC Notes")
with an aggregate principal amount of $150 million and received gross proceeds
of $147 million.

1996 Exchange Offer. Also included in fiscal 1997 financing activity is
an exchange offer that occurred in September 1996. In August 1996, the Company
offered to redeem (the "1996 Exchange Offer") a portion of its outstanding
Subordinated Guaranteed Pay-in-Kind Notes ("PIK Notes") for a cash payment and
exchange the remaining PIK Notes for new Senior Subordinated Guaranteed
Pay-in-Kind Notes due 2002. On September 11, 1996, the Company repurchased PIK
Notes in an aggregate amount of $102 million for a cash payment of $100 million
and, concurrently, exchanged essentially all remaining PIK Notes for 1996 PIK
Notes in an aggregate amount of $156 million. In addition, $13 million of
then-outstanding senior notes was repaid. Funding for the Exchange Offer was
accomplished through the application of $30 million from a collateral account
held by the then-existing term lenders, additional borrowing in an aggregate
amount of $55 million under the then-existing term loan, and borrowings of
approximately $36 million from the then-existing revolving credit facility. In
conjunction with the 1996 Exchange Offer, capitalized debt issue costs of
approximately $4 million, net of a discount on the PIK Notes, were charged to
net income in fiscal 1997 and accounted for as an extraordinary loss.

33
34

The DMC Notes, DMFC Notes, Term Loan and Revolving Credit Facility
agreements contain restrictive covenants which require the Company to meet
certain financial tests, including minimum levels of consolidated EBITDA (as
defined in the credit agreement), minimum fixed charge coverage, minimum
adjusted net worth and maximum leverage ratios. These requirements and ratios
generally become more restrictive over time, subject to allowances for seasonal
fluctuations. The Company was in compliance with all debt covenants at June 30,
1998.

Pension Funding

In fiscal 1997, Del Monte's defined benefit retirement plans were
determined to be underfunded under federal ERISA guidelines. It had been the
Company's policy to fund the Company's retirement plans in an amount consistent
with the funding requirements of federal law and regulations and not to exceed
an amount that would be deductible for federal income tax purposes. In
connection with the Recapitalization, the Company entered into an agreement with
the U.S. Pension Benefit Guaranty Corporation dated April 7, 1997 whereby the
Company contributed $15 million within 30 days after the consummation of the
Recapitalization. The Company will also contribute a minimum of $15 million in
calendar 1998, of which $10 million has been paid by June 30, 1998, $9 million
in calendar 1999, $8 million in calendar 2000 and $8 million in calendar 2001,
for a total of $55 million. The contributions required to be made in 1999, 2000
and 2001 have been secured by a $20 million letter of credit. The contribution
required to be made in 1998 will be paid prior to any scheduled amortization
under the Bank Financing in excess of $1 million, and the Company has agreed not
to make voluntary repayments of the loans under the Bank Financing prior to
making the contribution required to be made in 1998 or prior to obtaining the
letter of credit.

Environmental Matters

The Company spent approximately $5 million on domestic environmental
expenditures from fiscal 1996 through fiscal 1998, primarily related to UST
remediation activities and upgrades to boilers and wastewater treatment systems.
The Company projects that it will spend an aggregate of approximately $4 million
in fiscal 1999 and 2000 on capital projects and other expenditures in connection
with environmental compliance, primarily for boiler upgrades, compliance costs
related to the consolidation of its fruit and tomato processing operations and
continued UST remediation activities. The Company believes that its CERCLA and
other environmental liabilities will not have a material adverse effect on the
Company's financial position or results of operations. See "Business --
Environmental Compliance".

Tax Net Operating Loss Carryforwards

As of June 30, 1998, the Company had $77 million in net operating loss
carryforwards for tax purposes, which will expire between 2008 and 2012. The
Company's use of these net operating loss carryforwards in any year may be
limited by applicable laws.

Inflation

The Company's costs are affected by inflation and the effects of
inflation may be experienced by the Company in future periods. However, the
Company has historically mitigated the inflationary impact of increases in its
costs by controlling its overall cost structure.

34
35

35

INDEX TO FINANCIAL STATEMENTS

DEL MONTE FOODS COMPANY AND SUBSIDIARIES

PAGE
----

Report of Independent Auditors.................................................... 36
Consolidated Balance Sheets - June 30, 1997 and 1998.............................. 37
Consolidated Statements of Operations - Year ended June 30, 1997 and 1998......... 38
Consolidated Statements of Stockholders' Equity (Deficit) - Year ended
June 30, 1998................................................................... 39
Consolidated Statements of Cash Flows - Year ended June 30, 1997 and 1998......... 40
Notes to Consolidated Financial Statements........................................ 41

35
36

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Del Monte Foods Company

We have audited the accompanying consolidated balance sheet of Del Monte
Foods Company and subsidiaries as of June 30, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Del Monte Foods Company and subsidiaries as of June 30, 1997 and 1998, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

July 24, 1998
San Francisco, California

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37

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)

JUNE 30,
-----------------
ASSETS 1997 1998
- ------ ----- -----
(restated)

Current assets:
Cash and cash equivalents $ 5 $ 7
Trade accounts receivable, net of allowance 67 108
Other receivables 2 6
Inventories 339 366
Prepaid expenses and other current assets 9 14
----- -----
TOTAL CURRENT ASSETS 422 501

Property, plant and equipment, net 222 305
Intangibles -- 16
Other assets 23 23
----- -----
TOTAL ASSETS $ 667 $ 845
===== =====

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 220 $ 259
Short-term borrowings 82 --
Current portion of long-term debt 2 32
----- -----
TOTAL CURRENT LIABILITIES 304 291

Long-term debt 526 677
Other noncurrent liabilities 203 194
Redeemable preferred stock ($.01 par value per share, 1,000,000 shares
authorized; issued and outstanding 35,000 in 1997 and 37,253 in
1998; aggregate liquidation preference $36 in 1997 and $41 in 1998) 32 33
Stockholders' equity (deficit):
Common stock ($.01 par value per share, shares authorized:
191,542,000 in 1997 and 500,000,000 in 1998; issued and
outstanding: 26,815,880 in 1997 and 35,495,058 in 1998)
Paid-in capital 129 172
Retained earnings (deficit) (527) (522)
----- -----
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (398) (350)
----- -----
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 667 $ 845
===== =====

See Notes to Consolidated Financial Statements.

37
38

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT SHARE DATA)

JUNE 30,
-----------------------------------
1996 1997 1998
------- ------- -------
(restated) (restated)

Net sales $ 1,305 $ 1,217 $ 1,313
Cost of products sold 984 819 898
Selling, administrative and general expense 239 327 316
Special charges related to plant consolidation -- -- 10
Acquisition expense -- -- 7
------- ------- -------
OPERATING INCOME 82 71 82

Interest expense 67 52 77
Loss (gain) on sale of divested assets (123) 5 --
Other (income) expense 3 30 (1)
------- ------- -------

INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 135 (16) 6

Minority interest in earnings of subsidiary 3 -- --
Provision for income taxes 11 -- 1
------- ------- -------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 121 (16) 5

Extraordinary loss from early debt retirement 10 42 --
Cumulative effect of accounting change 7 -- --
------- ------- -------
NET INCOME (LOSS) $ 104 $ (58) $ 5
======= ======= =======

Basic net income (loss) per common share
Income (loss) before extraordinary item and cumulative
effect of accounting change $ 0.52 $ (1.40) $ 0.01
Net income (loss) 0.29 (2.07) 0.01

Diluted net income (loss) per common share
Income (loss) before extraordinary item and cumulative
effect of accounting change $ 0.52 $ (1.40) $ 0.01
Net income (loss) 0.29 (2.07) 0.01

See Notes to Consolidated Financial Statements.

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39

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTES TOTAL
RECEIVABLE RETAINED CUMULATIVE STOCKHOLDERS'
COMMON PAID-IN FROM EARNINGS TRANSLATION EQUITY
STOCK CAPITAL STOCKHOLDERS (DEFICIT) ADJUSTMENT DEFICIT)
----- ----- ----- ----- ---- -----

Balance at June 30, 1995 $ -- $ 3 $ (1) $(369) $(26) $(393)

Repayment of notes receivable
from stockholders 1 1

Issuance of shares --

Net income (as restated) 104 104
----- ----- ----- ----- ---- -----

Balance at June 30, 1996
(as restated) -- 3 -- (265) (26) (288)

Cancellation of shares in
connection with the
Recapitalization (3) (204) (207)

Issuance of shares 129 129

Net income (as restated) (58) (58)

Cumulative translation adjustment 26 26
----- ----- ----- ----- ---- -----

Balance at June 30, 1997
(as restated) -- 129 -- (527) -- (398)

Amortization of redeemable
preferred stock discount (1) (1)

Issuance of shares 44 44

Net income 5 5
----- ----- ----- ----- ---- -----
Balance at June 30, 1998 $ -- $ 172 $ -- $(522) $ -- $(350)
===== ===== ===== ===== ==== =====

NUMBER OF SHARES
COMMON TOTAL COMMON
STOCK CLASS A CLASS B CLASS E SHARES
---------- ----------- ------- ---------- ------------

Shares issued and outstanding at
June 30, 1995 -- 41,125,791 -- 4,788,550 45,914,341

Repurchase of shares -- (3,110,833) -- -- (3,110,833)
---------- ----------- ----- ---------- -----------

Shares issued and outstanding at
June 30, 1996 -- 38,014,958 -- 4,788,550 42,803,508

Cancellation of shares -- (38,014,958) -- (4,788,550) (42,803,508)
---------- ----------- ----- ---------- -----------

Issuance of shares 26,815,880 -- -- -- 26,815,880

Shares issued and outstanding at
June 30, 1997 26,815,880 -- -- -- 26,815,880

Issuance of shares 8,679,178 -- -- -- 8,679,178
---------- ----------- ----- ---------- -----------
Shares issued and outstanding at
June 30, 1998 35,495,058 -- -- -- 35,495,058
========== =========== == == ==========

See Notes to Consolidated Financial Statements.

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40

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

YEAR ENDED JUNE 30,
------------------------------
1996 1997 1998
------- ------- -----
(restated) (restated)

OPERATING ACTIVITIES:
Net income (loss) $ 104 $ (58) $ 5
Adjustments to reconcile net income (loss) to net
cash flows:
Extraordinary loss from early debt retirement 10 42 --
Cumulative effect of accounting change 7 -- --
Loss on sale of divested assets (123) 5 --
Net loss on sales of assets 2 3 1
Depreciation and amortization 31 29 35
Stock option compensation expense -- -- 2

Changes in operating assets and liabilities net
of effects of acquisition:
Accounts receivable 33 24 (45)
Inventories 11 (48) 74
Prepaid expenses and other current assets (2) 3 --
Other assets 1 6 --
Accounts payable and accrued expenses (28) 29 28
Other non-current liabilities 14 (10) (3)
------- ------- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 60 25 97
------- ------- -----

INVESTING ACTIVITIES:
Capital expenditures (16) (20) (32)
Proceeds from sales of assets 4 9 5
Proceeds from sales of divested assets 182 48 --
Acquisition of business -- -- (195)
------- ------- -----
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 170 37 (222)
------- ------- -----

FINANCING ACTIVITIES:
Short-term borrowings 1,276 1,137 300
Payment on short-term borrowings (1,354) (1,098) (382)
Proceeds from long-term borrowings -- 582 176
Principal payments on long-term debt (108) (407) (2)
Deferred debt issuance costs (2) (26) (7)
Prepayment penalty (5) (20) --
Payments to previous shareholders for
cancellation of stock -- (422) --
Issuance of common and preferred stock -- 161 42
Specific Proceeds Collateral Account (30) 30 --
Other (1) -- --
------- ------- -----
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (224) (63) 127
------- ------- -----

Effect of exchange rate changes on cash and cash equivalents (8) -- --
------- ------- -----
NET CHANGE IN CASH AND CASH EQUIVALENTS (2) (1) 2
Cash and cash equivalents at beginning of period 8 6 5
------- ------- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6 $ 5 $ 7
======= ======= =====

See Notes to Consolidated Financial Statements.

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41

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Business: Del Monte Foods Company ("DMFC") and its wholly-owned
subsidiary, Del Monte Corporation ("DMC"), (DMFC together with DMC, "the
Company") operates in one business segment: the manufacturing and marketing of
processed foods, primarily canned vegetables, fruit and tomato products. The
Company primarily sells its products under the Del Monte brand to a variety of
food retailers, supermarkets and mass merchandising stores. The Company holds
the rights to the Del Monte brand in the United States.

During fiscal 1998, the Company acquired certain of Contadina's canned
processed tomato product lines from Nestle USA, Inc. and Contadina Services,
Inc. (see Note B). Contadina operates in one business segment which manufactures
and markets branded, private label, industrial and foodservice processed tomato
products from manufacturing facilities in Hanford, California and Woodland,
California. Contadina's products are distributed throughout the United States.
The acquisition was accounted for using the purchase method of accounting.

Basis of Accounting: Pursuant to the Agreement and Plan of Merger, dated
February 21, 1997, and amended and restated as of April 14, 1997 (the "Merger
Agreement"), entered into among TPG Partners, L.P., a Delaware partnership
("TPG"), TPG Shield Acquisition Corporation, a Maryland corporation ("Shield"),
and DMFC, Shield merged with and into DMFC (the "Merger"), with DMFC being the
surviving corporation. By virtue of the Merger, shares of DMFC's preferred stock
having an implied value of approximately $14 held by certain of DMFC's
stockholders, who remained investors, were canceled and were converted into the
right to receive common stock of the surviving corporation. All other shares of
DMFC stock were canceled and were converted into the right to receive cash
consideration as set forth in the Merger Agreement. In the Merger, the common
stock and preferred stock of Shield was converted into shares of new DMFC common
stock and preferred stock, respectively. The Merger was accounted for as a
leveraged recapitalization for accounting purposes (the "Recapitalization");
accordingly, all assets and liabilities continue to be stated at historical
cost.

Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its majority owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Use of Estimates: Certain amounts reported in the consolidated financial
statements are based on management estimates. The ultimate resolution of these
items may differ from those estimates.

Cash Equivalents: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.

Inventories: Inventories are stated at the lower of cost or market. The
cost of substantially all inventories is determined using the LIFO method. The
Company has established various LIFO pools that have measurement dates
coinciding with the natural business cycles of the Company's major inventory
items.

Inflation has had a minimal impact on production costs since the Company
adopted the LIFO method as of July 1, 1991. Accordingly, there is no significant
difference between LIFO inventory costs and current costs.

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42

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

Property, Plant and Equipment and Depreciation: Property, plant and
equipment are stated at cost and depreciated over their estimated useful lives,
principally by the straight-line method. Maintenance and repairs are expensed as
incurred. Significant expenditures that increase useful lives are capitalized.

