0000940944-01-500098.txt : 20011018 0000940944-01-500098.hdr.sgml : 20011018 ACCESSION NUMBER: 0000940944-01-500098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010826 FILED AS OF DATE: 20011010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DARDEN RESTAURANTS INC CENTRAL INDEX KEY: 0000940944 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 593305930 STATE OF INCORPORATION: FL FISCAL YEAR END: 0526 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13666 FILM NUMBER: 1755733 BUSINESS ADDRESS: STREET 1: 5900 LAKE ELLENOR DR CITY: ORLANDO STATE: FL ZIP: 32809 BUSINESS PHONE: 4072454000 MAIL ADDRESS: STREET 1: 5900 LAKE ELLENOR DRIVE CITY: ORLANDO STATE: FL ZIP: 32809 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL MILLS RESTAURANTS INC DATE OF NAME CHANGE: 19950313 10-Q 1 form10q_fy02.txt FORM 10-Q - FY02 -1ST QUARTER ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------------------------------------------------ FORM 10-Q ------------------------------------------------------------------------------ (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 26, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .............. to .............. ------------------------------------------------------------------------------ 1-13666 Commission File Number ------------------------------------------------------------------------------ DARDEN RESTAURANTS, INC. (Exact name of registrant as specified in its charter) Florida 59-3305930 (State or other jurisdiction (I.R.S. Employer Identification No.) of corporation or oganization) 5900 Lake Ellenor Drive Orlando, Florida 32809 (Address of principal executive offices) (Zip Code) 407-245-4000 (Registrant's telephone number, including area code) ------------------------------------------------------------------------------ Indicate by check mark whether the 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. [X] Yes [ ] No ------------------------------------------------------------------------------ APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares of Common Stock, no par value, outstanding as of October 1, 2001: 116,548,161 (excluding 53,996,881 shares held in the Company's treasury). ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ DARDEN RESTAURANTS, INC. TABLE OF CONTENTS Page Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Earnings 3 Consolidated Balance Sheets 4 Consolidated Statements of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Part II - Other Information Item 1. Legal Proceedings 12 Item 5. Other information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Index to Exhibits 14 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In Thousands, Except per Share Data) (Unaudited)
Thirteen Weeks Ended ------------------------------------------------------------------------------------------------------------------- August 26, 2001 August 27, 2000 ------------------------------------------------------------------------------------------------------------------- Sales........................................................ $ 1,081,489 $ 1,018,205 Costs and Expenses: Cost of sales: Food and beverage....................................... 343,592 331,037 Restaurant labor........................................ 333,446 318,631 Restaurant expenses..................................... 154,150 139,444 ----------- ----------- Total Cost of Sales................................... $ 831,188 $ 789,112 Selling, general and administrative....................... 106,940 99,345 Depreciation and amortization............................. 39,510 35,636 Interest, net............................................. 8,274 6,274 ----------- ----------- Total Costs and Expenses............................ $ 985,912 $ 930,367 ----------- ----------- Earnings before Income Taxes................................. 95,577 87,838 Income Taxes................................................. (33,421) (30,917) ----------- ----------- Net Earnings................................................. $ 62,156 $ 56,921 =========== =========== Net Earnings per Share: Basic..................................................... $ 0.53 $ 0.47 =========== =========== Diluted................................................... $ 0.51 $ 0.46 =========== =========== Average Number of Common Shares Outstanding: Basic..................................................... 117,400 121,600 =========== =========== Diluted................................................... 122,500 124,400 =========== ===========
-------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. 3 DARDEN RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS (In Thousands)
(Unaudited) -------------------------------------------------------------------------------------------------------------------- August 26, 2001 May 27, 2001 -------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents................................. $ 35,780 $ 61,814 Receivables............................................... 24,075 32,870 Inventories............................................... 171,672 148,429 Net assets held for disposal.............................. 12,978 10,087 Prepaid expenses and other current assets................. 18,131 26,942 Deferred income taxes..................................... 48,483 48,000 ------------- ------------- Total Current Assets.................................... $ 311,119 $ 328,142 Land, Buildings and Equipment................................ 1,796,138 1,779,515 Other Assets................................................. 147,681 110,801 ------------- ------------- Total Assets.......................................... $ 2,254,938 $ 2,218,458 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................... $ 171,026 $ 156,859 Short-term debt........................................... 12,000 Current portion of long-term debt......................... 2,640 2,647 Accrued payroll........................................... 64,518 82,588 Accrued income taxes...................................... 71,119 47,698 Other accrued taxes....................................... 30,052 27,429 Other current liabilities................................. 218,437 225,037 ------------- ------------- Total Current Liabilities............................... $ 557,792 $ 554,258 Long-term Debt............................................... 515,957 517,927 Deferred Income Taxes........................................ 92,378 90,782 Other Liabilities............................................ 19,978 20,249 ------------- ------------- Total Liabilities..................................... $ 1,186,105 $ 1,183,216 ------------- ------------- Stockholders' Equity: Common stock and surplus.................................. $ 1,428,946 $ 1,405,799 Retained earnings......................................... 594,277 532,121 Treasury stock............................................ (890,396) (840,254) Accumulated other comprehensive income.................... (13,022) (13,102) Unearned compensation..................................... (50,972) (49,322) ------------- -------------- Total Stockholders' Equity............................ $ 1,068,833 $ 1,035,242 ------------- -------------- Total Liabilities and Stockholders' Equity.......... $ 2,254,938 $ 2,218,458 ============ ============== --------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 4 DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Thirteen Weeks Ended August 26, 2001 and August 27, 2000 (In Thousands) (Unaudited)
---------------------------------------------------------------------------------------------------------------------------- Common Accumulated Stock Other Total and Retained Treasury Comprehensive Unearned Stockholders' Surplus Earnings Stock Income Compensation Equity ---------------------------------------------------------------------------------------------------------------------------- Balance at May 27, 2001.................... $ 1,405,799 $532,121 $(840,254) $(13,102) $(49,322) $1,035,242 Comprehensive income: Net earnings........................... 62,156 62,156 Other comprehensive income: Foreign currency adjustment....... 102 102 Change in fair value of derivatives (22) (22) ---------- Total comprehensive income.......... 62,236 Stock option exercises (962 shares)........ 11,262 11,262 Issuance of restricted stock (188 shares), net of forfeiture adjustments............. 4,144 658 (4,742) 60 Earned compensation........................ 1,067 1,067 ESOP note receivable repayments............ 2,025 2,025 Income tax benefit credited to equity...... 7,231 7,231 Purchases of common stock for treasury (1,815 shares).......................... (51,196) (51,196) Issuance of treasury stock under Employee Stock Purchase Plan (45 shares) .......... 510 396 906 ---------------------------------------------------------------------------------------------------------------------------- Balance at August 26, 2001.................$1,428,946 $594,277 $(890,396) $(13,022) $(50,972) $1,068,833 ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Common Accumulated Stock Other Total and Retained Treasury Comprehensive Unearned Stockholders' Surplus Earnings Stock Income Compensation Equity ---------------------------------------------------------------------------------------------------------------------------- Balance at May 28, 2000.................... $1,351,707 $344,579 $(666,837) $(12,457) $(56,522) $960,470 Comprehensive income: Net earnings............................ 56,921 56,921 Other comprehensive income, foreign currency adjustment............. 238 238 ------------ Total comprehensive income.......... 57,159 Stock option exercises (495 shares)........ 5,143 5,143 Issuance of restricted stock (330 shares), net of forfeiture adjustments............. 3,430 1,027 (4,493) (36) Earned compensation........................ 1,006 1,006 ESOP note receivable repayments............ 2,950 2,950 Income tax benefit credited to equity...... 2,116 2,116 Purchases of common stock for treasury (3,355 shares).......................... (57,422) (57,422) Issuance of treasury stock under Employee Stock Purchase Plan (60 shares)........... 