The principal estimated useful lives are: land improvements -- 10 to 30
years; building and leasehold improvements -- 10 to 30 years; machinery and
equipment -- 7 to 15 years. Depreciation of plant and equipment and leasehold
amortization was $26, $24 and $32 for the years ended June 30, 1996, 1997 and
1998.

Intangibles: Intangibles consists of tradenames and trademarks, and are
carried at cost less accumulated amortization which is calculated on a
straight-line basis over the estimated useful life of the asset, not to exceed
40 years.

Revenue Recognition: Revenue from sales of product, and related cost of
products sold, is recognized upon shipment of product at which time title passes
to the customer. Customers generally do not have the right to return product
unless damaged or defective.

Cost of Products Sold: Cost of products sold includes raw material,
labor and overhead.

Advertising Expenses: The Company expenses all costs associated with
advertising as incurred or when the advertising first takes place. Advertising
expense was $5, $6 and $2 for the years ended June 30, 1996, 1997 and 1998,
respectively.

Research and Development: Research and development costs are included as
a component of "Selling, administrative and general expense." Research and
development costs charged to operations were $6, $5 and $5 for the years ended
June 30, 1996, 1997 and 1998, respectively.

Interest Rate Contracts: To manage interest rate exposure, the Company
uses interest-rate swap agreements. These agreements involve the receipt of
fixed rate amounts in exchange for floating rate interest payments over the life
of the agreement without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.

Foreign Currency Translation: For the Company's operations in countries
where the functional currency is other than the U.S. dollar, revenue and expense
accounts were translated at the average rates during the period.

Fair Value of Financial Instruments: The carrying amount of certain of
the Company's financial instruments, including accounts receivable, accounts
payable, and accrued expenses, approximates fair value due to the relatively
short maturity of such instruments.

The carrying amounts of the Company's borrowings under its short-term
revolving credit agreement and long-term debt instruments, excluding the senior
subordinated notes and the senior discount notes, approximate their fair value.
At June 30, 1998, the fair value of the senior subordinated notes was $168 and
of the senior discount notes was $147, as estimated based on quoted market
prices from dealers.

The fair value of the interest rate swap agreements at June 30, 1998 was
$(3). The fair value of interest rate swap agreements are the estimated amounts
that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
credit worthiness of the counterparties.

42
43

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

Stock Option Plan: The Company accounts for its stock-based employee
compensation for stock options using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost is
measured as the excess, if any, of the fair value of the Company's stock at the
date of the grant over the price the employee must pay to acquire the stock.

Net Income (Loss) per Common Share: The Company has adopted the
provisions of Statement of Financial Accounting Standards No. 128. Net income
(loss) per common share is computed by dividing net income (loss) attributable
to common shares by the weighted average number of common and redeemable common
shares outstanding during the period (Note F). Net income (loss) attributable to
common shares is computed as net income (loss) reduced by the cash and in-kind
dividends for the period on redeemable preferred stock.

Change in Accounting Principle: Effective July 1, 1995, the Company
adopted the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The statement requires that
assets held and used, including intangibles, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company has identified certain events as possible
indicators that an asset's carrying value may not be recoverable, including the
elimination of or a significant reduction in a product line. Future cash flows
will be estimated based on current levels of production, market sales price and
operating costs adjusted for expected trends. The statement also requires that
all long-lived assets, for which management has committed to a plan to dispose,
be reported at the lower of carrying amount or fair value. During fiscal 1996, a
review of assets to be disposed of resulted in identification of certain assets
(farm lands and plants no longer in use) whose carrying value exceeded their
present fair value, and a loss of $7 was recorded. The Company does not
depreciate long-lived assets held for sale.

NOTE B - ACQUISITIONS

On December 19, 1997, the Company acquired the Contadina canned tomato
business, including the Contadina trademark worldwide, capital assets and
inventory (the "Contadina Acquisition") from Nestle USA, Inc. ("Nestle") and
Contadina Services, Inc. for a total purchase price of $197, comprised of a base
price of $177 and an estimated net working capital adjustment of $20. The
consideration was paid solely in cash. The purchase price was subject to
adjustment based on the final calculation of net working capital as of the
closing date. Nestle provided its calculation of the net working capital which
resulted in a payment to the Company of $2, and therefore a reduction in the
purchase price to a total of $195. The Contadina Acquisition also included the
assumption of certain liabilities of approximately $5, consisting primarily of
liabilities in respect of reusable packaging materials and vacation accruals. In
connection with the Contadina Acquisition, approximately $7 of
acquisition-related expenses were incurred.

The acquisition was accounted for using the purchase method of
accounting. The allocation of purchase price to the assets acquired and
liabilities assumed has been made using estimated fair values which include
values based on independent appraisals and management estimates. These estimates
may be adjusted to actual amounts; however, any resulting adjustment is not
expected to be material. The allocation of the $195 purchase price is as
follows: inventory $93, prepaid expenses $5, property, plant and equipment $85,
intangibles $16 and accrued liabilities $4.

43
44

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

Results of operations of the Contadina Acquisition are included in the
Consolidated Statement of Operations for June 30, 1998 since the acquisition
date. The following unaudited pro forma information has been prepared assuming
the Contadina Acquisition had taken place on July 1, 1996:

YEAR ENDED JUNE 30,
-----------------------
1997 1998
------ ------

Net sales $1,377 $1,405
Operating income 61 80
Net loss before extraordinary item (48) (9)
Net loss $ (90) $ (9)
====== ======
Net loss attributable to common stockholders $ (160) $ (14)
====== ======
Loss per share $(2.51) $(0.41)
====== ======

These pro forma results have been prepared for comparative purposes only
and do not purport to represent what the Company's results of operations
actually would have been if the Contadina Acquisition had occurred as of the
date indicated.

NOTE C -- DIVESTED ASSETS

Del Monte Latin America. On August 27, 1996, the Company signed a stock
purchase agreement to sell its Latin America subsidiaries to an affiliate of
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"). This agreement was
amended and restated on October 25, 1996 for the sale of only the Company's
Mexican subsidiary, Productos Del Monte, S.A. de C.V. ("PDM") to an affiliate of
Hicks Muse for $38 which was completed on October 28, 1996. The sale of the
Central America and Caribbean subsidiaries to an affiliate of Donald W.
Dickerson, Inc. for $12 was completed on November 13, 1996. The combined
proceeds of both sales of $50, reduced by $2 of related transaction expenses,
resulted in a loss of $5.

The following results of the Latin American operations are included in
the Consolidated Statements of Operations:

YEAR ENDED JUNE 30,
-------------------
1996 1997
---- ----

Net sales $ 55 $ 17
Costs and expenses 50 17
---- ----
Income from operations before income taxes 5 --
Provision for income taxes 1 --
---- ----
Income from Latin American operations $ 4 $ --
==== ====

Del Monte Philippines. On March 29, 1996, the Company entered into a
repurchase agreement to sell its 50.1% interest in Del Monte Philippines (a
joint venture operating primarily in the Philippines) and also executed a supply
agreement, for total proceeds of $100 (net of $2 of related transaction
expenses) which were paid solely in cash. Under the terms of the supply
agreement, the Company must source substantially all of its pineapple
requirements from Del Monte Philippines over the eight-year term of the
agreement (Note K).

44
45

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The following results of the Del Monte Philippines operations are
included in the Consolidated Statement of Operations for the year ended June 30,
1996:

Net sales $102
Costs and expenses 97
----
Income from operations before income taxes 5
Provision for income taxes 2
----
Income from operations $ 3
====

All of the net proceeds from the sale of Del Monte Philippines were
temporarily applied to the revolving credit facility. In April 1996, $13 of
Senior Secured Notes were prepaid along with a $1 prepayment premium recorded as
an extraordinary loss. In addition, $30 was placed in the Specific Proceeds
Collateral Account until final agreement was reached with the Term Loan lenders
as to the application of funds. These funds were used in the September 1996
exchange offer.

Pudding Business. On November 27, 1995, the Company sold its pudding
business, including the capital assets and inventory on hand, to Kraft Foods,
Inc. for $89, net of $4 of related transaction expenses. The sale resulted in
the recognition of a $71 gain, reduced by $2 of taxes.

For the year ended June 30, 1996, net sales of $15, costs and expenses
of $11 and income from operations of $4 resulting from the pudding business are
included in the Consolidated Statement of Operations.

The net proceeds received from the pudding business sale were used to
prepay $54 of the term debt and $25 of the Senior Secured Notes. In conjunction
with the prepayment, the Company recorded an extraordinary loss for the early
retirement of debt. The extraordinary loss consists of a $4 prepayment premium
and a $5 write-off of capitalized debt issue costs related to the early
retirement of debt.

45
46

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE D - SUPPLEMENTAL BALANCE SHEET INFORMATION

JUNE 30,
----------------
1997 1998
----- -----
(restated)

Trade accounts receivable:
Trade $ 68 $ 109
Allowance for doubtful accounts (1) (1)
----- -----
TOTAL TRADE ACCOUNTS RECEIVABLE $ 67 $ 108
===== =====

Inventories:
Finished product $ 239 $ 237
Raw materials and supplies 13 19
Other, principally packaging material 87 110
----- -----
TOTAL INVENTORIES $ 339 $ 366
===== =====

Property, plant and equipment:
Land and land improvements $ 37 $ 42
Buildings and leasehold improvements 93 107
Machinery and equipment 233 307
Construction in progress 10 24
----- -----
373 480
Accumulated depreciation (151) (175)
----- -----
PROPERTY, PLANT AND EQUIPMENT, NET $ 222 $ 305
===== =====

Intangible assets:
Trademark $ -- $ 16
Accumulated amortization -- --
----- -----
INTANGIBLE ASSETS, NET $ -- $ 16
===== =====

Other assets:
Deferred debt issue costs $ 19 $ 26
Other 4 --
----- -----
23 26
Accumulated amortization -- (3)
----- -----
TOTAL OTHER ASSETS $ 23 $ 23
===== =====

Accounts payable and accrued expenses:
Accounts payable--trade $ 79 $ 99
Marketing and advertising 59 80
Payroll and employee benefits 17 18
Current portion of accrued pension liability 12 9
Current portion of other noncurrent liabilities 19 12
Other 34 41
----- -----
TOTAL ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 220 $ 259
===== =====

Other noncurrent liabilities:
Accrued postretirement benefits $ 145 $ 144
Accrued pension liability 26 16
Self-insurance liabilities 15 8
Other 17 26
----- -----
TOTAL OTHER NONCURRENT LIABILITIES $ 203 $ 194
===== =====

46
47

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE E - SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings under the revolving credit agreement were $82 at
June 30, 1997 and zero at June 30, 1998. Unused amounts under the revolving
credit agreement at June 30, 1997 and 1998 totaled $242 and $327, respectively.

In conjunction with the Contadina Acquisition, the Company issued $230
of 12 1/2% senioR discount notes ("DMFC Notes" ) and received proceeds of $126.
The DMFC Notes accrue interest on each June 15 and December 15, which will be
accreted through December 15, 2002, after which time interest is to be paid in
cash until maturity. The DMFC Notes mature on December 15, 2007. These DMFC
Notes are redeemable in whole or in part at the option of the Company on or
after December 15, 2002 at a price that initially is 106.250% of par and that
decreases to par, if redeemed, on December 15, 2005 or thereafter. On or prior
to December 15, 2000, the Company may, at its option, redeem up to 35% of the
aggregate principal amount at maturity of the DMFC Notes with the net cash
proceeds of one or more public equity offerings, at a redemption price of
112.50% of the accreted value to the date of redemption. The DMFC Notes were
issued with registration rights requiring the Company (i) to file, within 75
days of the consummation of the Contadina Acquisition, a registration statement
under the Securities Act of 1933, as amended, to exchange the DMFC Notes for new
registered notes with terms substantially identical to the Initial Notes and,
(ii) to use its best efforts to effect that registration within 150 days after
the consummation of the Contadina Acquisition. A registration statement was
filed to this effect on March 4, 1998 with an amended statement filed on July
10, 1998. Until the registration statement is declared effective, the Company
will be required to pay an additional .5% interest on the accreted value of the
DMFC Notes. In connection with the financing related to the Contadina
Acquisition, $7 of deferred debt issuance costs were capitalized.

On April 18, 1997, the Company completed a recapitalization transaction
in which $301 of proceeds from the transaction were used to repay the
outstanding balances of the then-existing $400 revolving credit facility, term
loan, and Senior Subordinated Guaranteed Pay-in-Kind Notes. Concurrent with the
Recapitalization, the Company entered into a credit agreement with respect to
the Term Loan Facility (the "Term Loan") and the Revolving Credit Facility (the
"Revolver"). The Term Loan provides for term loans in the aggregate amount of
$380, consisting of Term Loan A of $200 and Term Loan B of $180. The Revolver
provides for revolving loans in an aggregate amount of up to $350, including a
$70 Letter of Credit subfacility. The Revolving Credit Facility will expire in
fiscal 2003, Term Loan A will mature in fiscal 2003, and Term Loan B will mature
in fiscal 2005. In connection with the Contadina Acquisition, the Company
amended its bank financing agreements and related debt covenants to permit
additional funding under the existing Term B loan which was drawn in an amount
of $50. Amortization of the additional Term B loan amount is incremental to the
scheduled amortization of the existing Term B loan. Such additional amortization
will begin on a quarterly basis in the second quarter of fiscal 1999.

In connection with the Recapitalization, the Company incurred expenses
totaling $85 of which $25 were included in selling, advertising, administrative
and general expense, $22 were charged to other expense and $38 were accounted
for as an extraordinary loss. The extraordinary loss consisted of previously
capitalized debt issue costs of approximately $19 and a 1996 PIK Note premium
and a term loan make-whole aggregating $19. In addition, in conjunction with the
Bank Financing, $19 of debt issue costs were capitalized. Deferred debt issuance
costs are amortized on a straight-line basis over the life of the related debt
issuance.

The interest rates applicable to amounts outstanding under Term Loan A
and the Revolving Credit Facility are, at the Company's option, either (i) the
base rate (the higher of 0.50% above the Federal Funds Rate or the bank's
reference rate) plus 1.00% or (ii) the reserve adjusted offshore rate plus 2.00%
(7.625% at June 30, 1998). Interest rates on Term Loan B are, at the Company's
option, either (i) the base rate plus 2.00% or (ii) the offshore rate plus 3.00%
(8.625% at June 30, 1998).

The Company is required to pay the lenders under the Revolving Credit
Facility a commitment fee of 0.425% on the unused portion of such facility. The
Company is also required to pay the lenders under the Revolving Credit Facility
letter of credit fees of 1.50% per year for commercial letters of

47
48

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

credit and 2.00% per year for all other letters of credit, as well as an
additional fee in the amount of 0.25% per year to the bank issuing such letters
of credit. At June 30, 1998, a balance of $23 was outstanding on these letters
of credit.

In addition, on April 18, 1997, the Company issued senior subordinated
notes (the "DMC Notes") with an aggregate principal amount of $150 and received
gross proceeds of $147. The DMC Notes accrue interest at 12.25% per year,
payable semiannually in cash on each April 15 and October 15. The DMC Notes are
guaranteed by DMFC and mature on April 15, 2007. The DMC Notes are redeemable at
the option of the Company on or after April 15, 2002 at a premium to par that
initially is 106.313% and that decreases to par on April 15, 2006 and
thereafter. On or prior to April 15, 2000, the Company, at its option, may
redeem up to 35% of the aggregate principal amount of notes originally issued
with the net cash proceeds of one or more public equity offerings at a
redemption price equal to 112.625% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption; provided that at least 65% of the
aggregate principal amount of notes originally issued remains outstanding
immediately after any such redemption.

Long-term debt consists of the following:

JUNE 30,
------------
1997 1998
---- ----

Term Loan $380 $429
Senior Subordinated Notes 147 147
Senior Discount Notes -- 133
Other 1 --
---- ----
528 709
Less current portion 2 32
---- ----
$526 $677
==== ====

At June 30, 1998, scheduled maturities of long-term debt in each of the
next five fiscal years and thereafter will be as follows:

1999 $ 32
2000 37
2001 42
2002 47
2003 53
Thereafter 598
----
809
Less discount on notes 100
----
$709
====

The Term Loan and Revolver are collateralized by security interests in
certain of the Company's assets. At June 30, 1998, assets totaling $808 were
pledged as collateral for approximately $429 of short-term borrowings and
long-term debt.

The DMC Notes, DMFC Notes, Term Loan and Revolver (collectively "the
Debt") agreements contain restrictive covenants with which the Company must
comply. These restrictive covenants, in some circumstances, limit the incurrence
of additional indebtedness, payment of dividends, transactions with affiliates,
asset sales, mergers, acquisitions, prepayment of other indebtedness, liens and
encumbrances. In addition, the Company is required to meet certain financial
tests, including minimum levels of consolidated EBITDA (as defined in the credit
agreement), minimum fixed charge coverage, minimum adjusted net worth and
maximum leverage ratios. The Company is in compliance with all of the Debt
covenants at June 30, 1998.

48
49

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The Company made cash interest payments of $30, $24 and $71 for the
years ended June 30, 1996, 1997 and 1998, respectively.

As required by the Company's Debt agreements, the Company has entered
into interest-rate swap agreements which effectively converts $235 notional
principal amount of floating rate debt to a fixed-rate basis for a three-year
period beginning May 22, 1997, thus reducing the impact of interest-rate changes
on future income. The Company paid a fixed rate of 6.375% and received a
weighted average rate of 5.75%. The incremental effect on interest expense for
the year ended June 30, 1998 was approximately $1. The agreements also include a
provision establishing the rate the Company will pay as 7.50% if the three-month
LIBOR rate sets at or above 7.50% during the term of the agreements. The Company
will continue paying 7.50% until the three-month LIBOR again sets below 7.50% at
which time the fixed rate of 6.375% will again become effective. The Company is
exposed to credit loss in the event of nonperformance by the other parties to
the interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.

NOTE F - STOCKHOLDERS' EQUITY AND REDEEMABLE STOCK

On February 21, 1997, Del Monte Foods Company entered into a
recapitalization agreement and plan of merger, which was amended and restated as
of April 14, 1997, with affiliates of Texas Pacific Group. Under this agreement,
Shield, a corporation affiliated with TPG, was to be merged with and into DMFC,
with DMFC being the surviving corporation. The Merger became effective on April
18, 1997. By virtue of the Merger, shares of DMFC's outstanding preferred stock
having a value implied by the Merger consideration of approximately $14, held by
certain of DMFC's pre-recapitalization stockholders who remained investors
pursuant to the Recapitalization, were canceled, and were converted into the
right to receive new DMFC common stock. All other shares of DMFC stock were
canceled and were converted into the right to receive cash consideration, as set
forth in the Merger Agreement. In the Merger, the common and preferred stock of
Shield were converted into new shares of common stock and preferred stock,
respectively, of DMFC.

Immediately following the consummation of the Recapitalization, the
charter of DMFC authorized DMFC to issue capital stock consisting of 191,542,000
shares of new common stock (the "Common Stock"), $.01 par value, and 1,000,000
shares of new preferred stock (the "Preferred Stock"), $.01 par value. The
Company issued and had outstanding 26,815,880 shares of Common Stock, and 35,000
shares of Preferred Stock. TPG and certain of its affiliates or partners held
20,925,580 shares of DMFC's Common Stock, continuing shareholders of DMFC held
2,729,857 shares of such stock, and other investors held 3,160,443 shares. TPG
and certain of its affiliates held 17,500 outstanding shares of Series A
Preferred Stock, and TCW Capital Investment Corporation held 17,500 outstanding
shares of Series B Preferred Stock.

The Preferred Stock accumulates dividends at the annual rate of 14% of
the liquidation value, payable quarterly. These dividends are payable in cash or
additional shares of Preferred Stock, at the option of the Company, subject to
availability of funds and the terms of its loan agreements, or through a
corresponding increase in the liquidation value of such stock. The Preferred
Stock had an initial liquidation preference of $1,000 per share and may be
redeemed at the option of the Company at a redemption price equal to the
liquidation preference plus accumulated and unpaid dividends (the "Redemption
Price"). The Company is required to redeem all outstanding shares of Preferred
Stock on or prior to April 17, 2008 at the Redemption Price, or upon a change of
control of the Company at 101% of the Redemption Price. The initial purchasers
of Preferred Stock for consideration of $35 received 35,000 shares of Preferred
Stock and warrants to purchase, at a nominal exercise price, shares of DMFC
Common Stock representing 2% of the then-outstanding shares of DMFC Common
Stock. A value of $3 was placed on the warrants, and such amount is reflected as
paid-in-capital within stockholders' equity. The remaining $32 was reflected as
redeemable preferred stock. Effective May 1, 1998, all 547,262 warrants were
exercised with a resulting 547,262 shares of common stock issued to the holders
of the warrants.

49
50

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The two series of preferred stock had no voting rights except the right
to elect one director to the Board for each series, resulting in the authorized
number of directors to be increased, in cases where dividends are in arrears for
six quarters or shares have not been redeemed within ten days of a redemption
date.

On October 13, 1997, the Company authorized a new series of cumulative
redeemable preferred stock, Series C, and authorized issuance of shares of such
new series of preferred stock in exchange for all of the issued and outstanding
shares of cumulative redeemable preferred stock, Series A and B, held by
preferred stock shareholders. The Series A and Series B preferred stock were
retired upon completion of this exchange.

The terms of the Series C preferred stock are substantially identical to
those of the Series A and B stock with the exception of a call premium and right
of holders to require redemption upon a change in control. The Series C
preferred stock will be redeemable at the option of the Company at a redemption
price ranging from 103% of the liquidation preference, if redeemed prior to
October 1998, to 100% of the liquidation preference, if redeemed after October
2000. The Series A and B preferred stock was redeemable by the Company at par.
In the event of a change of control of the Company, the holders of the Series C
preferred stock will have the right to require the Company to repurchase shares
of such stock at 101% of the liquidation preference. Under the terms of the
Series A and B preferred stock, shares of such stock were mandatorily redeemable
(i.e., the holder did not have the option of continuing to hold such shares) at
101% of the liquidation preference. On January 16, 1998, TPG and certain of its
affiliates sold approximately 93% of their preferred stock holdings to
unaffiliated investors.

Dividends paid on redeemable preferred stock were $1 for the year ended
June 30, 1997 and $5 for the year ended June 30, 1998 consisting of $1 of
additional shares issued and $4 of accretion.

For the years ended June 30, 1996 and 1997, the Company declared
dividends for the following series of then-outstanding redeemable preferred
stock:

DIVIDEND RATE PER SHARE
YEAR ENDED JUNE 30,
-----------------------
SERIES 1996 1997
------ ----- -----

A1 $3.81 $1.92
B $3.87 $1.95
D $3.94 $1.98
E $3.94 $1.98

These dividends were paid in like-kind redeemable preferred stock at the
rate of .04 shares for each $.001 dividend declared. Resulting issuance of
additional shares and related par values were:

YEAR ENDED JUNE 30,
-------------------------
1996 1997
---------- ----------

Additional shares 1,824,999 1,027,406
Total par value $ 0.018 $ 0.010

In the Recapitalization, all of the redeemable preferred stock issued
prior to April 18, 1997 was either canceled and converted into the right to
receive new DMFC common stock or canceled and converted into the right to
receive cash consideration as set forth in the Merger Agreement.

50
51

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE G - EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted
earnings per share:

BASIC EARNINGS PER SHARE JUNE 30,
--------------------------------------------
1996 1997 1998
---- ---- ----
(restated) (restated)

Numerator:
Income (loss) per common share before extraordinary
item and cumulative effect of accounting change $ 121 $ (16) $ 5
Preferred stock dividends (82) (70) (5)
------------ ------------ ------------
Numerator for basic earnings (loss) per share -
income (loss) attributable to common shares
before extraordinary items and cumulative
effect of accounting change $ 39 $ (86) $ --
============ ============ ============

Denominator:
Denominator for basic earnings per share - weighted
average shares 75,047,353 61,703,436 31,619,642

Basic income (loss) per common share before
extraordinary item and cumulative effect of
accounting change $ 0.52 $ (1.40) $ 0.01

Extraordinary loss $ 10 $ 42 $ --

Extraordinary loss per common share $ (0.14) $ (0.67) $ --

Cumulative effect of accounting change $ 7 $ -- $ --

Cumulative effect of accounting change per common share $ (0.09) $ -- $ --

DILUTED EARNINGS PER SHARE

Numerator:
Income (loss) per common share before extraordinary
item and cumulative effect of accounting change $ 121 $ (16) $ 5
Preferred stock dividends (82) (70) (5)
------------ ------------ ------------
Numerator for diluted earnings (loss) per share -
income (loss) attributable to common shares before
extraordinary items and cumulative effect of
accounting change $ 39 $ (86) $ --
============ ============ ============

Denominator:
Denominator for diluted earnings per share -
weighted average shares 75,047,353 61,840,245 32,355,131

Diluted income (loss) per common share before
extraordinary item and cumulative effect of
accounting change $ 0.52 $ (1.40) $ 0.01

Extraordinary loss $ 10 $ 42 $ --

Extraordinary loss per common share $ (0.14) $ (0.67) $ --

Cumulative effect of accounting change $ 7 $ -- $ --

Cumulative effect of accounting change per common share $ (0.09) $ -- $ --

51
52

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE H - EMPLOYEE STOCK PLANS

STOCK OPTION INCENTIVE PLAN

On August 4, 1997, the Company adopted the 1997 Stock Incentive Plan
(amended November 4, 1997) which allows the granting of options to certain key
employees. Options may be granted to participants for up to 1,784,980 shares of
the Company's common stock. Options may be granted as incentive stock options or
as non-qualified options for purposes of the Internal Revenue Code. Options
terminate ten years from the date of grant. Two different vesting schedules have
been approved under the 1997 Stock Incentive plan. Under the plan, 1,736,520
options were granted. The first provides for annual vesting on a proportionate
basis over five years and the second provides for monthly vesting on a
proportionate basis over four years. In addition, on February 24, 1998, the
Company adopted the Del Monte Foods Company Non Employee Director and
Independent Contractor 1997 Stock Option Plan. Under the plan, 148,828 options
were granted. Options terminate 10 years from the date of grant and vest monthly
on a proportionate basis over four years.

The Del Monte Foods Company 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan") was approved in final form on May 29, 1998. Under the 1998
Stock Incentive Plan, grants of incentive and nonqualified stock options
("Options"), stock appreciation rights ("SARs") and stock bonuses (together with
Options and SARs, "Awards") representing 3,195,687 shares of Common Stock may be
made to key employees of the Company. The term of any Option or SAR is not to be
more than ten years from the date of its grant. At June 30, 1998, no Awards have
been made under the 1998 Stock Incentive Plan.

WEIGHTED AVERAGE EXERCISE
OPTION SHARES PRICE PER SHARE NUMBER OF SHARES

Outstanding at July 1, 1997 -- --
Granted $ 5.22 1,885,348
Canceled 5.22 46,353
Exercised -- --
Outstanding at June 30, 1998 5.22 1,838,995
Exercisable at June 30, 1998 5.22 452,422
Available for grant at June 30, 1998 13.31 3,195,687

The weighted-average remaining contractual life for the above options is
8.8 years.

The Company accounts for its stock option plans using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations, under
which no compensation cost for stock options is recognized for stock option
awards granted at or above fair market value

Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock Issued to Employees"
("SFAS 123"), and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted average assumptions: dividend
yield of 0%, expected volatility of 0; risk-free interest rates of 5.74%; and
expected lives of 7 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The weighted
average fair value per share of options granted during the year was $2.78.

52
53

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information as calculated in accordance with SFAS 123, results in pro
forma net income of $5 and a pro forma loss per common share of $(0.01) for the
year ended June 30, 1998.

STOCK PURCHASE PLAN

Effective August 4, 1997, the Del Monte Foods Company Employee Stock
Purchase Plan was established under which certain key employees are eligible to
participate. A total of 957,710 shares of common stock of the Company are
reserved for issuance under the Employee Stock Purchase Plan, At June 30, 1998,
454,146 shares of the Company'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 year ended June 30, 1998 was $2.

NOTE I - RETIREMENT BENEFITS

The Company sponsors three non-contributory defined benefit pension
plans covering substantially all full-time employees. Plans covering most hourly
employees provide pension benefits that are based on the employee's length of
service and final average compensation before retirement. Plans covering
salaried employees provide for individual accounts which offer lump sum or
annuity payment options, with benefits based on accumulated compensation and
interest credits made monthly throughout the career of each participant. Assets
of the plans consist primarily of equity securities and corporate and government
bonds.

It has been the Company's policy to fund the Company's retirement plans
in an amount consistent with the funding requirements of federal law and
regulations and not to exceed an amount that would be deductible for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those benefits expected to be earned
in the future. Del Monte's defined benefit retirement plans were determined to
be underfunded under federal ERISA guidelines. In connection with the
Recapitalization, the Company entered into an agreement with the U.S. Pension
Benefit Guaranty Corporation dated April 7, 1997 whereby the Company will
contribute a total of $55 to its defined benefit pension plans through calendar
2001, with $15 contributed within 30 days after the consummation of the
Recapitalization. The contributions to be made in 1999, 2000 and 2001 will be
secured by a $20 letter of credit to be obtained by the Company by August 31,
1998.