298 524 822 ---------------------------------------------------------------------------------------------------------------------------- Balance at August 27, 2000................. $1,362,694 $401,500 $ (722,708) $(12,219) $(57,059) $972,208 ---------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 5 DARDEN RESTAURANTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Thirteen Weeks Ended -------------------------------------------------------------------------------------------------------------------- August 26, 2001 August 27, 2000 -------------------------------------------------------------------------------------------------------------------- Cash Flows--Operating Activities Net earnings.................................................... $ 62,156 $ 56,921 Adjustments to reconcile net earnings to cash flow: Depreciation and amortization................................. 39,510 35,636 Amortization of unearned compensation and loan costs.......... 1,894 1,631 Change in current assets and liabilities...................... 9,904 5,249 Change in other liabilities .................................. (271) (81) Loss on disposal of land, buildings and equipment............. 1,233 539 Deferred income taxes......................................... 1,113 (1,257) Income tax benefit credited to equity......................... 7,231 2,116 Other, net.................................................... 193 (87) ------------ ---------- Net Cash Provided by Operating Activities................... $ 122,963 $ 100,667 --------- ---------- Cash Flows--Investing Activities Purchases of land, buildings and equipment...................... (60,186) (82,221) Increase in other assets........................................ (6,591) (2,432) Purchase of trust owned life insurance.......................... (31,500) Proceeds from disposal of land, buildings and equipment (including net assets held for disposal)...................... 369 4,575 ------------- ---------- Net Cash Used by Investing Activities....................... $ (97,908) $ (80,078) -------------- ---------- Cash Flows--Financing Activities Proceeds from issuance of common stock.......................... 12,168 5,965 Purchases of treasury stock..................................... (51,196) (57,422) ESOP note receivable repayment.................................. 2,025 2,950 (Decrease) Increase in short-term debt.......................... (12,000) 37,300 Repayment of long-term debt..................................... (2,032) (2,956) Payment of loan costs........................................... (54) (147) ------------- ---------- Net Cash Used by Financing Activities....................... $ (51,089) $ (14,310) ---------- ---------- (Decrease) Increase in Cash and Cash Equivalents................... (26,034) 6,279 Cash and Cash Equivalents - Beginning of Period.................... 61,814 26,102 ----------- ---------- Cash and Cash Equivalents - End of Period.......................... $ 35,780 $ 32,381 ========== ========== Cash Flow from Changes in Current Assets and Liabilities Receivables..................................................... 8,795 554 Inventories..................................................... (23,243) (33,879) Prepaid expenses and other current assets....................... 459 182 Accounts payable................................................ 14,167 24,414 Accrued payroll................................................. (18,070) (12,398) Accrued income taxes............................................ 23,421 29,926 Other accrued taxes............................................. 2,623 2,755 Other current liabilities....................................... 1,752 (6,305) ------------ ---------- Change in Current Assets and Liabilities...................... $ 9,904 $ 5,249 =========== ========== --------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 6 DARDEN RESTAURANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar Amounts in Thousands, Except per Share Data) Note 1. Background Darden Restaurants, Inc. (the "Company") owns and operates casual dining restaurants under the trade names Red Lobster(R), Olive Garden(R), Bahama Breeze(R) and Smokey Bones(R) BBQ Sports Bar. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). They do not include certain information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the thirteen weeks ended August 26, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending May 26, 2002. These statements should be read in conjunction with the consolidated financial statements and footnotes included in our annual report on Form 10-K for the year ended May 27, 2001 ("Form 10-K"). The accounting policies used in preparing these consolidated financial statements are the same as those described in our Form 10-K. Certain reclassifications have been made to prior period amounts to conform with current period presentation. Note 2. Consolidated Statements of Cash Flows During the thirteen weeks ended August 26, 2001 (hereafter sometimes also referred to as "the quarter"), the Company paid $7,496 for interest (net of amounts capitalized) and $1,620 for income taxes. During the thirteen weeks ended August 27, 2000, the Company paid $9,657 for interest (net of amounts capitalized) and $851 for income taxes. Note 3. Net Earnings Per Share Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares outstanding. Options to purchase 68,822 and 3,858,748 shares of common stock were excluded from the calculation of diluted earnings per share for the thirteen weeks ended August 26, 2001 and August 27, 2000, respectively, because their exercise prices exceeded the average market price of common shares for the period. Note 4. Derivatives In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Gains or losses resulting from changes in the fair values of those derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. The ineffective portion of all hedges is recognized in earnings. In June 2000, the FASB issued SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB Statement No. 133". SFAS 138, which amended the accounting and reporting standards of SFAS 133 for certain derivative instruments and hedging activities, was required to be adopted concurrently with SFAS 133. The Company adopted SFAS 133 and SFAS 138 in the first quarter of fiscal 2002. There were no transition adjustments that were required to be recognized as a result of the adoption of these new standards, and therefore adoption of these standards did not materially impact the Company's consolidated financial position, results of operations or cash flows. 7 During the quarter, the Company entered into futures contracts to reduce the risk of natural gas price fluctuations. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value are not included in current earnings but are reported as other comprehensive income, a component of stockholders' equity. These changes in fair value will be included in earnings of future periods when the natural gas is purchased and used by the Company in its operations. It is expected that $22 of net losses related to these contracts, recognized in accumulated other comprehensive income as of August 26, 2001, will be reclassified into restaurant expenses during the fiscal year ending May 26, 2002. To the extent these derivatives are not effective, changes in their fair value are immediately recognized in current earnings. No gains or losses were recognized in earnings during the thirteen weeks ended August 26, 2001. As of August 26, 2001, the maximum length of time over which the Company is hedging its exposure to the variability in future natural gas cash flows is nine months. No gains or losses were reclassified into earnings as a result of the discontinuance of natural gas cash flow hedges because it was probable that the original forecasted transactions would not occur. Note 5. Trust Owned Life Insurance In August 2001, the Company caused a trust, that it previously had established, to purchase life insurance policies covering certain Company officers and other key employees ("Trust Owned Life Insurance" or "TOLI"). The trust is the owner and sole beneficiary of the TOLI policies. The policies were purchased to offset some of the costs of the participant earnings component of the Company's existing nonqualified deferred compensation plan. The cash surrender value of the policies, which is included in other assets in the accompanying consolidated balance sheets, amounted to $31,500 at August 26, 2001. Changes in cash surrender value are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings. Note 6. Restructuring Liability In 1997, the Company recorded restructuring charges of $70,900 in connection with the closing of certain restaurant properties. The related liabilities are included in other current liabilities in the accompanying consolidated balance sheets and were established to accrue for estimated carrying costs of buildings and equipment prior to disposal, employee severance costs, lease buy-out provisions and other costs associated with the restructuring action. All restaurant closings under this restructuring action have been completed. The remaining restructuring actions, including disposal of the closed owned properties and the lease buy-outs related to the closed leased properties, are expected to be substantially completed during the current fiscal year. A summary of restructuring liability activity for the thirteen weeks ended August 26, 2001 is as follows:
Balance at May 27, 2001................................................ $ 5,798 Cash Payments: Carrying costs and employee severance payments.................... (194) Lease payments including lease buy-outs........................... (183) ------- Balance at August 26, 2001............................................. $ 5,421
Note 7. Treasury Stock Pursuant to the Company's 64.6 million share stock repurchase program and in accordance with applicable securities regulations, the Company repurchased 1,815,404 shares of its common stock for $51,196 in the first quarter of fiscal 2002, resulting in a cumulative repurchase as of August 26, 2001 of a total of 54,332,771 shares. The Company's stock repurchase plan is used by the Company to offset the dilutive effect of stock option exercises and to increase shareholder value. The repurchased common stock is reflected as a reduction of stockholders' equity. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following table sets forth selected restaurant operating data as a percentage of sales for the periods indicated. All information is derived from the consolidated statements of earnings for the thirteen weeks ended August 26, 2001 and August 27, 2000.
Thirteen Weeks Ended -------------------------------------------------------------------------------------------------------------------- August 26, 2001 August 27, 2000 -------------------------------------------------------------------------------------------------------------------- Sales........................................................ 100.0% 100.0% Costs and Expenses: Cost of sales: Food and beverage....................................... 31.8 32.5 Restaurant labor........................................ 30.8 31.3 Restaurant expenses..................................... 14.3 13.7 ------ ------ Total Cost of Sales................................... 76.9% 77.5% Selling, general and administrative....................... 9.9 9.8 Depreciation and amortization............................. 3.6 3.5 Interest, net............................................. 0.8 0.6 ------- ------ Total Costs and Expenses............................ 91.2% 91.4% ------ Earnings before Income Taxes................................. 8.8 8.6 Income Taxes................................................. (3.1) (3.0) ------- ------ Net Earnings................................................. 5.7% 5.6% ======= ======
-------------------------------------------------------------------------------- Results of Operations For the fiscal 2002 first quarter ended August 26, 2001, earnings after tax were $62.2 million or 51 cents per diluted share, compared to earnings after tax of $56.9 million or 46 cents per diluted share in the first quarter of last year. The increase in first quarter earnings was primarily attributable to strong same-restaurant sales at both Red Lobster and Olive Garden. Sales of $1.08 billion for the first quarter were 6.2% higher than last year's first quarter. The increase in sales was primarily attributable to a net increase of 35 restaurants since August 27, 2000, and an increase in same-restaurant sales. Food and beverage costs for the first quarter were 31.8% of sales, compared to 32.5% of sales last year primarily attributable to lower product costs. Restaurant labor costs decreased to 30.8% of sales compared to last year's 31.3% of sales primarily due to efficiencies resulting from higher sales volumes. Restaurant expenses increased to 14.3% of sales compared to 13.7% last year primarily due to increased utility and new restaurant preopening expenses, partially offset by the impact of higher sales volumes. Selling, general and administrative expenses amounted to 9.9% of sales which was comparable to last year's 9.8% of sales. Depreciation and amortization as a percentage of sales increased from 3.5% to 3.6% primarily as a result of new restaurant and remodel activity, partially offset by the favorable impact of higher sales volumes. Interest expense increased to 0.8% of sales compared to 0.6% last year primarily due to higher debt levels. The effective tax rate for the first quarter of fiscal 2002 was 35.0% compared to 35.2% in last year's first quarter. The decrease in the effective tax rate resulted primarily from increases in annual expected tax credits and tax exempt income, partially offset by a higher level of expected pre-tax income for 2002 and a reduction in certain tax deductible costs. Division Results Red Lobster sales of $578.3 million were 3.9% above last year's first quarter. Same-restaurant sales in the United States increased 3.2% for the quarter, marking the fifteenth consecutive quarter of same-restaurant sales increases. First quarter operating profits improved over the prior year primarily as a result of the increased sales and lower food and beverage costs as a percentage of sales. 9 Olive Garden sales of $462.2 million were 6.0% above last year's first quarter. Same-restaurant sales in the United States increased 4.2%, representing the twenty-eighth consecutive quarter of same-restaurant sales increases. First quarter operating profits improved over the prior year primarily due to increased sales and lower restaurant labor and selling, general and administrative expenses as a percentage of sales, partially offset by higher restaurant expenses as a percentage of sales. Bahama Breeze continued to produce strong sales during the quarter. Two new openings occurred in the first quarter, bringing the total number of restaurants in operation to 23. One additional restaurant opened since the end of the first quarter and at least five more openings are scheduled for this fiscal year. Restaurant sales at Smokey Bones continue to exceed management's initial expectations. One new opening occurred in the first quarter bringing the total number of restaurants in operation to ten. Five additional restaurants under construction are planned to open in fiscal 2002. The table below details the number of restaurants open at the end of the first quarter of fiscal 2002, compared with the number open at the end of May 2001 and the end of last fiscal year's first quarter. NUMBER OF RESTAURANTS
-------------------------------------------------------------------------------------------------------------------- August 26, 2001 May 27, 2001 August 27, 2000 -------------------------------------------------------------------------------------------------------------------- Red Lobster - USA.................. 628 629 621 Red Lobster - Canada............... 32 32 32 -------- ------ ------ Total......................... 660 661 653 Olive Garden - USA................. 475 472 464 Olive Garden - Canada.............. 5 5 5 -------- ------ ------ Total......................... 480 477 469 Bahama Breeze...................... 23 21 14 Smokey Bones ...................... 10 9 2 -------- ------ ------ Total......................... 1,173 1,168 1,138 ======== ====== ====== --------------------------------------------------------------------------------------------------------------------
Seasonality The Company's sales volumes fluctuate seasonally. In fiscal years 2000 and 2001, the Company's sales were highest in the spring, lowest in the fall, and comparable during winter and summer. Severe weather, storms and similar conditions may impact sales volumes seasonally in some operating regions. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Financial Condition, Liquidity and Capital Resources Inventories totaled $171.7 million as of August 26, 2001, up from $148.4 million at May 27, 2001. The increase resulted from typical first quarter increases in seafood inventory levels due to availability. The additional seafood is expected to be used during the current fiscal year. Accounts payable of $171.0 million at August 26, 2001, increased from $156.9 million at May 27, 2001, principally as a result of the increased level of inventories. Other assets totaled $147.7 million as of August 26, 2001, up from $110.8 million at May 27, 2001. The increase resulted primarily from the Company's purchase of Trust Owned Life Insurance during the first quarter with an initial cash surrender value totaling $31.5 million. The Trust Owned Life Insurance was purchased to offset some of the costs of the Company's nonqualified deferred compensation plan. Cash and cash equivalents of $35.8 million at August 26, 2001, decreased from $61.8 million at May 27, 2001, primarily as a result of the purchase of this insurance. 10 Accrued income taxes of $71.1 million at August 26, 2001, increased from $47.7 million at May 27, 2001, principally due to the timing of income tax payments. The Company's long-term debt consists principally of (i) $150.0 million of unsecured 6.375 percent notes due in February 2006, (ii) $100.0 million of unsecured 7.125 percent debentures due in February 2016, (iii) $150.0 million of unsecured 8.375 percent senior notes due in September 2005, (iv) $75.0 million of unsecured 7.45 percent medium-term notes due in April 2011, and (v) a $42.4 million commercial bank loan that is used to support two loans from the Company to the Employee Stock Ownership Plan portion of the Darden Savings Plan. The Company also has a commercial paper program that serves as its primary source of short-term financing. As of August 26, 2001, there were no borrowings outstanding under the program. To support the program, the Company has a credit facility with a consortium of banks under which the Company can borrow up to $300.0 million. As of August 26, 2001, no amounts were outstanding under the credit facility. Capital expenditures were $60.2 million for the first quarter of fiscal 2002 compared to $82.2 million in last year's first quarter. The decrease principally relates to timing as the Company estimates that its fiscal 2002 capital expenditures will be slightly more than that of fiscal 2001. The Company repurchased 1,815,404 shares of its common stock for $51.2 million in the first quarter of fiscal 2002 compared to 3,354,988 shares for $57.4 million in last year's first quarter. Forward-Looking Statements Certain information included in this report and other materials filed or to be filed by the Company with the SEC (as well as information included in oral statements or written statements made or to be made by the Company) may contain statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words or phrases such as "believe," "plan," "will", "expect," "intend," "estimate," and "project," and similar expressions are intended to identify forward-looking statements. All of these statements, and any other statements in this report that are not historical facts, are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding the number of new Bahama Breeze and Smokey Bones restaurants expected to be opened during fiscal 2002, the completion of certain restructuring actions during the current fiscal year, and the Company's plans to participate in the "Dine Out for America" project. These forward-looking statements are based on assumptions concerning important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, could cause the actual results to materially differ from those expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, competition, economic and market conditions, changes in food and other costs, importance of locations, effects of government regulations and the Company's ability to achieve its growth objectives, each of which is more specifically discussed in Exhibit 99 filed with the Company's Form 10-K, which is incorporated into this report by reference. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to a variety of market risks, including fluctuations in interest rates, foreign currency exchange rates, and commodity prices. To manage this exposure, the Company periodically enters into interest rate, foreign currency exchange, and commodity instruments for other than trading purposes. The Company uses the variance/covariance method to measure value at risk, over time horizons ranging from one week to one year, at the 95 percent confidence level. As of August 26, 2001, the Company's potential losses in future net earnings resulting from changes in foreign currency exchange rates, commodity prices, and floating rate debt interest rate exposures were approximately $1 million over a period of one year (including the impact of the natural gas hedges discussed above in Note 4 to the Financial Statements). At August 26, 2001, the value at risk from an increase in the fair value of all of the Company's long-term fixed-rate debt, over a period of one year, was approximately $36 million. The fair value of the Company's long-term fixed-rate debt during the first quarter of fiscal 2002 averaged approximately $478 million, with a high of approximately $489 million and a low of approximately $470 million. The Company's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows by targeting an appropriate mix of variable and fixed rate debt. 11 PART II OTHER INFORMATION Item 1. Legal Proceedings. From time to time, the Company is made a party to legal proceedings arising in the ordinary course of business. The Company does not believe that the results of these legal proceedings, even if unfavorable to the Company, will have a materially adverse impact on its financial position, results of operations or cash flows. Item 5. Other Information. The Company is planning that, on October 11, 2001, all Company restaurants will mark the one-month anniversary of the terrorist attacks on the United States by donating 100% of their profits for the day to the American Red Cross Disaster Relief Fund as part of the national "Dine Out for America" project. Every meal purchased in Company restaurants that day will benefit relief efforts and the victims and their families affected by the tragic events on September 11, 2001. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit 10(a) Darden Restaurants, Inc. FlexComp Plan, as amended and restated. Exhibit 10(b) Darden Restaurants, Inc. Compensation Plan for Non-Employee Directors, as amended. Exhibit 10(c) Darden Restaurants, Inc. Stock Plan for Directors, as amended. Exhibit 12 Computation of Ratio of Consolidated Earnings to Fixed Charges. (b) Reports on Form 8-K. (i) On June 22, 2001, the Company filed a current report on Form 8-K announcing annual and fourth quarter financial results for fiscal 2001 as well as national expansion of Smokey Bones. 12 SIGNATURES Pursuant to the requirements 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. DARDEN RESTAURANTS, INC. Dated: October 10, 2001 By: /s/ Paula J. Shives ------------------------------------ Paula J. Shives Senior Vice President, General Counsel and Secretary Dated: October 10, 2001 By: /s/ Clarence Otis, Jr. ------------------------------------ Clarence Otis, Jr. Senior Vice President, Chief Financial Officer (Principal financial and accounting officer) 13 INDEX TO EXHIBITS Exhibit Number Exhibit Title 10(a) Darden Restaurants, Inc. FlexComp Plan, as amended and restated. 10(b) Darden Restaurants, Inc. Compensation Plan for Non-Employee Directors, as amended. 10(c) Darden Restaurants, Inc. Stock Plan for Directors, as amended. 12 Computation of Ratio of Consolidated Earnings to Fixed Charges 14 EX-10 3 exhibit10a.txt EXHIBIT 10A, FLEX COMP DARDEN RESTAURANTS, INC. FLEXCOMP PLAN As Amended and Restated Effective January 1, 1998 DARDEN RESTAURANTS, INC. FLEXCOMP PLAN ARTICLE I INTRODUCTION Section 1.1 Purpose of Plan. Darden Restaurants, Inc. (formerly known as "General Mills Restaurants, Inc.") hereby adopts the Darden Restaurants. Inc. FlexComp Plan (the "Plan") for a select group of the key management and highly compensated employees of the Company as a means of providing bonus income and a method for sheltering a portion of an eligible individual's income from current taxation by providing (i) current bonus income (referred to herein as "FlexComp Awards") on an annual basis and providing a means by which an eligible individual may elect to defer the payment of all or a portion of his or her FlexComp Award for a period of one or more years, and (ii) a means by which an eligible individual may elect to defer the payment of all or a portion of his or her salary and/or applicable bonus (in addition to his FlexComp Awards) for a period of one or more years. In addition, this Plan is intended to be a successor Plan with respect to certain liabilities on behalf of certain individuals who had deferred compensation accounts under the General Mills Restaurants, Inc. FlexComp Plan, the General Mills, Inc. Deferred Compensation Plan and/or the Supplemental Savings Plan of General Mills, Inc. immediately prior to the Effective Date, which liabilities were transferred to this Plan as a result of the spin-off of General Mills Restaurants, Inc. from General Mills, Inc. Section 1.2 Effective Date of Plan. This Plan is a successor plan to the plans named below as of the Effective Date. This Plan is amended, effective January 1, 1996, to allow for the deferral of salary and bonuses with respect to eligible individuals. The original effective date of the predecessor plans, from which liabilities are transferred to this Plan, are as follows: (a) The original effective date of the General Mills Restaurants, Inc. FlexComp Plan was June 1, 1994; (b) The original effective date of the General Mills, Inc. Deferred Compensation Plan was May 1, 1984; and (c) The original effective date of the Supplemental Savings Plan of General Mills, Inc. was July 25, 1983. 1 ARTICLE II DEFINITIONS Section 2.1 Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Section 2.2 Committee shall mean the Minor Amendment Committee of the Board of Directors of the Company or its delegate. Section 2.3 Company shall mean Darden Restaurants, Inc. and any of its subsidiaries or affiliated business entities as shall be authorized to participate in the Plan by the Board, or its delegate. Section 2.4 Deferred Comp Participant shall mean a Participant who is eligible under Section 3.3 to defer all or a portion of his or her compensation (including salary and/or bonuses) as described in Section 4.4. Section 2.5 DSP shall mean the Darden Savings Plan (formerly the "Profit Sharing and Savings Plan for Darden Restaurants, Inc.). Section 2.6 Effective Date shall mean May 29, 1995. Section 2.7 FlexComp Award Participant shall mean a Participant who is eligible under Section 3.2 for a FlexComp Award under Section 4.1 and deferral of that award under Section 4.3. Section 2.8 Management Incentive Plan shall mean the plan adopted by Darden Restaurants, Inc. for key management employees. Section 2.9 Minor Amendment Committee shall mean the Minor Amendment Committee, appointed by the Board of Directors of Darden Restaurants, Inc. Section 2.10 Participant shall mean any employee of the Company who meets the eligibility requirements for a deferral under this Plan as set forth in Article III. Section 2.11 Plan Year shall mean the twelve-month period ending each May 31. Section 2.12 Retirement Plan shall mean the Retirement Income Plan of Darden Restaurants, Inc. (formerly the "Pension Plan for Salaried Employees of General Mills Restaurants, Inc. "). 2 Section 2.13 Supplemental Savings Plan shall mean the Supplemental Savings Plan of General Mills, Inc. under which certain employees of General Mills, Inc. or one of its affiliates had an account balance as of the Effective Date, which liabilities were transferred to this Plan as of the Effective Date, or, with respect to individuals who became employees of the Company after the Effective Date, but before the one-year anniversary of the Effective Date, on said one-year anniversary of the Effective Date. 3 ARTICLE III ELIGIBILITY FOR AWARDS AND DEFERRALS Section 3.1 Participation. An individual shall be a Participant in this Plan only if he or she satisfies any of the eligibility criteria set forth in Section 3.2 or Section 3.3. Upon becoming a Participant under Section 3.2 or Section 3.3, such an individual shall be permitted to participate solely for the deferral and award provisions of this Plan for which he or she has satisfied the eligibility criteria. Notwithstanding the foregoing, in no event may a Participant defer any amounts under this Plan during a period when the individual is receiving any amounts paid pursuant to a severance plan or arrangement or a special service allowance maintained by the Company. Section 3.2 FlexComp Award Participants. An individual who has completed one year of service with the Company (including service with General Mills, Inc. prior to the Effective Date) shall be eligible to become a FlexComp Award Participant in the FlexComp Award feature of this Plan (including the deferral of such Award) for a Plan Year, if such individual: (a) is designated as eligible to participate hereunder by the Minor Amendment Committee (or its designee); (b) is a highly compensated employee (as defined in Code Section 414(q) and the regulations and other guidance issued thereunder) for the current DSP and Retirement Plan plan years (or, within the last two plan years of the DSP and the Retirement Plan was a highly compensated employee) or is employed at a salary which, on an annual basis, is anticipated to exceed $80,000 (adjusted for increases in the cost of living at the same time and in the same manner permitted under Code Section 415(d)); (c) is either employed by the Company or receiving benefits under a long-term disability income plan of the Company ("LTD Plan") on or after June 1, 1994; (d) is not an active participant in the Retirement Plan, the DSP, or any other tax-qualified retirement plan sponsored or maintained by the Company; and (e) would be entitled to accrue benefits under the Retirement Plan and be entitled to have contributions made under the DSP (or, if the individual is receiving benefits from an LTD Plan, would be entitled to accrue benefits under the Retirement Plan) if such plans did not have restrictions on participation by highly compensated employees or employees whose annualized salary as of his date of hire exceeds $80,000 (as adjusted). Section 3.3 Deferred Comp Participants. Effective January 1, 1996, an individual shall be eligible to to become a Deferred Comp Participant in the deferred compensation features of 4 this Plan (other than those deferral features applicable to FlexComp Awards) for any Plan Year, if he or she: (a) is an officer; (b) is a highly compensated employee (as defined in Code Section 414(q) and the regulations and other guidance issued thereunder) under the DSP and the Retirement Plan for the DSP and Retirement Plan plan years that occur within the Plan Year or was a highly compensated employee during the preceding two plan years of the DSP and the Retirement Plan or is employed at a salary which, on an annual basis, is anticipated to exceed $80,000 (adjusted for increases in the cost of living at the same time and in the same manner permitted under Code Section 415(d)); or (c) after having become eligible under (a) or (b) above for a prior Plan Year, the individual would have been a highly compensated employee under the DSP or the Retirement Plan for the DSP or Retirement Plan plan year ending within the Plan's Plan Year (as defined in Code Section 414(q) and the regulations and other guidance issued thereunder) had the individual's compensation included all amounts that the individual deferred under this Plan other than deferrals, if any, of the FlexComp Awards. 