53
54

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The following table sets forth the pension plans' funding status and
amounts recognized on the Company's balance sheet:

JUNE 30
---------------
1997 1998
----- -----

Actuarial present value of benefit obligations:
Vested benefit obligation $(269) $(277)
===== =====
Accumulated benefit obligation $(274) $(286)
===== =====

Projected benefit obligation for services rendered to date $(279) $(292)
Plan assets at fair value 276 299
----- -----
Plan assets in excess of (less than) projected
benefit obligation (3) 7
Unrecognized net actuarial gain (34) (31)
Unrecognized prior service income (1) (1)
----- -----
Accrued pension cost recognized in the consolidated
balance sheet $ (38) $ (25)
===== =====

The components of net periodic pension cost for all defined benefit
plans are as follows:

JUNE 30
----------------------------
1996 1997 1998
---- ---- ----

Service cost for benefits earned during period $ 4 $ 3 $ 3
Interest cost on projected benefit obligation 21 21 21
Actual return on plan assets (32) (35) (35)
Net amortization and deferral 11 13 10
----- ----- ------
Net periodic pension cost $ 4 $ 2 $ (1)
===== ===== ======

Significant rate assumptions used in determining net periodic pension
cost and related pension obligations are as follows:

AS OF JUNE 30,
-------------------------
1996 1997 1998
---- ---- ----

Discount rate used in determining projected
benefit obligation 8.0% 7.75% 7.0%
Rate of increase in compensation levels 5.0 5.0 5.0
Long-term rate of return on assets 9.0 9.0 9.0

In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees. The
contributions to multi-employer plans for the year ended June 30, 1998 was $6.
The Company also sponsors defined contribution plans covering substantially all
employees. Company contributions to the plans are based on employee
contributions or compensation. Contributions under such plans totaled $1 for the
year ended June 30, 1998.

The Company sponsors several unfunded defined benefit postretirement
plans providing certain medical, dental and life insurance benefits to eligible
retired, salaried, non-union hourly and union employees. Benefits, eligibility
and cost-sharing provisions vary by plan and employee group.

54
55

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

Net periodic postretirement benefit cost included the following
components:

JUNE 30,
----------------------
1996 1997 1998
---- ---- ----

Service cost $ 2 $ 1 $ 1
Interest cost 9 9 8
Amortization of prior service cost -- (1) (1)
Amortization of actuarial losses (gains) (3) (3) (3)
Curtailment gain (4) -- --
--- ---- ----
Net periodic postretirement benefit cost $ 4 $ 6 $ 5
=== === ===

The Company amortizes unrecognized gains and losses at the end of the
fiscal year over the expected remaining service of active employees. The
following table sets forth the plans' combined status reconciled with the amount
included in the consolidated balance sheet:

JUNE 30,
-------------
1997 1998
---- ----

Accumulated postretirement benefit obligation:
Current retirees $ 80 $ 83
Fully eligible active plan participants 11 7
Other active plan participants 13 18
---- ----
104 108
Unrecognized prior service cost 10 8
Unrecognized gain 38 35
---- ----
Accrued postretirement benefit cost $152 $151
==== ====

For the years ended June 30, 1997 and 1998, the weighted average annual
assumed rate of increase in the health care cost trend is 11.5%, and is assumed
to decrease gradually to 6.0% in the year 2004. The health care cost trend rate
assumption has a significant effect on the amounts reported. An increase in the
assumed health care cost trend by 1% in each year would increase the accumulated
postretirement benefit obligation as of June 30, 1998 by $12 and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for the period then ended by $1.

The discount rate used in determining the accumulated postretirement
benefit obligation as of June 30, 1997 and 1998 was 7.75% and 7.00%,
respectively.

55
56

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE J - PROVISION FOR INCOME TAXES

The provision for income taxes consists of the following:

YEAR ENDED JUNE 30,
------------------------
1996 1997 1998
---- ---- ----
(restated) (restated)

Income before minority interest and taxes:
Domestic $106 $(58) $ 6
Foreign 12 1 --
---- ---- ----
$118 $(57) $ 6
==== ==== ====

Income tax provision (benefit) Current:
Federal $ 5 $ -- $ 1
State 6 -- --
---- ---- ----
Total current 11 -- 1
---- ---- ----
Deferred:
Federal -- -- --
State -- -- --
---- ---- ----
Total deferred -- -- --
---- ---- ----
$ 11 $ -- $ 1
==== ==== ====

Significant components of the Company's deferred tax assets and
liabilities are as follows:

YEAR ENDED JUNE 30,
-------------------
1997 1998
----- -----
(restated)

Deferred tax assets:
Post employment benefits $ 53 $ 53
Pension expense 16 12
Purchase accounting -- 7
Workers' compensation 8 4
Leases and patents 4 3
Interest -- 3
State income taxes 14 11
Other 24 17
Net operating loss and tax credit
carry forward 33 31
----- -----
Gross deferred tax assets 152 141
Valuation allowance (122) (112)
----- -----
Net deferred tax assets 30 29
Deferred tax liabilities:
Depreciation 30 26
Intangible -- 3
----- -----
Gross deferred liabilities 30 29
----- -----
Net deferred tax asset $ -- $ --
===== =====

The net change in the valuation allowance for the years ended June 30,
1997 and 1998 was an increase of $30 and a decrease of $10, respectively. The
Company believes that based on a history of tax losses and related absence of
recoverable prior taxes through net operating loss carryback, it is more likely
than not that the net operating losses and the net deferred tax assets will not
be realized. Therefore, a full valuation allowance in the amount of $112 has
been recorded.

56
57

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The differences between the provision for income taxes and income taxes
computed at the statutory U.S. federal income tax rates are explained as
follows:

YEAR ENDED JUNE 30,
-----------------------
1996 1997 1998
---- ---- ----

Income taxes (benefit) computed at the statutory
U.S. federal income tax rates $42 $(19) $ 2
Taxes on foreign income at rates different than U.S.
federal income tax rates (1) -- --
State taxes, net of federal benefit 3 -- --
Net operating losses for which no benefit
has been recognized -- 19 --
Realization of prior years' net operating losses
and tax credits (33) -- (1)
--- ---- ----
Provision for income taxes $11 $ -- $ 1
=== ==== ====

As of June 30, 1998, the Company had operating loss carryforwards for
tax purposes available from domestic operations totaling $77 which will expire
between 2008 and 2012.

The Company made income tax payments of $5 and $4 for the years ended
June 30, 1996 and 1997. The Company made no income tax payments for the year
ended June 30, 1998.

NOTE K - COMMITMENTS AND CONTINGENCIES

The Company leases certain property and equipment and office and plant
facilities. At June 30, 1998, the aggregate minimum rental payments required
under operating leases that have initial or remaining terms in excess of one
year are as follows:

1999 $15
2000 13
2001 11
2002 6
2003 5
Thereafter 36
---
$86
===

Minimum payments have not been reduced by minimum sublease rentals of $6
due through 2016 under noncancelable subleases. Rent expense was $28, $32 and
$35 for the fiscal years ended June 30, 1996, 1997 and 1998, respectively. Rent
expense includes contingent rentals on certain equipment based on usage.

The Company has entered into noncancelable agreements with growers, with
terms ranging from two to ten years, to purchase certain quantities of raw
products. Total purchases under these agreements were $54, $114, $66 for the
years ended June 30, 1996, 1997 and 1998. The Company also has commitments to
purchase certain finished goods.

57
58

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

At June 30, 1998, aggregate future payments under such purchase
commitments (priced at the June 30, 1998 estimated cost) are estimated as
follows:

1999 $ 60
2000 49
2001 38
2002 35
2003 31
Thereafter 73
----
$286 ----
====

In connection with the sale of the Company's 50.1% interest in Del Monte
Philippines, a joint venture operating primarily in the Philippines, on March
29, 1996, the Company signed an eight-year supply agreement whereby the Company
must source substantially all of its pineapple requirements from Del Monte
Philippines over the agreement term. The Company expects to purchase $38 in
fiscal 1999 under this supply agreement for pineapple products. During the year
ended June 30, 1998, the Company purchased $38 under the supply agreement.

Effective December 21, 1993, DMC sold substantially all of the assets
and certain related liabilities of its can manufacturing operations in the
United States to Silgan Containers Corporation ("Silgan"). In connection with
the sale to Silgan, DMC entered into a ten-year supply agreement under which
Silgan, effective immediately after the sale, began supplying substantially all
of DMC's metal container requirements for foods and beverages in the United
States. Purchases under the agreement during the year ended June 30, 1998
amounted to $186. The Company believes the supply agreement provides it with a
long-term supply of cans at competitive prices that adjust over time for normal
manufacturing cost increases or decreases.

On November 1, 1992, DMC entered into an agreement with Electronic Data
Systems Corporation ("EDS") to provide services and administration to the
Company in support of its information services functions for all domestic
operations. Payments under the terms of the agreement are based on scheduled
monthly base charges subject to various adjustments such as system usage and
inflation. Total payments for the years ended June 30, 1996, 1997 and 1998 were
$16, $18 and $16, respectively. The agreement expires in November 2002 with
optional successive one-year extensions.

At June 30, 1998, base payments under the agreement are as follows:

1999 $14
2000 13
2001 13
2002 14
2003 5
---
$59
===

Del Monte has a concentration of labor supply in employees working under
union collective bargaining agreements, which represent approximately 79% of its
hourly and seasonal work force. Of these represented employees, 4% of employees
are under agreements that will expire in calendar 1999.

The Company accrues for losses associated with environmental remediation
obligations when such losses are probable, and the amounts of such losses are
reasonably estimable. Accruals for estimated losses from environmental
remediation obligations generally are recognized no later than completion of the
remedial feasibility study. Such accruals are adjusted as further information
develops or circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.

58
59

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

The Company is defending various claims and legal actions that arise
from its normal course of business, including certain environmental actions.
While it is not feasible to predict or determine the ultimate outcome of these
matters, in the opinion of management none of these actions, individually or in
the aggregate, will have a material effect on the Company's results of
operations, cash flow, liquidity or financial position.

On March 25, 1997, the entities that purchased the Company's Mexican
subsidiary in October 1996 commenced an action in Texas state court alleging,
among other things, that the Company breached the agreement with respect to the
purchase because the financial statements of the Mexican subsidiary did not
fairly present its financial condition and results of operations in accordance
with U.S. generally accepted accounting principles. In connection with this
action, $8 of the cash proceeds from the Recapitalization which were payable to
shareholders and certain members of senior management of DMFC were held in
escrow to be applied to fund the Company's costs and expenses in defending the
action, with any remaining amounts available to pay up to 80% of any ultimate
liability of the Company to the purchasers. In January 1998, the Company reached
a settlement of this litigation. The settlement resolves all claims and disputes
relating to the sale of the Company's Mexican subsidiary, including the purchase
price adjustment contemplated at the time of the sale. The Company's portion of
the settlement was within the amount reserved and thus did not adversely impact
net income of the Company.

NOTE L - FOREIGN OPERATIONS AND GEOGRAPHIC DATA

The Company's earnings in fiscal 1996 and 1997 were derived in part from
foreign operations. These operations, a significant factor in the economies of
the countries where the Company operates, were subject to the risks that are
inherent in operating in such foreign countries, including government
regulations, currency and ownership restrictions, risks of expropriation and
burdensome taxes. Certain of these operations were also dependent on leases and
other agreements with these governments. Transfers between geographic areas were
accounted for as intercompany sales, and transfer prices are based generally on
negotiated contracts. As of November 1996, the Company no longer had any
ownership in foreign operations.

The following table shows certain financial information relating to the
Company's operations in various geographic areas:

YEAR ENDED JUNE 30,
-------------------
1996 1997
------ ------

Net sales
United States $1,147 $1,203
Philippines 142 --
Latin America 55 17
Transfer between geographic areas (39) (3)
------ ------
Total net sales $1,305 $1,217
====== ======

Operating income:
United States $ 65 $ 71
Philippines 12 --
Latin America 5 --
------ ------
Total operating income $ 82 $ 71
====== ======

Assets:
United States $ 701 $ 667
Philippines -- --
Latin America 35 --
------ ------
$ 736 $ 667
====== ======

Liabilities of the Company's Operations
Located in Foreign Countries $ 7 $ --
====== ======

59
60

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE M - DEL MONTE CORPORATION

DMC is directly-owned and wholly-owned by DMFC. For the year ended June
30, 1998, DMC and DMC's subsidiaries accounted for 100% of the consolidated
revenues and net earnings of the Company, except for those expenses incidental
to the DMFC Notes. As of June 30, 1998, DMFC's sole asset, other than
intercompany receivables from DMC, was the stock of DMC. DMFC had no
subsidiaries other than DMC and DMC's subsidiaries, and had no direct
liabilities other than intercompany payables to DMC and the DMFC Notes. DMFC is
separately liable under various guarantees of indebtedness of DMC, which
guarantees of indebtedness are full and unconditional.

NOTE N - RELATED PARTY TRANSACTIONS

In connection with the Recapitalization, the Company entered into a
ten-year agreement dated April 18, 1997 (the "Management Advisory Agreement")
with TPG pursuant to which TPG is entitled to receive an annual fee from the
Company for management advisory services equal to the greater of $.5 or 0.05% of
the budgeted consolidated net sales of the Company. For the year ended June 30,
1998, TPG received fees of less than $1. In addition, the Company has agreed to
indemnify TPG, its affiliates and shareholders, and their respective directors,
officers, agents, employees and affiliates from and against fees and expenses,
arising out of or in connection with the services rendered by TPG thereunder.
The Management Advisory Agreement makes available the resources of TPG
concerning a variety of financial and operational matters, including advice and
assistance in the reviewing the Company's business plans and its results of
operations and in evaluating possible strategic acquisitions, as well as
providing investment banking services in identifying and arranging sources of
financing. The services that will be provided by TPG cannot otherwise be
obtained by the Company without the addition of personnel or the engagement of
outside professional advisors. In management's opinion, the fees provided for
under the Management Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arms'-length transaction with an unaffiliated third party.

In connection with the Recapitalization, the Company also entered into
an agreement dated April 18, 1997 (the "Transaction Advisory Agreement") with
TPG pursuant to which TPG is entitled to receive fees up to 1.5% of the
"transaction value" for each transaction in which the Company is involved, which
may include acquisitions, refinancings and recapitalizations. The term
"transaction value" means the total value of any subsequent transaction,
including, without limitation, the aggregate amount of the funds required to
complete the subsequent transaction (excluding any fees payable pursuant to the
Transaction Advisory Agreement and fees, if any paid to any other person or
entity for financial advisory, investment banking, brokerage or any other
similar services rendered in connection with such transaction) including the
amount of indebtedness, preferred stock or similar items assumed (or remaining
outstanding). In connection with the Contadina Acquisition, TPG received $3 upon
the closing of the acquisition as compensation for its services as financial
advisor for the acquisition. In management's opinion, the fees provided for
under the Transaction Advisory Agreement reasonably reflect the benefits to be
received by the Company and are comparable to those obtainable in an
arms'-length transaction with an unaffiliated third party.