5 ARTICLE IV FLEXCOMP AWARDS AND PLAN DEFERRALS Section 4.1 Payment of Annual FlexComp Award. A FlexComp Award Participant who: (i) as of the last day of a Plan Year, is actively employed by the Company or receiving benefits under an LTD Plan; or (ii) terminates employment during a Plan Year due to "retirement" (as that term is defined under the Retirement Plan) or death, shall be paid any FlexComp Award that he or she may become entitled to receive for the Plan Year (as determined under Section 4.2) in cash as soon as practicable following the end of such Plan Year. A FlexComp Award Participant who terminates during a Plan Year for any reason other than "retirement" (as defined under the Retirement Plan) or death shall be paid any FlexComp Award that he or she may become entitled to receive for the Plan Year in cash as soon as practicable after the end of the Plan Year following his or her termination of employment. Section 4.2 Amount of Annual FlexComp Award. A FlexComp Award Participant shall be entitled to an annual FlexComp Award, the amount of which shall be determined under the following formula: ["X" (a DSP factor) plus the product of "Y" (an age-based factor) and "Z" (a service-based factor)] times Current Compensation. The determination of the appropriate factors and the definitions of the relevant terms are set forth below: (a) X, the DSP factor, is based on the Participant's lost DSP matching contributions, and, equals: (1) 3% for periods before October 1, 1997; and (2) a variable amount, determined in the Company's discretion, but which percentage shall be applied consistently to all suchParticipants, between 1.5% and 6% for periods on and after October 1, 1997. (b) Y, the age-based factor is 1.085/\ (the Participant's age minus 30), with the Participants age being determined as of the last day of the Plan Year, unless the Participant terminates during the Plan Year for any reason other than "retirement" (as defined under the Retirement Plan) or death, in which case the Participant's age shall be determined as of his or her date of termination. (c) Z, the service-based factor is equal to 1.8 + (.02 x the Participant's years of credited service under the Retirement Plan (including years of service credited under the Pension Plan for Hourly Employees of General Mills Restaurants, Inc., if such service would have been included under the portability provisions of the Retirement Plan had the Participant been an active participant in the Retirement Plan at the time of the FlexComp Award) and under the Retirement Income Plan of General Mills, Inc. during periods when the Participant was entitled to accrue benefits thereunder before first becoming eligible to participate in this Plan). (d) The product of Y and Z shall not be less than 2%, or greater than 20%. 6 (e) The Participant's Current Compensation is determined solely for the period during which the Participant was ineligible to accrue benefits under the Retirement Plan or the Retirement Income Plan of General Mills, Inc. and is the "Earnable Compensation" that would have been recognized under the Retirement Plan for such period, without regard to any limitations on compensation imposed under the Code. Notwithstanding the preceding sentence, the following special rules shall apply in determining Current Compensation: (1) Any annual incentive compensation that is based on fiscal year performance shall be considered Current Compensation for the Plan Year in which it accrues, and any incentive compensation that is not based on fiscal year performance shall be considered Current Compensation for the Plan Year in which paid. (2) In the case of a Participant who is totally and permanently disabled and who is receiving long-term disability benefits from an LTD Plan, Current Compensation shall include "hypothetical earnings" based on the greater of (l) the Participant's base salary rate at the time the disability occurred, or (2) the Participant's eligible earnings for the calendar year immediately prior to the onset of the disability, but shall not include "hypothetical earnings" for any period after the earlier of (A) the date the Participant attains age 65, or (B) the date the Participant is no longer eligible to receive benefits under an LTD Plan. (3) Current Compensation shall not include any amounts paid pursuant to a severance plan or arrangement or a special service allowance. (4) Any amounts attributable to sign-on bonuses or special project bonuses shall not be considered Current Compensation for purposes of determining the amount of any FlexComp Award (although such amounts shall be included for determining an individual's compensation for purposes of Section 3.3(c), whether or not deferred). (5) Current Compensation shall not include amounts paid prior to the date of a Participant's first anniversary of employment, unless such Participant was hired prior to November 1, 1994. (f) In the event a Participant terminates employment with the Company during the Plan Year for any reason other than "retirement" (as defined under the Retirement Plan) or death, the Participant shall be entitled to a FlexComp Award for the portion of the Plan Year in which he or she is employed, based on his or her Current Compensation for the partial Plan Year. Section 4.3 Deferral of Annual FlexComp Award. Notwithstanding Section 4.1, any FlexComp Award Participant may elect to defer up to 100% (in a whole percentage) of any 7 FlexComp Award that he or she may become entitled to receive for a Plan Year. Any such election shall apply to the specified percentage of the Participant's FlexComp Award for the Plan Year, provided the Participant completes and submits to the Company a deferral election form no later than the December 31 within such Plan Year. If a Participant will first become eligible to participate in the FlexComp Plan after December 31 of a Plan Year but prior to the end of such Plan Year, such Participant may make a deferral election conditioned on the granting of a FlexComp Award for such Plan Year (a "Conditional Election"), if made prior to December 31st of that Plan Year. Such Conditional Election shall apply to the FlexComp Award, if any, made to the Participant for such Plan Year. The Participant's deferral percentage election shall remain in effect with respect to any FlexComp Awards for future Plan Years, until the Participant changes such election by completing and submitting to the Company a new deferral election form on or before any subsequent December 31. Any such new election shall apply to the specified percentage of the Participant's FlexComp Award for the Plan Year in which such December 31 falls and for future Plan Years until the Participant next changes his or her election. Notwithstanding the foregoing, the amount of any deferral may not exceed the gross amount of the Participant's FlexComp Award reduced by any tax required to be withheld from such amounts under Code Section 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the date of any FlexComp Award, then any deferral election made with respect to such FlexComp Award shall not become effective. Section 4.4 Salary, Incentive, and Bonus Deferral Elections. (a) Elections by Officers. A Deferred Comp Participant who is an officer of the Company may make the following deferral elections: (1) Base Compensation. Such Participant may make an initial election to defer up to 15% (in a whole percentage) of his or her base compensation by completing and submitting to the Company a deferral election form no later than 30 days after first becoming a Deferred Comp Participant. Such election shall apply to the Participant's base compensation attributable to services performed after the election and before the beginning of the next calendar year. That initial deferral election shall continue to apply with respect to all future base compensation until the election is changed by the Participant. The Participant may elect to modify any deferral election of base compensation for the remainder of any calendar year or any future year by providing written notice to the Company at such time and in such manner as determined by the Minor Amendment Committee (or its delegate). Any such change shall be effective as soon as practicable after the end of the week following the week after the Company's receipt of the Participant's written notice of change. (2) Management Incentive Plan Bonus Deferral. Such Participant may elect to defer up to 100% (in a whole percentage) of his or her Management Incentive Plan incentive compensation by completing and submitting to the Company a deferral election form no later than the earlier of: (i) the 8 date which is thirty (30) days after first becoming eligible to participate in the Deferred Compensation feature, or (ii) the sixtieth (60th) day preceding the end of the Company's fiscal year. Such deferral election shall apply to all future Management Incentive Plan incentive compensation payments until changed for a future Plan Year by the Participant in writing. A Participant may elect to change his or her deferral election of incentive compensation by providing written notice to the Company no later than the sixtieth (60th) day immediately preceding the Company's fiscal year for which such incentive compensation would otherwise be payable. Notwithstanding the foregoing, the amount of any deferral may not exceed the gross amount of the Participant's incentive compensation reduced by any tax required to be withheld from such amounts under Code Section 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the date of any incentive compensation award, then any deferral election made with respect to such incentive compensation award shall not become effective. (b) Elections by All Other Participants. A Deferred Comp Participant who is not an officer of the Company may make the following deferral elections: (1) Deferrals of Earnable Compensation. Such Participant may elect to defer up to 15% (in a whole percentage) of his or her "earnable compensation" (as such term is defined under the DSP) by completing and submitting to the Company a deferral election form no later than 30 days after first becoming eligible to participate in the Deferred Compensation feature. Such election shall apply to the Participant's "earnable compensation" attributable to services performed after the election and shall remain in effect until changed by the Participant. A Participant may change his or her deferral election of earnable compensation for any future period by providing written notice to the Company on such forms as prescribed by the Minor Amendment Committee or its delegate. Any such change shall be effective as soon as practicable after the end of the week following the week after the Company's receipt of the Participants written notice. (2) Bonus for Operations. Such Participant may elect to defer up to 15% (in a whole percentage) of his or her operations bonus by completing and submitting to the Company a deferral election form no later than the earlier of: (i) the date which is thirty (30) days after first becoming eligible to participate in the Deferred Compensation feature, or (ii) the forty-fifth (45th) day preceding