NOTE O - PUBLIC OFFERING

In fiscal 1998, the Company filed a registration statement on Form S-1
with the SEC for the purpose of making a public offering of shares of its Common
Stock (the "Offering"). The Offering, which was expected to close in July 1998,
was postponed due to conditions in the equity securities market.

On May 1, 1998, in contemplation of the Offering, Del Monte Foods
Company merged with and into a newly created wholly-owned subsidiary
incorporated under the laws of the state of Delaware to change Del Monte

60
61

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

Foods Company's state of incorporation from Maryland to Delaware. The
Certificate of Incorporation authorizes the issuance of an aggregate of
500,000,000 shares of Common Stock and an aggregate of 2,000,000 shares of
preferred stock.

On July 22, 1998, the Company declared, by way of a stock dividend
effective July 24, 1998, a 191.542-for-one stock split of all of the Company's
outstanding shares of Common Stock (the "Stock Split"). Accordingly, all share
and per share amounts for all periods have been retroactively adjusted to give
effect to the Stock Split.

NOTE P - PLANT CONSOLIDATION

In the third quarter of fiscal 1998, management committed to a plan to
consolidate processing operations. In connection with this plan, the Company
recorded charges of $7. These costs relate to severance and benefit costs for
433 employees to be terminated. No expenditures have been recorded against this
accrual as of June 30, 1998. This plan will be implemented in a specific
sequence over the next three years. The plan involves suspending operations at
the Modesto facility for a year while that facility is reconfigured to
accommodate fruit processing which is currently taking place at the San Jose and
Stockton facilities (which sites will be permanently closed). The tomato
processing currently at the Modesto facility will be moved to the Hanford
facility. Management believes that because of these sequenced activities, it is
not likely that there will be any significant changes to this plan. In addition,
due to historically low turnover at the affected plants, the Company can
reasonably estimate the number of employees to be terminated, and, due to the
existence of union contracts, the Company can reasonably estimate any related
benefit exposure.

The Company anticipates that it will incur total charges of
approximately $36 as a result of these plant closures. These expenses include
costs, net of estimated salvage values, of $16 representing accelerated
depreciation resulting from the effects of adjusting the assets' remaining
useful lives to match the period of use prior to the plant closure, $7 in
severance costs (as described above) and various other costs totaling $13, such
as costs to remove and dispose of those assets and ongoing fixed costs to be
incurred during the Modesto plant reconfiguration and until the sale of the San
Jose and Stockton properties. Total charges relating to plant closures recorded
in fiscal 1998 were $10 million (including depreciation expense of $3 million
recorded in the fourth quarter of fiscal 1998). These charges are expected to
affect the Company's results over the next four-year period as follows: $13 in
fiscal 1999 (including depreciation expense of $9), $9 in fiscal 2000 (including
depreciation expense of $4), $3 in fiscal 2001 and $1 in fiscal 2002.

Assets that are subject to accelerated depreciation, the costs of which
have begun to be reflected in operations during the fourth quarter of fiscal
1998 resulting in an additional depreciation charge of $3, consist primarily of
buildings and of machinery and equipment, which will no longer be needed due to
the consolidation of the operations of the two fruit processing plants and the
consolidation of the operations of two tomato processing plants. The remaining
useful lives of the buildings at the San Jose facility were decreased by
approximately 20 years due to this acceleration. The remaining useful lives of
machinery and equipment at the affected plants have been reduced to one year,
two years and three years for the Modesto, San Jose and Stockton facilities,
respectively.

NOTE Q - SUBSEQUENT EVENT

On July 10, 1998, the Company entered into an agreement with Nabisco,
Inc. to reacquire rights to the Del Monte brand in South America and to purchase
Nabisco's canned fruit and vegetable business in Venezuela, including a food
processing plant in Venezuela. Nabisco had retained ownership of the Del Monte
brand in South American and the Venezuela Del Monte business when it sold other
Del Monte businesses in 1989.

61
62

DEL MONTE FOODS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE DATA)

NOTE R - RESTATEMENT OF FINANCIAL INFORMATION

The Company has restated its financial statements for the years ended
June 30, 1996 and 1997. This action was taken following consultation with the
staff of the Securities and Exchange Commission regarding the deferral of $16 of
gain resulting from the sale of the Company's 50.1% interest in Del Monte
Philippines in March 1996 (see Note C). The Company had allocated $16 of the
$100 proceeds from the sale to the supply agreement the Company executed in
conjunction with the sale. The deferred gain of $16 was being recognized by the
Company over the eight-year term of the supply agreement. After discussions with
the staff of the Securities and Exchange Commission, the Company has recognized
the $16 gain at the time of the sale.

The fiscal 1996 financial statements have been restated to include the
$16 gain and the fiscal 1997 financial statements have been restated to reverse
the recognition of $2 of the deferred gain. The impact of these adjustments on
the Company's financial results as originally reported is summarized as follows:

1996 1997
-------------------------- --------------------------
AS REPORTED AS RESTATED AS REPORTED AS RESTATED
----------- ----------- ----------- -----------

Net income (loss) before
extraordinary item $ 105 $ 121 $ (14) $ (16)
Net income (loss) .......... 88 104 (56) (58)
Net income (loss)
attributable to
common shares ........... 6 22 (126) (128)
Net income (loss) per common
share .................... 0.08 0.29 (2.04) (2.07)

NOTE S - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

1998 (1) (2) First Second Third Fourth
----- ----- ----- -----

Net Sales $ 251 $ 369 $ 348 $ 345
Operating income 17 20 20 25
Income (loss) before extraordinary item -- 2 (2) 5
Net income (loss) -- 2 (2) 5
Per share data: (3)
Basic income (loss) per share before
extraordinary item (0.06) 0.05 (0.10) 0.11
Diluted income (loss) per share before
extraordinary item (0.06) 0.05 (0.10) 0.10

1997 (4) (as restated)
Net Sales $ 264 $ 364 $ 308 $ 281
Operating income 17 24 26 4
Income (loss) before extraordinary item 3 5 15 (39)
Net income (loss) (1) 5 15 (77)
Per share data: (3)
Basic income (loss) per share before
extraordinary item (0.27) (0.25) (0.12) (1.47)
Diluted income (loss) per share before
extraordinary item (0.27) (0.25) (0.12) (1.44)

(1) The third and fourth quarters of 1998 include $2 and $1, respectively, of
inventory step-up related to inventory purchased in the Contadina
Acquisition.

(2) The third and fourth quarters of 1998 include $7 and $3, respectively, of
charges related to the Company's plant consolidation program.

(3) Earnings per share is computed independently for each of the periods
presented; therefore, the sum of the earnings per share amounts for the
quarters may not equal the total for the year.

(4) The fourth quarter of 1997 includes $85 of expenses related to the
Recapitalization.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and position of individuals
who are serving as directors and executive officers of Del Monte. Such
individuals hold the same positions with DMC. Each director will hold office
until the next annual meeting of shareholders or until his successor has been
elected and qualified. Officers are elected by the Board of Directors and serve
at the discretion of the Board.

NAME AGE POSITIONS
- ---- --- ---------

Richard W. Boyce .............. 44 Chairman of the Board; Director
Richard G. Wolford ............ 53 Chief Executive Officer; Director
Wesley J. Smith ............... 51 Chief Operating Officer; Director
Timothy G. Bruer .............. 41 Director
Al Carey ...................... 46 Director
Patrick Foley ................. 66 Director
Brian E. Haycox ............... 56 Director
Denise M. O'Leary ............. 41 Director
William S. Price, III ......... 42 Director
Jeffrey A. Shaw ............... 34 Director
David L. Meyers ............... 52 Executive Vice President, Administration and Chief
Financial Officer
Glynn M. Phillips ............. 61 Executive Vice President, Sales
Brent D. Bailey ............... 46 Executive Vice President, Marketing
Thomas E. Gibbons ............. 50 Senior Vice President and Treasurer
William J. Spain .............. 56 Senior Vice President, Technology
Richard L. French ............. 41 Senior Vice President and Chief Accounting Officer
William R. Sawyers ............ 36 Vice President, General Counsel and Secretary

Richard W. Boyce, Chairman of the Board; Director. Mr. Boyce became
Chairman of the Board and a director of Del Monte in August 1997. Mr. Boyce has
been President of SRB, Inc., which provides management services to TPG and its
affiliated companies, since 1997. He currently serves as Chairman and Chief
Executive Officer of Favorite Brands International, Inc. He was employed by
PepsiCo from 1992 to 1997, most recently as Senior Vice President of Operations
for Pepsi-Cola North America. From 1980 to 1992, Mr. Boyce was employed by Bain
& Company, where he was a partner. He is also a director of J. Crew Group, Inc.

Richard G. Wolford, Chief Executive Officer; Director. Mr. Wolford
joined Del Monte as Chief Executive Officer and a director in April 1997 upon
consummation of the Recapitalization. From 1967 to 1987, he held a variety of
positions at Dole Foods, including President of Dole Packaged Foods from 1982 to
1987. From 1988 to 1996, he was Chief Executive Officer of HK Acquisition Corp.
where he developed food industry investments with venture capital investors.

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Wesley J. Smith, Chief Operating Officer; Director. Mr. Smith joined Del
Monte as Chief Operating Officer and a director in April 1997 upon consummation
of the Recapitalization. From 1972 to 1995, he was employed by Dole Foods in a
variety of positions, including senior positions in finance, marketing,
operations and general management in California, Hawaii and Honduras.

Timothy G. Bruer, Director. Mr. Bruer became a director of Del Monte in
August 1997. Mr. Bruer has been President and Chief Executive Officer and a
director of Silverado Foods, Inc. since March 1997. From 1993 until that time,
he was Vice President and General Manager of the Culinary Division of Nestle. He
is also a director of Authentic Specialty Foods Inc.

Al Carey, Director. Mr. Carey became a director of Del Monte in November
1997. He is the Chief Operating Officer of Frito-Lay, Inc., a division of
PepsiCo, Inc., and has been employed in various capacities with that company
since 1981.

Patrick Foley, Director. Mr. Foley became a director of Del Monte in
August 1997. Mr. Foley is Chairman, President and Chief Executive Officer of DHL
Corporation, Inc. and its major subsidiary, DHL Airways, Inc. He joined DHL in
September 1988, with more than 30 years experience in hotel and airline
industries. He was formerly Chairman and President of Hyatt Hotel Corporation.
Mr. Foley serves on the Boards of Directors of Continental Airlines, Inc., DHL
International, Flextronics International, Foundation Health Systems, Inc. and
Glenborough Realty Trust, Inc.

Brian E. Haycox, Director. Mr. Haycox was elected to the Board of
Directors of Del Monte in June 1995. He was elected as Co-Chairman and Co-Chief
Executive Officer of Del Monte in December 1995, and he served in those
capacities until the consummation of the Recapitalization. Mr. Haycox served as
President and Chief Executive Officer of Del Monte Tropical Fruit Company from
1988 until 1993. Prior to that time Mr. Haycox served in a variety of management
positions within the Del Monte organization.

Denise M. O'Leary, Director. Ms. O'Leary became a director of Del Monte
in August 1997. Ms. O'Leary has been a Special Limited Partner of Menlo Ventures
since 1996. From 1983 to 1996, she was a General Partner of Menlo Ventures. Ms.
O'Leary serves on the Boards of Directors of various private companies as well
as on the Board of ALZA Corporation. She is a member of the Board of Trustees of
Stanford University and a director of UCSF Stanford Health Care.

William S. Price, III, Director. Mr. Price became a director of Del
Monte in August 1997. Mr. Price was a founding partner of TPG in 1992. Prior to
forming TPG, he was Vice President of Strategic Planning and Business
Development for G. E. Capital, and from 1985 to 1991, he was employed by Bain &
Company, where he was a partner and co-head of the Financial Services Practice.
Mr. Price serves on the Boards of Directors of Belden & Blake Corporation,
Beringer Wine Estates Holdings, Inc., Continental Airlines, Inc., Denbury
Resources, Inc., Favorite Brands International, Inc., Vivra Specialty Partners,
Inc. and Zilog, Inc.

Jeffrey A. Shaw, Director. Mr. Shaw became a director of Del Monte in
May 1997. Mr. Shaw is a partner of TPG and has been an executive of TPG since
1993. Prior to joining TPG, Mr. Shaw was a principal of Acadia Partners, L.P.,
an investment partnership affiliated with the Robert M. Bass Group, for three
years. Mr. Shaw serves as a director of Ducati Motors S.p.A., Ducati North
America, Inc., Favorite Brands International, Inc. and Ryanair PLC.

David L. Meyers, Executive Vice President, Administration and Chief
Financial Officer. Mr. Meyers joined the Company in 1989. He was elected Chief
Financial Officer of Del Monte in December 1992 and served as a member of the
Board of Directors of Del Monte from January 1994 until consummation of the
Recapitalization. Prior to joining the Company, Mr. Meyers held a variety of
financial and accounting positions with RJR Nabisco (1987 to 1989), Nabisco
Brands USA (1983 to 1987) and Standard Brands, Inc. (1973 to 1983).

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Glynn M. Phillips, Executive Vice President, Sales. Mr. Phillips joined
Del Monte in October 1994. Prior to joining the Company, Mr. Phillips was Vice
President, Sales of The Clorox Company where he also held various sales and
marketing positions from 1973 to 1994.

Brent D. Bailey, Executive Vice President, Marketing. Mr. Bailey joined
Del Monte in his current position in January 1998. Prior to that he was with The
Dial Corporation since 1992 as Senior Vice President and General Manager --
Household Division, and Senior Vice President -- Portfolio Group. From 1974 to
1992, Mr. Bailey held marketing management positions with Procter & Gamble,
Frito-Lay and Pillsbury.

Thomas E. Gibbons, Senior Vice President and Treasurer. Mr. Gibbons
joined Del Monte in 1969 and was elected to his current position in February
1995. He was elected Vice President and Treasurer of Del Monte in January 1990.
Mr. Gibbons' prior experience also includes a variety of positions within the
Company's and RJR Nabisco's tax and financial organizations.

William J. Spain, Senior Vice President, Technology. Mr. Spain joined
Del Monte in 1966 and was elected to his current position in February 1995.
Previously, he was Vice President, Research, Government and Industry Relations
of Del Monte. Mr. Spain has also held various positions within Del Monte in
corporate affairs, production management, quality assurance, environmental and
energy management, and consumer services.

Richard L. French, Senior Vice President and Chief Accounting Officer.
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 the Company's financial organization.