the end of the applicable bonus period. Such deferral election shall apply to all future operations bonuses until changed by the Participant in writing. A Participant may elect to change his or her deferral election of future operations bonuses by providing written notice to the Company no later than the forty-fifth (45th) day preceding the end of the next applicable bonus period. Notwithstanding 9 the foregoing, the amount of any deferral may not exceed the gross amount of the Participant's operations bonus reduced by any tax required to be withheld from such amounts under Code Section 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the date of any award of an operations bonus, then any deferral election made with respect to such bonus shall not become effective. (3) Management Incentive Plan Bonus. Such Participant may elect to defer up to 15% (in a whole percentage) of his or her Management Incentive Plan bonus, provided the Participant completes and submits to the Company a deferral election form no later than the earlier of: (i) the date which is thirty (30) days after first becoming eligible to participate in the Deferred Compensation feature, or (ii) the sixtieth (60th) day preceding the end of the applicable bonus period. Such deferral election shall apply to all future Management Incentive Plan bonuses until changed by the Participant in writing. A Participant may elect to change his or her deferral election of future Management Incentive Plan bonuses by providing written notice to the Company no later than the sixtieth (60th) day preceding the end of the next applicable Plan Year. Notwithstanding the foregoing, the amount of any deferral may not exceed the gross amount of the Participant's Management Incentive Plan bonus reduced by any tax required to be withheld from such amounts under Code Section 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the date of any award of a Management Incentive Plan bonus, then any deferral election made with respect to such bonus shall not become effective. (c) Special Bonuses. Effective with respect to bonuses awarded on or after January 1, 1996, any Deferred Comp Participant may elect to defer up to 100% (in a whole percentage) of: (i) any "sign-on bonus" that may become payable to such Participant by completing and submitting to the Company a deferral election form no later than his or her date of hire, and (ii) any "special project bonus" that the Senior Vice President of Personnel, in his or her sole discretion, may award to such Participant by completing and submitting to the Company a deferral election form within 30 days of receiving from the Company a written communication regarding the goals and objectives that must be attained in order to earn such special project bonus. Notwithstanding the foregoing, the amount of any deferral under this subsection may not exceed the gross amount of the applicable bonus reduced by any tax required to be withheld from such amounts under Code sections 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the date of any award of a sign-on or special project bonus, then any deferral election made with respect to such bonus shall not become effective. 10 (d) Bridge Period Benefit Amount and Restricted Stock Amount. In addition to the deferral elections under subsections (a), (b) and (c), a Deferred Comp Participant may elect to defer an amount of his or her base compensation for calendar years 1998 and 1999, which amount is equivalent to a specified percentage (in a whole percentage) of his or her "Bridge Period Benefit Amount," provided, however, that such election shall not be effective for base compensation earned prior to September 1, 1998. The Participant's Bridge Period Benefit Amount shall equal (i) the taxable amounts paid to the Participant under the Darden Restaurants, Inc. Bridge Period Benefit Plan and the Darden Restaurants, Inc. Bridge Period Retirement Plan, plus (ii) the amounts realized by the Participant on his or her exercise of all or any portion of the Stock Option granted under such plans prior to December 31, 1999. In addition, a Participant may elect to defer an amount of his or her: (i) base compensation and Management Incentive Plan incentive compensation award if the Participant is an officer of the Company, (ii) earnable compensation, operations bonus and Management Incentive Plan incentive compensation award if the Participant is not an officer of the Company, and/or (iii) special bonuses, which amount is equivalent to a specified percentage (in a whole percentage) of his or her "Restricted Stock Amount." The Participant's Restricted Stock Amount shall equal the value of the Participant's restricted stock that vests in the year such base compensation, incentive compensation, earnable compensation, or bonus is earned. Any such election under this subsection (d) shall be made by completing and submitting to the Company a deferral election form that shall apply to base compensation or earnable compensation that would otherwise be payable at least 30 days after such form is submitted to the Company and to incentive compensation and operations and special bonuses that are not determinable prior to at least 30 days after such form is submitted to the Company, pursuant to rules established by the Company. A Participant may change his or her deferral election of base compensation, earnable compensation and/or incentive compensation (including operations and special bonuses) under this subsection (d) by providing written notice to the Company. Any such change shall apply to base compensation or earnable compensation that would otherwise be payable as soon as practicable after the end of the week following the week after the Company's receipt of the Participant's written notice and to incentive compensation (including operations and special bonuses) that is not determinable prior to at least 30 days after the Company receives the Participant's written notice, pursuant to rules established by the Company. Notwithstanding the foregoing, the amount of any deferral under this subsection (d) may not exceed the gross amount of the Bridge Period Benefit Amount and/or Restricted Stock Amount reduced by any tax required to be withheld from such amounts under Code Section 3101 (a) and (b) or any state or local statute. Further, notwithstanding any prior deferral election, if the Participant terminates prior to the effective date of any deferral under this Section 4.3(d), then any deferral election made shall not become effective. Section 4.5 Short-Term Deferrals. Notwithstanding the foregoing provisions of this Article IV, the Company may permit a Participant to elect to defer all or part of the Participant's incentive compensation award, if any, to a date certain selected by the Company within the taxable year it would otherwise be paid, upon written notice to the Company received by December 31 of the preceding calendar year. Interest shall be credited on such deferred amount at a rate selected by the Company and shall be communicated to the Participant at the same time the availability of any such short-term deferral opportunity is communicated to Participants. 11 ARTICLE V ESTABLISHMENT OF ACCOUNTS AND CREDITS TO ACCOUNTS Section 5.1 Deferred Accounts and Rates of Return on Deferred Accounts. A deferred compensation account ("Deferred Account") shall be established on behalf of each Participant with respect to whom an amount is deferred under Section 4.4 of this Plan, including amounts transferred in accordance with Appendix A. The amount of a Participant's deferrals under this Plan shall be credited to such Participant's Deferred Account as soon as practicable after the amount would otherwise have been paid in the absence of the deferral election. Effective January 1, 1998, each Participant's Deferred Account shall be credited daily with a "rate of return" on the total deferred amounts credited to the Participant's Deferred Account and a Participant may make separate elections with respect to "rates of return" for past and future deferrals. Such "rates of return" are described in Section 5.3. Section 5.2 FlexComp Accounts and Rates of Return on Amounts in FlexComp Accounts. A deferred FlexComp Award account ("FlexComp Account") shall be established on behalf of each Participant who elects to defer a percentage of his or her FlexComp Awards. The amount of a Participant's deferred FlexComp Awards shall be credited to such Participant's FlexComp Account as soon as practicable after the amount would otherwise have been paid in the absence of a deferral election. Effective January 1, 1998, each Participant's FlexComp Account shall be credited daily with a "rate of return" on the total deferred amounts credited to the Participant's FlexComp Account and a Participant may make separate elections with respect to "rates of return" for past and future deferrals. Such "rates of return" are described in Section 5.3. Section 5.3 Rates of Return. The "rates of return" credited to a Participant's accounts under Sections 5.1 and 5.2 shall be based upon the actual investment performance of funds in the DSP, or at such other rates as may be made available to the Participant from time to time pursuant to the provisions of the Plan. Effective June 1, 1997, a Participant may elect to have the "rate of return" credited to his or her accounts established or maintained under this Plan reflect any of the following rates: (a) the rate of return as from time to time earned by the Stable Capital Fund of the DSP; (b) the rate of return as from time to time earned by the Total Return Fund of the DSP; (c) the rate of return as from time to time earned by the Equity Fund of the DSP; (d) the rate of return as from time to time earned by the Foreign Fund of the DSP; (e) the rate of return as from time to time earned by the Small Capital Stock of the DSP: 12 (f) the rate of return as from time to time earned by the Darden Stock Fund of the DSP; or (g) any other rates of return of other funds or portfolios established under a qualified benefit plan maintained by the Company which the Committee may establish as an available rate of return under this Plan. The Committee may delete funds, on a prospective basis, by notifying all Participants whose Accounts include rates of return based on such funds, in advance, and soliciting elections for transfer to other rates of return then available to such Participants. Participants may elect to have any combination of the above "rates of return" accrue on amounts in their accounts, from 1% to 100%, provided that the sum of the percentages attributable to such rates equals 100%. A Participant may change the "rate(s) of return" to be credited to his or her accounts, on a daily basis, by notifying the Committee or its delegate, at such time and in such manner as approved by the Committee or its delegate. Effective January 1, 1998, each Participant's accounts will be credited daily with the "rate(s) of return" elected by the Participant until the amount in each Participant's Accounts is distributed to the Participant on the distribution date(s) elected by the Participant. Each Participant shall receive a quarterly statement of the balance of his or her accounts. Section 5.4 Impact on Other Benefit Plans. The Company may maintain life and/or disability plans under which benefits earned or payable are related to a Participant's earnings. Any such benefits will generally be based upon the earnings that a Participant would have earned in a given calendar year in the absence of any deferral hereunder. 