William R. Sawyers, Vice President, General Counsel and Secretary. Mr.
Sawyers joined Del Monte in November 1993 and was elected to his current
position in 1995. Prior to joining the Company, Mr. Sawyers was an associate
with the law firm of Shearman & Sterling from 1987 to 1993.

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ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth compensation paid by the Company for
fiscal years 1996, 1997 and 1998 to each individual serving as its Chief
Executive Officer during fiscal year 1998, to each of the four other most highly
compensated executive officers of the Company as of the end of fiscal 1998.

Long Term Compensation
-----------------------------------
Securities
Name and Principal Fiscal Other Annual Underlying LTIP All Other
Positions Year Salary(1) Bonus Comp(2) Option Awards Payouts(3) Comp (4)
- ----------------------------------- ---- ---------- ---------- ------------ ------------- ---------- ---------

Richard G. Wolford (5) ............ 1998 $ 500,000 $ 250,000 -- 569,071 -- $ 7,995
Chief Executive Officer 1997 100,641 -- -- -- -- 251,196

Wesley J. Smith (6) ............... 1998 400,000 200,000 -- 569,071 -- 6.896
Chief Operating Officer 1997 80,513 -- -- -- -- 251,145

David L. Meyers ................... 1998 298,000 149,000 151,701 -- 12,206
Executive Vice President, 1997 286,000 159,400 -- -- $ 421,000 2,959,771
Administration & CFO 1996 273,000 143,000 $ 55,386 -- 421,000 11,242

Glynn M. Phillips ................. 1998 238,795 118,300 -- 29,497 -- 11,838
Executive Vice President, 1997 239,118 118,300 -- -- 280,000 1,974,454
Sales 1996 225,750 118,250 -- -- 280,000 9,206

Thomas E. Gibbons ................. 1998 191,467 57,200 -- 12,067 -- 4,800
Senior Vice President & 1997 183,458 59,900 -- -- 210,000 115,829
Treasurer 1996 175,600 63,900 -- -- 54,600 4,717

(1) Reflects actual base earnings for the fiscal year specified.

(2) Fiscal 1996 reflects certain perquisites, including moving expenses for Mr.
Meyers ($33,091) and company car ($15,500).

(3) Reflects payments under the Company's Old Management Equity Plan and Long
Term Incentive Plan.

(4) For fiscal 1996: Company contributions to the Del Monte Corporation Savings
Plan --Mr. Meyers $4,500; Mr. Phillips $4,500; Mr. Gibbons $4,500; Company
paid term life premiums -- Mr. Meyers $3,407; Mr. Phillips $4,706; Mr.
Gibbons $217; amount paid under the nonqualified Additional Benefits Plan
-- Mr. Meyers $3,335.

For fiscal 1997: Company contributions to the Del Monte Corporation Savings
Plan -- Mr. Meyers $4,500; Mr. Phillips $4,500; Mr. Gibbons $4,500, Company
paid term life premiums -- Mr. Wolford $1,196; Mr. Smith $1,145; Mr. Meyers
$4,198; Mr. Phillips $5,325; Mr. Gibbons $217; amount paid under the
nonqualified Additional Benefits Plan -- Mr. Meyers $4,130; amounts under
the New MEP (as defined below) paid April 1997 -- Mr. Meyers $2,946,943;
Mr. Phillips $1,964,629; Mr. Gibbons $111,112. For Messrs. Wolford and
Smith, the fiscal 1997 amount includes a consulting fee of $250,000 each
paid in December 1997 for the period prior to April 18, 1997.

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For fiscal 1998: Company contributions to the Del Monte Corporation Savings
Plan -- Mr. Wolford $1,875; Mr. Smith $2,000; Mr. Meyers $4,800; Mr.
Phillips $4,800; Mr. Gibbons $4,800, Company paid term life premiums -- Mr.
Wolford $6,120; Mr. Smith $4,896; Mr. Meyers $3,585; Mr. Phillips $7,038;
amount paid under the nonqualified Additional Benefits Plan -- Mr. Meyers
$3,821.

(5) Mr. Wolford became Chief Executive Officer as of April 18, 1997.

(6) Mr. Smith became Chief Operating Officer as of April 18, 1997.

OPTION GRANTS IN LAST FISCAL YEAR

Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
----------------------------------------- -----------------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise
Options to Employees in Price
Granted Fiscal (Per Expiration
Name (1) Year Share) Date 5% 10%
- ---------------------------- ------- ---------------- -------- ---------- ---------- ----------

Richard G. Wolford 569,071 32.8% $5.22 4/18/07 $1,866,553 $4,734,671
Wesley J. Smith 569,071 32.8% 5.22 4/18/07 1,866,553 4,734,671
David L. Meyers 151,701 8.7% 5.22 4/18/07 497,579 1,262,152
Glynn M. Phillips 29,497 1.7% 5.22 4/18/07 96,750 245,415
Thomas E. Gibbons 12,067 0.7% 5.22 4/18/07 39,580 100,397

(1) Messrs. Wolford and Smith vest monthly on a proportionate basis over a four
(4) year period; Messrs. Meyers, Phillips and Gibbons vest annually on a
proportionate basis over a five (5) year period.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES

Number of
Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at
Options at June 30,
June 30, 1998 1998(1)
------------- -------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ------------------ -------- -------- ------------- -------------

Richard G. Wolford -- $-- 166,777/402,294 $--
Wesley J. Smith -- -- 166,777/402,294 --
David L. Meyers -- -- 29,881/121,820 --
Glynn M. Phillips -- -- 5,749/23,748 --
Thomas E. Gibbons -- -- 2,107/9,960 --

(1) As of the end of fiscal 1998, there was no public market for the Company's
Common Stock. Under a Stockholders' Agreement between the Company and each
optionee, the Company has certain rights to acquire any Common Stock
issuable upon the exercise of an option. Such acquisition would be at a
price set by a formula which, as of the end of fiscal 1998, equaled $5.22
per share.

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EMPLOYMENT AND OTHER ARRANGEMENTS

The Management Equity Plan. Established beginning in fiscal 1995 and
modified in March 1996, the Company's Management Equity Plan ("New MEP")
provided awards to certain key executives upon the sale of the Company or upon
the public offering of the Company's Common Stock. Under the terms of the New
MEP, the "Base Value" of the Company's preferred and Common Stock was
established at $125 million. To the extent that proceeds from the sale of the
Company to preferred and common stockholders (after repayment of debt but
without reduction for payment to executives under the New MEP) exceeded the $125
million Base Value, an award pool of 6% of such excess was set aside for payment
to the Company's executive officers. The New MEP was terminated concurrent with
the Recapitalization.

In connection with the Recapitalization, the Company made payments
aggregating approximately $19.7 million pursuant to the New MEP. This amount was
allocated as follows:

Mr. Haycox(1) ..............$4,911,572
Mr. Mullan(1) .............. 4,911,572
Mr. Little(2) .............. 2,946,943
Mr. Meyers ................. 2,946,943
Mr. Phillips ............... 1,964,629
Other officers(3) .......... 2,000,016

(1) Messrs. Haycox's and Mullan's employment as Co-Chairmen/Co-CEO terminated
as of April 18, 1997.

(2) Mr. Little's employment as Executive Vice President, Worldwide Operations
terminated as of April 30, 1997.

(3) Other officers includes Mr. Gibbons and 17 other senior officers.

Messrs. Meyers and Phillips were participants in the MEP prior to its
modification in March 1996 (the "Old MEP"), and as such became eligible for
awards for fiscal 1995 based on the annual equity growth formula in effect under
the Old MEP for such year. Messrs. Meyers and Phillips were paid installment
payments of the Old MEP awards in the amounts of $421,000 and $280,000,
respectively, in June 1996 and remained eligible for installment payment of the
Old MEP awards in the amounts of $421,000 and $280,000, respectively, for fiscal
1997. The Company was obligated to pay these fiscal 1997 awards at the time of
the Recapitalization.

Long Term Incentive Plan. Established on July 1, 1990, amended and
restated on July 1, 1995, the Long Term Incentive Plan ("LTIP") provided certain
key management employees with a long-term incentive program based on Company
performance. The LTIP had a performance cycle of three (3) fiscal years with
interim award payments at the end of each fiscal year based on employee's target
award. The three year target award was determined by multiplying (i) the
executive's base pay by (ii) a percentage based on salary grade level, and
multiplying the result by (iii) three (for each fiscal year in the performance
cycle). Interim awards were determined by comparing actual financial performance
compared to target goals and subject to a percentage payout schedule. Mr.
Gibbons received fiscal 1995 and fiscal 1996 awards of $50,400 and $54,600,
respectively. Mr. Gibbons received the final fiscal 1997 award in the amount of
$210,000 at the time of the Recapitalization. The plan was terminated following
the Recapitalization.

The Annual Incentive Award Plan. The Annual Incentive Award Plan
("AIAP") provides annual cash bonuses to certain management employees, including
certain of the named senior executives. The target bonus for each eligible
employee is based on a percentage of base salary. Actual payment amounts are
based on the Company's achievement of annual earnings objectives and individual
performance objectives at fiscal year end. The targeted percentage of base
salary is as follows: Mr. Wolford - 50%, Mr. Smith - 50%, Mr. Meyers - 50%, Mr.
Phillips - 50%, and Mr. Gibbons - 30%. Messrs. Wolford and Smith were not
eligible for the AIAP for fiscal 1997.

Stock Purchase Plan. The Del Monte Foods Company Employee Stock Purchase
Plan was approved on August 4, 1997 and amended on November 4, 1997. Under the
Plan, key employees are allowed to purchase up to

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$5 million in Common Stock. To date, 454,146 shares of the Company's Common
Stock have been purchased by and issued to eligible employees.

Stock Incentive Plans. The Del Monte Foods Company 1997 Stock Incentive
Plan was approved on August 4, 1997 and amended on November 4, 1997. Under the
1997 Stock Incentive Plan, grants of incentive stock options and nonqualified
stock options representing 1,784,980 shares of Common Stock may be made to key
employees. With the exception of options for 151,701 shares issued to Mr. Bailey
on January 19, 1998, the options were granted at an exercise price equal to the
fair market value of the shares at the time of such grant and have a ten-year
term. Two different vesting schedules have been approved under the 1997 Stock
Incentive Plan. The first provides for annual vesting on a proportionate basis
over five years and the second provide for monthly vesting on a proportionate
basis over four years. As of June 30, 1998, options for 1,690,167 shares of
Common Stock are held by eligible employees. It is not anticipated that any
additional options will be granted pursuant to this plan.

The Del Monte Foods Company 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan") was adopted as the Del Monte Foods Company 1998 Stock Option
Plan by the Board of Directors on April 24, 1998 and approved in final form by
the Compensation Committee on May 29, 1998. Under the 1998 Stock Incentive Plan,
grants of incentive and nonqualified stock options ("Options"), stock
appreciation rights ("SARs") and stock bonuses (together with Options and SARs,
"Awards") representing 3,195,687 shares of Common Stock may be made to employees
of the Company. Subject to certain limitations, the Compensation Committee has
authority to grant Awards under the 1998 Stock Incentive Plan and to set the
terms of any such Awards. As of June 30, 1998, no Awards had been made under the
1998 Stock Incentive Plan.

The Del Monte Retirement Plan for Salaried Employees. The Del Monte
Corporation Retirement Plan for Salaried Employees (the "Del Monte Corporation
Retirement Plan"), which became effective as of January 1, 1990, is a
non-contributory defined benefit retirement plan covering salaried employees of
the Company and its subsidiaries. Credits are made monthly to each participant's
personal retirement account ("PRA") consisting of a percentage of that month's
eligible compensation, plus interest on his or her account balance. A
participant is fully vested upon completion of five years of service.

The percentage of monthly compensation credited varies according to age
as follows:

All Monthly Monthly Compensation
Participant Age Compensation Above Social Security Base
- --------------- ------------ --------------------------

Below 35 ..................... 4.0% 3.0%
35 but below 45 .............. 5.0% 3.0%
45 but below 55 .............. 6.0% 3.0%
55 and over .................. 7.0% 3.0%

The Del Monte Corporation Retirement Plan was amended effective January
1, 1998 to change the interest credit from 110% of the U.S. Pension Benefit
Guaranty Corporation ("PBGC") rate to the yield on the 12-month Treasury Bill
rate plus 1.5%. In addition, the factors for annuity conversions were changed
from specific Company factors to factors based on 30-year Treasury Bond yields
and an Internal Revenue Service ("IRS") specified mortality table. A
participant's annual age 65 annuity benefit will be the greater of an annuity
based on (i) the credit balance as of December 31, 1997 increased by interest
credits (and not compensation credits) of 110% of the December 31, 1997 PBGC
rate divided by 8.2 or (ii) the credit balance at the time of retirement using
an annuity factor based on 30-year Treasury Bond yields and an IRS specified
mortality table. Alternatively, a participant at retirement or other termination
of employment may elect a lump sum distribution of his or her account balance.

Participants who, as of January 1, 1988, were at least age 40 with ten
or more years' service, or at least age 55 with five or more years' service, are
eligible to receive an alternative retirement benefit that is based on the terms
of the prior Del Monte Corporation Retirement plan. For credited service after
December 31, 1981, such participants have accrued an annual benefit of 1.75% of
average final compensation multiplied by years of credited service. Average
final compensation is the participant's highest five years' average compensation
during his or her

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last ten years of credited service; compensation generally includes base salary
and awards under the AIAP but not other forms of incentive compensation. The
amount determined by this alternative benefit formula is reduced by .75% of the
participant's Social Security benefit, multiplied by years of credited service.
For credited service prior to January 1, 1982, a similar benefit formula is
applied.

The Del Monte Corporation Retirement Plan was amended effective April
30, 1992 to cease recognition of any future credited service or average final
compensation under the alternative retirement benefit. At retirement, a
participant who was eligible for the alternative retirement benefit will receive
an annual retirement benefit equal to the greater of the retirement benefit
determined by his or her PRA, or his or her alternative retirement benefit based
on compensation and credited service to April 30, 1992. Alternatively, a
participant may elect the greater of a lump sum distribution of his or her PRA
account balance or the actuarial equivalent lump sum of the age 65 alternative
benefit.

Nonqualified Retirement Plans. Effective January 1, 1990, the Company
established the Del Monte Corporation Additional Benefits Plan and the Del Monte
Corporation Supplemental Benefits Plan (the "Nonqualified Retirement Plans").
The Nonqualified Retirement Plans are "top hat" and "excess" benefit plans
designed to provide benefits in excess of those otherwise permitted under the
Del Monte Corporation Retirement Plan and the Del Monte Corporation Savings Plan
(which is qualified under Section 401(k) of the Internal Revenue Code) by
Sections 401(a)(17) and 415 of the Internal Revenue Code. The Nonqualified
Retirement Plans also provide benefits in respect of certain amounts of
severance not taken into account under the Del Monte Corporation Retirement Plan
or the Del Monte Corporation Savings Plan. Employees who participate in the Del
Monte Corporation Retirement Plan or the Del Monte Corporation Savings Plan are
generally eligible to participate in the Nonqualified Retirement Plans. Benefits
under the Nonqualified Retirement Plans are unfunded and paid from the general
assets of the Company.