13 ARTICLE VI PAYMENT OF ACCOUNTS Section 6.1 Hardship Distributions. At any time prior to the time an amount is otherwise payable hereunder, an active Participant may request a distribution of deferred amounts on account of the Participant's financial hardship, subject to the following requirements: (a) Such distribution shall be made, in the sole discretion of the Minor Amendment Committee or its delegate, if the Participant has incurred an unforeseeable emergency. (b) For purposes of this plan, an "unforeseeable emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant and that would result in severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a Participant's dependent (as defined in Code section 152(a)), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case and be based on the information supplied by the Participant, in writing, on the form provided by the Minor Amendment Committee or its delegate. (c) Notwithstanding the foregoing, payment under this Section 6.1 may not be made to the extent that such hardship is or may be relieved: (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under the Plan. In addition to the foregoing, distributions under this Section 6.1 shall not be allowed for purposes of sending a child to college or the Participant's desire to purchase a home or other residence. In all events, distributions made on account of an unforeseeable emergency are limited to the extent reasonably needed to satisfy the emergency need. (d) All distributions under this Section 6.1 shall be made as soon as practicable after the Minor Amendment Committee or its delegate has approved the distribution and that the requirements of this Section 6.1 have been met. 14 Section 6.2 Payment of Deferred Amounts. At the time a Participant makes his or her election to defer any amounts under this Plan, the Participant must also elect a distribution date and a form of payment with respect to the deferral of each of the amounts subject to any such election, in accordance with subsections (a) and (b) and subject to subsection (c) below. A Participant who has a Supplemental Savings Account transferred to this Plan pursuant to Appendix A shall also elect a distribution date and form of payment with respect to his or her Supplemental Savings Account, in accordance with subsections (a) and (b) and subject to subsection (c) below. Each deferred amount under this Plan is paid separately according to the Participant's deferred distribution date election. Notwithstanding any Participant election to the contrary, all distributions under this Plan shall be paid or commence to be paid as soon as practicable after the January 1 coincident with or next following the Participant's termination of employment or retirement from the Company. (a) Distribution Date. The distribution date may be any date that is at least one year subsequent to the date the compensation, bonus, FlexComp Award or the Supplemental Savings Account (whichever is applicable) would otherwise be payable, but shall not be later than the date the Participant attains age 70. (b) Form of Payment. The Participant may elect to have his or her deferred amounts subject to such election, paid in: (1) a single payment, (2) substantially equal annual installments for a period not to exceed ten (10) years, (3) substantially equal annual installments for a period not to exceed fifteen (15) years for deferral elections made prior to December 31, 1985 (if so elected at the time of the original deferral), or (4) any other form of payment requested in writing by the Participant and approved by the Minor Amendment Committee or its delegate, with regard to amounts deferred under Article IV. (c) Special Rules. Notwithstanding the above, the following provisions shall apply: (1) Except as provided in Subsection 7.2(c)(3), if a Participant terminates employment for any reason other than Retirement or death, the Committee or its delegate shall require that full payment of all amounts deferred under this Plan be paid in the form of a single lump sum cash payment as soon as practicable after the January 1 coincident with or next following the Participant's termination of employment. (2) As to all future and previous deferrals, an active Participant may request to amend his or her distribution date and/or form of payment with respect to a deferral provided: (i) the initial distribution date in the absence of 15 such distribution election amendment is not within twelve (12) months of the date of the amendment; (ii) his or her amended distribution date is at least one year after the distribution date in the absence of such distribution election amendment; (iii) his or her amended form of payment is in substantially equal annual installments for a period not to exceed ten (10) years or a lump sum; and (iv) no modifications for distribution dates and/or forms of payment are permitted with respect to any deferrals after payment of such deferrals has commenced to be paid. No more than two amendments to the Participant's initial distribution election with respect to a particular deferral shall be permitted. Any such amendment must be in writing and submitted to the Committee for approval. (3) Notwithstanding any other provision of this Plan to the contrary, a Participant may, at any time prior or subsequent to the distribution date selected by the Participant, request in writing to the Committee to have his or her form of payment of any or all amounts in his or her FlexComp Account, Deferred Compensation Account, and/or Supplemental Savings Account changed to an immediate lump-sum distribution, provided that the amount of any such lump-sum distribution shall be reduced by an amount equal to the product of (X) the total lump-sum distribution otherwise payable (based on the value of the Participant's FlexComp Account, Deferred Compensation Account, or Supplemental Savings Account, as the case may be) as of the first day of the month in which the lump-sum amount is paid, adjusted by a pro-rata portion of the rate of return for the prior month in which the lump-sum is paid, determined by multiplying the actual rate of return for such prior month by a fraction, the numerator of which is the number of days in the month in which the request is received prior to the date of payment, and the denominator of which is the number of days in the month, and (Y) the rate set forth in Statistical Release H.I 5(519). or any successor publication, as published by the Board of Governors of the Federal Reserve System for one-year U.S. Treasury notes under the heading "Treasury Constant Maturities" for the first day of the calendar month in which the written request for an immediate lump-sum distribution is approved by the Committee. Any such lump sum distribution shall be paid within one (1) business day of approval by the Committee of such request. Section 6.3 Death of a Participant. If a Participant dies before the full distribution of his or her accounts under this Article VI, a lump sum payment of the remaining distribution amount shall be made to the beneficiary designated by the Participant. This payment shall be made as soon as practicable after the Committee receives notification of the Participant's death. In the absence of any such designation, payment shall be made to the personal representative, executor or administrator of the Participant's estate. 16 ARTICLE VII ADMINISTRATION OF THE PLAN Section 7.1 Committee. This Plan shall be administered by the Committee. The Committee shall act by affirmative vote of a majority of its members at a meeting or in writing without a meeting. The Committee shall appoint a secretary who may be but need not be one of its own members. The secretary shall keep complete records of the administration of the Plan. The Committee may authorize each and any one of its members to perform routine acts and to sign documents on its behalf. Section 7.2 Plan Administration. The Committee may appoint such persons or establish such subcommittees, employ such attorneys, agents, accountants or investment advisors necessary or desirable to advise or assist it in the performance of its duties hereunder, and the Committee may rely upon their respective written opinions or certifications. Administration of the Plan shall consist of interpreting and carrying out the provisions of the Plan in the discretion of the Committee. The Committee shall, in its discretion, determine the eligibility of employees to participate in the different features of the Plan, their rights while Participants in the Plan and the nature and amounts of benefits to be received therefrom. The Committee shall, in its discretion, decide any disputes which may arise under the Plan. The Committee may provide rules and regulations for the administration of the Plan consistent with its terms and provisions. Any construction or interpretation of the Plan and any determination of fact in administering the Plan made in good faith by the Committee shall be final and conclusive for all Plan purposes. Section 7.3 Claims Procedure. (a) The Minor Amendment Committee or its delegate shall prescribe a form for the presentation of claims under the terms of this Plan. (b) Upon presentation to the Minor Amendment Committee or its delegate of a claim on the prescribed form, the Minor Amendment Committee or its delegate shall make a determination of the validity thereof. If the determination is adverse to the claimant, the Minor Amendment Committee or its delegate shall furnish to the claimant within a reasonable period of time after the receipt of the claim a written notice setting forth the following: (1) The specific reason or reasons for the denial; (2) Specific reference to pertinent provisions of this Plan on which the denial is based; (3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (4) An explanation of this Plan's claim review procedure. 