Set forth below are the estimated annual benefits payable at age 65
(assuming lump sum payments are not elected) under the Del Monte Corporation
Retirement Plan and the Nonqualified Retirement Plans:

Year Attaining Estimated Annual
Participant Age 65 Retirement Benefit(a)
- ----------- ------ ---------------------

Mr. Wolford ................................... 2009 $125,819
Mr. Smith ..................................... 2012 127,143
Mr. Phillips .................................. 2002 28,260
Mr. Meyers .................................... 2010 186,356
Mr. Gibbons ................................... 2012 178,762

(a) The estimated annual retirement benefits shown assumes no increase in
compensation or AIAP and interest credits (as defined in the plans) of
6.68%.

Employment Arrangements. During fiscal 1998, the Company had employment
agreements with each of Messrs. Wolford, Smith, Meyers, Phillips, and Gibbons.
The following summaries of the material provisions of the employment agreements
with Mr. Wolford and Mr. Smith (the "Wolford/Smith Employment Agreements"), the
employment agreement with Mr. Meyers (the "EVP Employment Agreement") and the
employment agreement with Mr. Phillips (the "Phillips Employment Agreement") do
not purport to be complete and are qualified in their entirety by reference to
such agreements. The employment agreements of Messrs. Wolford, Smith, Meyers,
Phillips and Gibbons have been filed as exhibits to this Form 10-K.

On March 16, 1998, Del Monte entered into employment agreements with Mr.
Wolford and Mr. Smith as Chief Executive Officer and Chief Operating Officer,
respectively. The Wolford/Smith Employment Agreements are for an indefinite
term. Under the terms of the Wolford/Smith Employment Agreements, if the
employment of Mr. Wolford or Mr. Smith is terminated by Del Monte for any reason
other than for cause or by such executive for any reason, he would be entitled
to continue to receive his base salary and target award under the AIAP (50% of
base salary) and to participate in certain employee welfare benefit plans and
programs of the Company for up to two

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years after the date of such termination of employment, subject to his not
competing with the Company, not soliciting employees of the Company and not
disclosing proprietary or confidential information of the Company and subject to
his signing a general release and waiver with respect to certain claims he may
have against the Company.

The EVP Employment Agreement is for an indefinite term. Specifically,
the EVP Employment Agreement provides that if the executive's employment
terminates for any reason other than for Cause (as defined) or if the executive
resigns for Good Reason (as defined), such executive would receive as severance,
subject to the executive's not competing with the Company or disclosing
confidential information or trade secrets of the Company, severance payments
over a three-year period commencing on the date of such termination or
resignation. The aggregate amount of the severance payable to the executive over
such three-year period would equal two times the sum of: (a) the executive's
highest annual base salary in effect during the twelve-month period prior to
such termination or resignation and (b) the target award (50% of annual base
salary) under the AIAP (or successor thereto) for the year in which such
termination or resignation occurs (or, if greater, the amount of the award for
the next preceding year). In addition, the executive would receive a pro rata
annual bonus under the AIAP for the year in which such termination or
resignation occurs and would be entitled to participate in the employee benefit
plans and programs maintained by the Company in which the executive participates
until the earlier of (i) the end of the three-year period and (ii) such time as
the executive is covered by comparable programs of a subsequent employer.

The Phillips Employment Agreement is for an indefinite term. The
Phillips Employment Agreement provides that if Mr. Phillips' employment
terminates for any reason other than for Cause (as defined) or if Mr. Phillips
resigns for Good Reason (as defined), Mr. Phillips would receive as severance
three months of his then current base pay. In addition, if Mr. Phillips executes
and delivers to the Company a written agreement confirming his commitment not to
compete with the Company and not to disclose confidential information or trade
secrets of the Company, the Company would then provide Mr. Phillips severance
payments over an eighteen-month period commencing on the date of such
termination or resignation. The aggregate amount of the severance payable to Mr.
Phillips over such eighteen-month period would equal the sum of (a) Mr.
Phillips' highest annual rate of base salary in effect during the twelve-month
period prior to such termination or resignation, and (b) the target award under
the AIAP (or successor thereto) for the year in which such termination or
resignation occurs (or, if greater, the amount of the award for the next
preceding year of employment). In addition, Mr. Phillips would receive a pro
rata annual bonus under the AIAP for the year in which such termination or
resignation occurs and would be entitled to participate in the employee benefit
plans and programs maintained by the Company in which Mr. Phillips participates
until the earlier of (i) the end of the eighteen-month period or (ii) such time
as Mr. Phillips is covered by comparable programs of a subsequent employer.

Mr. Gibbons' employment agreement is similar to that of Mr. Phillips
except that it does not require Mr. Gibbons to execute an agreement not to
compete or disclose confidential information in order to receive severance
payments over an eighteen-month period.

DIRECTORS' COMPENSATION

Under Company policy, Messrs. Boyce, Bruer, Foley and Haycox and Ms.
O'Leary each receive $25,000 per year to be paid in cash or in Common Stock of
DMFC, at the option of the director. Each of these directors also receive $2,000
for each committee meeting of the Board of Directors attended in person.

In February 1998, the Company adopted a stock incentive plan with terms
substantially identical to the terms of the Del Monte Foods 1997 Stock Incentive
Plan for the benefit of directors and independent contractors of the Company.
Pursuant to that plan, Mr. Boyce received options representing 148,828 shares of
Common Stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the period following consummation of the Recapitalization through
the end of Del Monte's last completed fiscal year, Del Monte did not have a
compensation committee or other board committee performing equivalent functions.
During that period, the entire Board of Directors had authority to consider
executive compensation matters. The membership of the Board of Directors during
that period is described under

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"Management -- Directors and Executive Officers" above. No person who was an
officer, employee or former officer of Del Monte or any of its subsidiaries
participated in deliberations of Del Monte's Board of Directors concerning
executive officer compensation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of August 31, 1998, (i) by each person who is
known by the Company to own beneficially more than 5% of the Common Stock; (ii)
by each of the Company's directors; (iii) by each of the executive officers of
the Company identified in the table set forth under the heading "Management --
Executive Compensation;" and (iv) by all executive officers and directors as a
group.

SHARES BENEFICIALLY OWNED (A)
NAME AND ADDRESS OF -------------------------------------
BENEFICIAL OWNER NUMBER PERCENT(B)
---------------- ------------- ----------

TPG Partners, L.P. ...................... 24,682,808(c) 69.5%
201 Main Street, Suite 2420
Fort Worth, TX 76102
TPG Parallel I, L.P. .................... 2,459,828(c) 6.9
201 Main Street, Suite 2420
Forth Worth, TX 76102
399 Venture Partners, Inc. .............. 2,490,046 7.0
399 Park Avenue, 14th Floor
New York, NY 10043
Richard W. Boyce ........................ 148,828(d) 0.4
Richard G. Wolford ...................... 636,110(e) 1.8
Wesley J. Smith ......................... 636,110(e) 1.8
Timothy G. Bruer ........................ -- --
Al Carey ................................ 2,681(f) 0.0
Patrick Foley ........................... 4,022(f) 0.0
Brian E. Haycox ......................... 5,363(f) 0.0
Denise M. O'Leary ....................... 4,022(f) 0.0
William S. Price, III ................... --(c) --
Jeffrey A. Shaw ......................... -- --
David L. Meyers ......................... 199,586(g) 0.6
Glynn M. Phillips ....................... 48,651(h) 0.1
Thomas E. Gibbons ....................... 33,328(i) 0.1
All executive officers and directors as a
group (14 persons) ...................... 28,931,056(j) 78.2

(a) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in this table and these notes.

(b) Calculated excluding all shares issuable pursuant to agreements, options or
warrants of Del Monte, except as to each individual, entity or group, the
shares issuable to such individual, entity or group pursuant to agreements,
options or warrants of Del Monte, as described below in notes (d) through
(j), as the case may be.

(c) TPG Partners, L.P. and TPG Parallel I, L.P. are entities affiliated with
William S. Price, III. Mr. Price disclaims beneficial ownership of all
shares owned by such entities.

(d) Includes 148,828 shares issuable upon exercise of options issued to Mr.
Boyce.

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(e) In each case, includes 569,071 shares issuable upon exercise of options.

(f) Messrs. Carey, Foley and Haycox and Ms. O'Leary have elected to receive
shares of Common Stock in lieu of cash for their directors' fees. See
"Executive Compensation -- Directors' Compensation."

(g) Includes 151,701 shares issuable upon exercise of options.

(h) Includes 29,497 shares issuable upon exercise of options.

(i) Includes 12,067 shares issuable upon exercise of options.

(j) Includes all shares held by entities affiliated with a director as
described in note (d) above and all shares issuable by Del Monte pursuant
to arrangements as described in notes (e) through (i) above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with the Recapitalization, the Company entered into a
ten-year agreement dated April 18, 1997 (the "Management Advisory Agreement")
with TPG pursuant to which TPG is entitled to receive an annual fee from the
Company for management advisory services equal to the greater of $500,000 and
0.05% of the budgeted consolidated net sales of the Company. In addition, the
Company has agreed to indemnify TPG, its affiliates and shareholders, and their
respective directors, officers, agents, employees and affiliates from and
against fees and expenses, arising out of or in connection with the services
rendered by TPG thereunder. Such indemnification may not extend to actions
arising under the U.S. federal securities laws. The Management Advisory
Agreement makes available the resources of TPG concerning a variety of financial
and operational matters, including advice and assistance in reviewing the
Company's business plans and its results of operations and in evaluating
possible strategic acquisitions, as well as providing investment banking
services in identifying and arranging sources of financings. The Management
Advisory Agreement does not specify the minimum number of TPG personnel who must
provide such services or the individuals who must provide them, nor does it
require that a minimum amount of time be spent by such personnel on Company
matters. The services that will be provided by TPG cannot otherwise be obtained
by the Company without the addition of personnel or the engagement of outside
professional advisors. In management's opinion, the fees provided for under the
Management Advisory Agreement reasonably reflect the benefits to be received by
the Company and are comparable to those obtained in an arm's-length transaction
with an unaffiliated third party.

In connection with the Recapitalization, the Company also entered into
an agreement dated April 18, 1997 (the "Transaction Advisory Agreement") with
TPG pursuant to which TPG received a cash financial advisory fee of
approximately $8.4 million upon the closing of the Recapitalization as
compensation for its services as financial advisor for the Recapitalization,
which included assistance in connection with the evaluation of the fairness of
the Recapitalization and the valuation of the Company in connection therewith.
TPG also is entitled to receive fees up to 1.5% of the "transaction value" for
each subsequent transaction in which the Company is involved. The term
"transaction value" means the total value of any subsequent transaction,
including, without limitation, the aggregate amount of the funds required to
complete the subsequent transaction (excluding any fees payable pursuant to the
Transaction Advisory Agreement and fees, if any paid to any other person or
entity for financial advisory, investment banking, brokerage or any other
similar services rendered in connection with such transaction) including the
amount of indebtedness, preferred stock or similar items assumed (or remaining
outstanding). The Transaction Advisory Agreement includes indemnification
provisions similar to those in the Management Advisory Agreement, which
provisions also may not extend to actions arising under the U.S. federal
securities laws. In connection with the Contadina Acquisition, TPG received from
the Company a transaction fee of approximately $3 million. In connection with
the South America Acquisition, TPG will receive a transaction fee of less than
$.5 million. In management's opinion, the fees provided for under the
Transaction Advisory Agreement reasonably reflect the benefits received and to
be received by the Company and are comparable to those obtained in an
arm's-length transaction with an unaffiliated third party.

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Also in connection with the Recapitalization, DMFC and the holders of
its common stock, including TPG, entered into a stockholders' agreement dated as
of April 18, 1997 (the "Stockholders' Agreement"). Among other things, the
Stockholders' Agreement (i) imposes certain restrictions on the transfer of
shares of DMFC common stock and (ii) gives such holders registration rights
under certain circumstances. DMFC will bear the costs of preparing and filing
any such registration statement and will indemnify and hold harmless, to the
extent customary and reasonable, holders selling shares covered by such a
registration statement. Directors and members of management of the Company to
date have received 470,236 restricted shares of Common Stock, which are subject
to stockholders' agreements with the Company which impose similar restrictions.

During the second and third quarters of fiscal 1998, the Company sold
shares of Common Stock to certain key employees, including the executive
officers of the Company, pursuant to the Company's Employee Stock Purchase Plan.
See "Management -- Employment and Other Arrangements -- Stock Purchase Plan."
Messrs. Wolford and Smith each borrowed $175,000 from the Company in order to
acquire a portion of the stock purchased by him pursuant to such plan, all of
which remains outstanding. As of August 1, 1998, these loans bore interest at a
rate of 5.41%, which rate is adjusted semi-annually, and are evidenced by
promissory notes which are secured by a pledge of the stock purchased with the
proceeds of the loans. The Company extended these loans in accordance with
applicable law governing transactions by a corporation with its officers. The
Company cannot predict whether the terms of such transactions, if made with a
disinterested third party, would be more or less favorable to Messrs. Wolford
and Smith, although the Company has no reason to believe that such terms would
be less favorable. The Bank Financing limits the ability of the Company to make
loans or advances to employees to a maximum amount outstanding at any time of $5
million. Aside from the loans to Messrs. Wolford and Smith, the Company has made
no such loans or advances to any of its directors, officers or employees. Any
vote by the party receiving any loan must be made in accordance with Delaware
law.

Certain conflicts of interest could arise as a result of the
relationship between the Company and TPG. Messrs. Price and Shaw, each a partner
of TPG, and Mr. Boyce, an officer of a company that provides management services
to TPG, are also directors of the Company. None of the Company's management is
affiliated with TPG. TPG has the power to control the management and policies of
the Company and the determination of matters requiring stockholder approval. TPG
may be subject to a conflict of interest in allocating acquisition or other
business opportunities between the Company and other entities in which TPG has
substantial investments. Although currently TPG has no investment in any entity
that competes directly with the Company, it may in the future make such an
investment.

The Company will address any conflicts of interest and future
transactions it may have with its affiliates, including TPG, or other interested
parties in accordance with applicable law. Delaware law provides that any
transaction with any director or officer or other entity in which any of the
Company's directors or officers are also directors or officers, or have a
financial interest, will not be void or voidable solely due to the fact of the
interest or affiliation, nor because the votes of interested directors are
counted in approving the transaction, so long as (i) the material facts of the
relevant party and its interest are disclosed to the Board of Directors or the
stockholders, as applicable, and the transaction is approved in good faith by a
majority of the disinterested directors or by a specific vote of the
stockholders, as applicable; or (ii) the transaction is fair to the Company at
the time it is authorized, approved or ratified.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

(i) The following financial statements of Del Monte Foods
Company and subsidiaries are included in Item 8:

Report of KPMG Peat Marwick LLP, Independent Auditors
Consolidated Balance Sheets - June 30, 1997 and 1998
Consolidated Statements of Operations - Years ended June 30,
1996, 1997 and 1998
Consolidated Statements of Stockholders' Equity (Deficit) -
Years ended June 30, 1996, 1997 and 1998
Consolidated Statements of Cash Flows - Years ended June 30,
1996, 1997 and 1998
Notes to consolidated financial statements

(ii) Report of Ernst & Young LLP, Independent Auditors, on the
Company's statements of operations, stockholders' equity and
cash flows for the year ended June 30, 1996 follows on page
74.

2. Financial Statements Schedules:

Schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the
financial statements or notes thereto.

3. Exhibits

The exhibits listed on the accompanying Exhibit Index are
incorporated by reference herein and filed as part of this
report.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by registrant during the last quarter of
the period covered by this report.

(c) See Item 14(a)3 above.

(d) See Item 14(a)1 and 14(a)2 above.

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Del Monte Foods Company

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Del Monte Foods Company and subsidiaries
for the year ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of Del Monte Foods Company and subsidiaries for the year ended
June 30, 1996 in conformity with generally accepted accounting principles.

In the fiscal year ended June 30, 1996, Del Monte Foods Company changed its
methods of accounting for impairment of long-lived assets and for long-lived
assets to be disposed of.

ERNST & YOUNG LLP

San Francisco, California
August 29, 1996, except for Note R, as to which the date is June 29, 1998 and
the third paragraph of Note O, as to which the date is July 22, 1998

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

DEL MONTE FOODS COMPANY

By: /s/ RICHARD G. WOLFORD
----------------------------------
Richard G. Wolford Date: September 21, 1998
Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ RICHARD G. WOLFORD Chief Executive Officer; Director September 21, 1998
- ----------------------------------------
Richard G. Wolford

/s/ DAVID L MEYERS Executive Vice President, September 21, 1998
- ---------------------------------------- Administration and Chief
David L. Meyers Financial Officer

/s/ RICHARD L. FRENCH Senior Vice President and September 21, 1998
- ---------------------------------------- Chief Accounting Officer
Richard L. French

/s/ DICK W. BOYCE Director; Chairman of the Board September 21, 1998
- ----------------------------------------
Richard W. Boyce

/s/ TIMOTHY G. BRUER Director September 21, 1998
- ----------------------------------------
Timothy G. Bruer

/s/ AL CAREY Director September 21, 1998
- ----------------------------------------
Al Carey

/s/ PATRICK FOLEY Director September 21, 1998
- ----------------------------------------
Patrick Foley

/s/ BRIAN E. HAYCOX Director September 21, 1998
- ----------------------------------------
Brian E. Haycox

/s/ DENISE O'LEARY Director September 21, 1998
- ----------------------------------------
Denise O'Leary

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/s/ WILLIAM S. PRICE, III Director September 21, 1998
- ----------------------------------------
William S. Price, III

/s/ JEFFREY A. SHAW Director September 21, 1998
- ----------------------------------------
Jeffrey A. Shaw

/s/ WESLEY J. SMITH Director September 21, 1998
- ----------------------------------------
Wesley J. Smith

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EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
- -------- -----------

2.1 Agreement and Plan of Merger, dated as of February 21, 1997, amended
and restated as of April 14, 1997, among TPG Partners, L.P., TPG
Shield Acquisition Corporation and Del Monte Foods Company (the
"Agreement and Plan of Merger") (incorporated by reference to Exhibit
2.1 to Registration Statement No. 333-29079, filed June 24, 1997 (the
"DMC Registration Statement")) NOTE: Pursuant to the provisions of
paragraph (b)(2) of Item 601 of Regulation S-K, the Registrant hereby
undertakes to furnish to the Commission upon request copies of any
schedule to the Agreement and Plan of Merger.

2.2 Asset Purchase Agreement, dated as of November 12, 1997, among Nestle
USA, Inc., Contadina Services, Inc., Del Monte Corporation and Del
Monte Foods Company (the "Asset Purchase Agreement") (incorporated by
reference to Exhibit 10.1 to Report on Form 8-K No. 33-36374-01 filed
January 5, 1998)

3.1 Certificate of Incorporation of Del Monte Foods Company (incorporated
by reference to Exhibit 3.1 to Amendment No. 1 to the Registration
Statement on Form S-1 No. 333-48235, filed May 18, 1998 ("Amendment
No. 1 to the Registration Statement on Form S-l"))

3.2 By-laws of Del Monte Foods Company (incorporated by reference to
Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form
S-1)

3.3 Certificate of Designations filed May 4, 1998 (incorporated by
reference to Exhibit 3.3 to Amendment No. 1 to the Registration
Statement on Form S-1)

3.4 Certificate of Merger between Del Monte Foods Company, a Maryland
corporation, and Del Monte Foods Company, a Delaware corporation,
filed May 1, 1998 (incorporated by reference to Exhibit 3.4 to
Amendment No. 1 to the Registration Statement on Form S-1)

3.5 Articles of Merger between Del Monte Foods Company, a Maryland
corporation, and Del Monte Foods Company, a Delaware corporation,
filed May 1, 1998 (incorporated by reference to Exhibit 3.5 to
Amendment No. 1 to the Registration Statement on Form S-1)

4.1 Stockholders' Agreement, dated as of April 18, 1997, among Del Monte
Foods Company and its Stockholders (incorporated by reference to
Exhibit 3.6 to the DMC Registration Statement) NOTE: Pursuant to the
provisions of paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the
Registrant hereby undertakes to furnish to the Commission upon request
copies of the instruments pursuant to which various entities hold
long-term debt of the Company or its parent or subsidiaries, none of
which instruments govern indebtedness exceeding 10% of the total
assets of the Company and its parent or subsidiaries on a consolidated
basis

4.2 Form of Stockholders' Agreement among Del Monte Foods Company and its
employee stockholders (incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-8 filed November 24, 1997 File No.
333-40867 (the "Registration Statement on Form S-8"))

4.3 Form of Stockholders' Agreement between Del Monte Foods Company and
its Non-Employee Directors (incorporated by reference to Exhibit 4.4
to Amendment No. 1 to the Registration Statement on Form S-1)

4.4 Form of Stockholders' Agreement between Del Monte Foods Company and
its Non-Employee Directors -- Directors' Fee Arrangement (incorporated
by reference to Exhibit 4.5 to Amendment No. 1 to the Registration
Statement on Form S-1)

4.5 Form of Registration Rights Agreement by and among TPG Partners, L.P.,
TPG Parallel I, L.P. and Del Monte Foods Company (incorporated by
reference to Exhibit 4.6 to Amendment No. 3 to the Registration
Statement on Form S-1 No. 333-48235, filed June 30, 1998)

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10.1 Indenture, dated as of December 17, 1997, among Del Monte Foods
Company, as issuer, and Marine Midland Bank, as trustee, relating to
the Notes (the "Indenture") (incorporated by reference to Exhibit 4.1
to the Registration Statement on Form S-4 No. 333-47289, filed March
4, 1998 (the "Exchange Offer Registration Statement")) NOTE: Pursuant
to the provisions of paragraph (b)(2) of Item 601 of Regulation S-K,
the Registrant hereby undertakes to furnish to the Commission upon
request copies of any schedule to the Indenture

10.2 Form of Series B 12 1/2% Senior Discount Note due 2007 of Del Monte
Foods Company (the "Exchange Notes") (included as Exhibit B to the
Indenture) (incorporated by reference to Exhibit 4.2 to the Exchange
Offer Registration Statement)

10.3 Registration Rights Agreement, dated as of December 17, 1997, by and
among Del Monte Foods Company and the Initial Purchasers listed
therein, relating to the Notes (the "Registration Rights Agreement")
(incorporated by reference to Exhibit 4.3 to the Exchange Offer
Registration Statement) NOTE: Pursuant to the provisions of paragraph
(b)(2) of Item 601 of Regulation S-K, the Registrant hereby undertakes
to furnish to the Commission upon request copies of any schedule to
the Registration Rights Agreement.

10.4 Amended and Restated Credit Agreement, dated as of December 17, 1997,
among Del Monte Corporation, ("BofA") Bank of America National Trust
and Savings Association, as Administrative Agent, and the other
financial institutions parties thereto (the "Amended Credit
Agreement") (incorporated by reference to Exhibit 4.4 to the Exchange
Offer Registration Statement) NOTE: Pursuant to the provisions of
paragraph (b)(2) of Item 601 of Regulation S-K, the Registrant hereby
undertakes to furnish to the Commission upon request copies of any
schedule to the Amended Credit Agreement.

10.5 Amended and Restated Parent Guaranty, dated December 17, 1997,
executed by Del Monte Foods Company, with respect to the obligations
under the Amended Credit Agreement (the "Restated Parent Guaranty")
(incorporated by reference to Exhibit 4.5 to the Exchange Offer
Registration Statement)

10.6 Security Agreement, dated April 18, 1997, between Del Monte
Corporation and Del Monte Foods Company and Bank of America National
Trust and Savings Association (incorporated by reference to Exhibit
4.6 to the DMC Registration Statement)

10.7 Pledge Agreement, dated April 18, 1997. between Del Monte Corporation
and Bank of America National Trust and Savings Association
(incorporated by reference to Exhibit 4.7 to the DMC Registration
Statement)

10.8 Parent Pledge Agreement, dated April 18, 1997. between Del Monte Foods
Company and Bank of America National Trust and Savings Association
(incorporated by reference to Exhibit 4.8 to the DMC Registration
Statement)

10.9 Indenture, dated as of April 18, 1997, among Del Monte Corporation, as
issuer, Del Monte Foods Company, as guarantor, and Marine Midland
Bank, as trustee, relating to the 12 1/4% Senior Subordinated Notes
Due 2007 (incorporated by reference to Exhibit 4.2 to the DMC
Registration Statement)

10.10 Registration Rights Agreement, dated as of April 18, 1997, by and
among Del Monte Corporation and the Purchasers listed therein,
relating to the 12 1/4% Senior Subordinated Notes Due 2007
(incorporated by reference to Exhibit 4.9 to the DMC Registration
Statement)

10.11 Transaction Advisory Agreement, dated as of April 18, 1997, between
Del Monte Corporation and TPG Partners, L.P. (incorporated by
reference to Exhibit 10.1 to the Registration Statement)

10.12 Management Advisory Agreement, dated as of April 18, 1997, between Del
Monte Corporation and TPG Partners, L.P. (incorporated by reference to
Exhibit 10.2 to the Registration Statement)

10.13 Retention Agreement between Del Monte Corporation and David L. Meyers,
dated November 1, 1991 (incorporated by reference to Exhibit 10.3 to
the DMC Registration Statement)

10.14 Retention Agreement between Del Monte Corporation and Glynn M.
Phillips, dated October 5, 1994 (incorporated by reference to Exhibit
10.4 to the DMC Registration Statement)

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81

10.15 Retention Agreement between Del Monte Corporation and Thomas E.
Gibbons, dated January 1, 1992 (incorporated by reference to Exhibit
10.5 to the DMC Registration Statement)

10.16 Del Monte Foods Annual Incentive Award Plan and 1997 Plan Year
Amendments (incorporated by reference to Exhibit 10.8 to the DMC
Registration Statement)

10.17 Additional Benefits Plan of Del Monte Corporation, as amended and
restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.9 to the DMC Registration Statement)

10.18 Supplemental Benefits Plan of Del Monte Corporation, effective as of
January 1, 1990, as amended as of January 1, 1992 and May 30, 1996
(incorporated by reference to Exhibit 10.10 to the DMC Registration
Statement)

10.19 Del Monte Foods Company Employee Stock Purchase Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-8)

10.20 Del Monte Foods Company 1997 Stock Incentive Plan (incorporated by
reference to Exhibit 4.2 to the Registration Statement on Form S-8)

10.21 Agreement for Information Technology Services between Del Monte
Corporation and Electronic Data Systems Corporation, dated November 1,
1992, as amended as of September 1, 1993 and as of September 15, 1993
(incorporated by reference to Exhibit 10.11 to the DMC Registration
Statement)

10.22 Supply Agreement between Del Monte Corporation and Silgan Containers
Corporation, dated as of September 3, 1993, as amended as of December
21, 1993 (incorporated by reference to Exhibit 10.12 to the DMC
Registration Statement)

10.23 Del Monte Foods Company Non-Employee Directors and Independent
Contractors 1997 Stock Incentive Plan (incorporated by reference to
Exhibit 10.23 to Amendment No. 1 to the Registration Statement on Form
S-1)

10.24 Del Monte Foods Company 1998 Stock Incentive Plan (incorporated by
reference to Exhibit 10.24 to Amendment No. 2 to the Registration
Statement on Form S-1 No. 333-48235, filed June 3, 1998)

*10.25 Employment Agreement and Promissory Note of Richard Wolford

*10.26 Employment Agreement and Promissory Note of Wesley Smith

10.27 Supplemental Indenture, dated as of April 24, 1998, among Del Monte
Corporation, as Issuer, Del Monte Foods Company, as Guarantor, and
Marine Midland Bank, as Trustee (incorporated by reference to Exhibit
10.25 to the Registration Statement on Form S-1 No. 333-48235)

10.28 Supplemental Indenture, dated as of April 24, 1998, between Del Monte
Foods Company, as Guarantor, and Marine Midland Bank, as Trustee
(incorporated by reference to Exhibit 10.26 to the Registration
Statement on Form S-1 No. 333-48235)

10.29 Amendment and Waiver, dated as of April 16, 1998, to the Amended
Credit Agreement and the Restated Parent Guaranty, by Del Monte
Corporation and the financial institutions party thereto (incorporated
by reference to Exhibit 10.27 to the Registration Statement on Form
S-1 No. 333-48235)

10.30 Commitment Letter dated April 15, 1998 to Del Monte Corporation from
BofA and Bankers Trust Company (incorporated by reference to Exhibit
10.28 to the Registration Statement on Form S-1 No. 333-48235)

10.31 Supplemental Indenture, dated as of December 19, 1997, among Del Monte
Corporation, as Issuer, Del Monte Foods Company, as Guarantor, and
Marine Midland Bank, as Trustee

*11.1 Statement Re computation of earnings per share

*12.1 Statement Re computation of ratio of earnings to fixed charges

21.1 Subsidiaries of Del Monte Foods Company and Del Monte Corporation

*23.1 Consent of Ernst & Young LLP, Independent Auditors

*23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants

*27.1 Financial Data Schedule

* filed herewith

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