17 (c) If a claim is denied, the claimant may appeal such denial to the Minor Amendment Committee or its delegate for a full and fair review of the adverse determination. The claimant's request for review must be in writing and be made to the Minor Amendment Committee or its delegate within 60 days after receipt by the claimant of the written notification required under subsection (b) above. The claimant or his or her duly authorized representative may submit issues and comments in writing which shall be given full consideration by the Minor Amendment Committee or its delegate in its review. (d) The Minor Amendment Committee or its delegate may, in its sole discretion, conduct a hearing. A request for a hearing will be given full consideration. At such hearing, the claimant shall be entitled to appear and present evidence and be represented by counsel. (e) A decision on a request for review shall be made by the Minor Amendment Committee or its delegate not later than 60 days after receipt of the request; provided, however, in the event of a hearing or other special circumstances, such decision shall be made not later than 120 days after receipt of such request. (f) The Minor Amendment Committee's or its delegate's decision on review shall state in writing the specific reasons and references to this Plan provisions on which it is based. Such decision shall be immediately provided to the claimant. In the event the claimant disagrees with the findings of the Minor Amendment Committee or its delegate, the matter shall be referred to arbitration in accordance with Section 7.6 hereof. (g) The Minor Amendment Committee or its delegate may allocate its responsibilities among its several members, except that all matters involving the hearing of and decision on claims and the review of the determination of benefits shall be made by the full Minor Amendment Committee or its delegate. No member of the Minor Amendment Committee or its delegate shall participate in any matter relating solely to himself or herself. Section 7.4 Non-Assignabilitv. The interests herein and the right to receive distributions from a Participant's accounts under this Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, the interests of the Participant under this Plan in his or her accounts may be terminated by the Minor Amendment Committee or its delegate, which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such Participant or make any other disposition of such interests that it deems appropriate. Section 7.5 Amendments to Plan. Darden Restaurants, Inc. reserves the right to suspend, amend or otherwise modify or terminate this Plan at any time, without notice. Such action shall be taken by the Board of Directors of Darden Restaurants, Inc. or its delegate, in 18 writing. However, this Plan may not be suspended, amended, otherwise modified, or terminated after a Change in Control without the written consent of a majority of Participants determined as of the day before such Change in Control occurs. A "Change in Control" shall mean the occurrence of any of the following events: (a) any person (including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becomes the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the shares of Darden Restaurants, Inc. entitled to vote for the election of directors; (b) as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sales of assets or contested election, or combination of the foregoing, the persons who were directors of Darden Restaurants, Inc. just before such event shall cease to constitute a majority of Darden Restaurants, Inc.'s Board of Directors; or (c) the shareholders of Darden Restaurants, Inc. approve an agreement providing for a transaction in which Darden Restaurants, Inc. will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of Darden Restaurants, Inc. occurs. Notwithstanding any other provision of this Plan to the contrary, the Minor Amendment Committee or its delegate may, in its sole discretion, direct that payments be made before such payments are otherwise due if, for any reason (including, but not limited to a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, or a decision by a court of competent jurisdiction involving a Participant or Beneficiary), such Committee believes that Participants or their Beneficiaries have recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to such Participants under this Plan before such amounts are scheduled to be paid. In making this determination, the Minor Amendment Committee or its delegate shall take into account the hardship that would be imposed on Participants or their Beneficiaries by the payment of federal income taxes under such circumstances. Section 7.6 Arbitration. Subject to the completion of the claims procedure described in Section 7.3, any controversy or claim arising out of or relating to this Plan, or any alleged breach of the terms or conditions contained herein, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") as such rules may be modified herein. (a) An award rendered in connection with an arbitration pursuant to this Section 7.6 shall be final and binding and judgment upon such an award may be entered and enforced in any court of competent jurisdiction. (b) The forum for arbitration under this Plan shall be Orlando, Florida and the governing law for such arbitration shall be the laws of the State of Florida. 19 (c) Arbitration under this Section 7.6 shall be conducted by a single arbitrator selected jointly by Darden Restaurants, Inc. and the Participant or Beneficiary, as applicable (the "Complainant"). If within thirty (30) days after a demand for arbitration is made, Darden Restaurants, Inc. and the Complainant are unable to agree on a single arbitrator, three arbitrators shall be appointed to conduct the arbitration. Each party shall select one arbitrator and those two arbitrators shall then select a third neutral arbitrator within thirty (30) days after their appointment. In connection with the selection of the third arbitrator, consideration shall be given to familiarity with executive compensation plans and experience in dispute resolution between parties, as a judge or otherwise. If the arbitrators selected by the parties cannot agree on the third arbitrator, they shall discuss the qualifications of such third arbitrator with the AAA before selection of such arbitrator, which selection shall be in accordance with the Commercial Arbitration Rules of the AAA. (d) If an arbitrator cannot continue to serve, a successor to an arbitrator selected by a party shall be also selected by the same party, and a successor to a neutral arbitrator shall be selected as specified in subsection (c) of this Section. A full rehearing will be held only if the neutral arbitrator is unable to continue to serve or if the remaining arbitrators unanimously agree that such a rehearing is appropriate. (e) The arbitrator or arbitrators shall be guided, but not bound, by the Federal Rules of Evidence and by the procedural rules, including discovery provisions, of the Federal Rules of Civil Procedure. Any discovery shall be limited to information directly relevant to the controversy or claim in arbitration. (f) The parties shall each be responsible for their own costs and expenses, except for the fees and expenses of the arbitrators, which shall be shared equally by Darden Restaurants, Inc. and the Complainant. Section 7.7 Plan Unfunded. Nothing in this Plan shall be interpreted or construed to require the Company in any manner to fund any obligation to the Participants, terminated Participants or beneficiaries hereunder. Nothing contained in this Plan nor any action taken hereunder shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between the Company and the Participants, terminated Participants, beneficiaries, or any other persons. Any funds which may be accumulated in order to meet any obligation under this Plan shall for all purposes continue to be a part of the general assets of the Company; provided, however, that the Company may establish a trust to hold funds intended to provide benefits hereunder so long as the assets of such trust become subject to the claims of the general creditors of the Company in the event of bankruptcy or insolvency of the Company. To the extent that any Participant, terminated Participant, or Beneficiary acquires a right to receive payments from the Company under this Plan, such rights shall be no greater than the rights of any unsecured general creditor of the Company. 20 Section 7.8 Applicable Law. All questions pertaining to the construction, validity and effect of this Plan shall be determined in accordance with the laws of the State of Florida, to the extent not preempted by Federal law. Section 7.9 Limitation of Rights. This Plan is a voluntary undertaking on the part of the Company. Neither the establishment of this Plan nor the payment of any benefits hereunder, nor any action of the Company or the Minor Amendment Committee or its delegate shall be held or construed to be a contract of employment between the Company and any eligible employee or to confer upon any person any legal right to be continued in the employ of the Company. The Company expressly reserves the right to discharge, discipline or otherwise terminate the employment of any eligible employee at any time. Participation in this Plan gives no right or claim to any benefits beyond those which are expressly provided herein and all rights and claims hereunder are limited as set forth in this Plan. Section 7.10 Severability. In the event any provision of this Plan shall be held illegal or invalid, or would serve to invalidate this Plan, that provision shall be deemed to be null and void, and this Plan shall be construed as if it did not contain that provision. Section 7.11 Headings and Number. The headings to the Articles and Sections of this Plan are inserted for reference only, and are not to be taken as limiting or extending the provisions hereof. Section 7.12 Incapacity. If the Minor Amendment Committee or its delegate determines that a Participant, a terminated Participant, or any Beneficiary under this Plan (each of which shall be referred to as the "Recipient") is unable to care for his or her affairs because of illness, accident, or mental or physical incapacity, or because the Recipient is a minor, the Minor Amendment Committee or its delegate may direct that any benefit payment due the Recipient be paid to his or her duly appointed legal representative, or, if no such representative is appointed, to the Recipient's spouse, child, parent, or other blood relative, or to a person with whom the Recipient resides or who has incurred expense on behalf of the Recipient. Any such payment so made shall be a complete discharge of the liabilities of this Plan with respect to the Recipient. Section 7.13 Binding Effect and Release. All persons accepting benefits under this Plan shall be deemed to have consented to the terms of this Plan. Any final payment or distribution to any person entitled to benefits under this Plan shall be in full satisfaction of all claims against this Plan, the Minor Amendment Committee or its delegate, and the Company arising by virtue of this Plan. 21 APPENDIX A SUPPLEMENTAL SAVINGS ACCOUNTS Eligibility for Supplemental Savings Account. An individual who was employed by the Company on the Distribution Date and who had an account balance under the terms of the Supplemental Savings Plan as of such date, shall have a Supplemental Savings Plan Account established hereunder to the extent such liability is transferred to this Plan as of the one-year anniversary of the Distribution Date. No Forfeitures of Supplemental Savings Account. All amounts credited to a Participant's Supplemental Savings Account under the Plan shall be fully vested. 22 EX-10 4 exhibit10b.txt EXHIBIT 10(B)COMP PLAN NON-EMPL.DIR Exhibit 10(b) DARDEN RESTAURANTS, INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS (effective October 1, 2000) THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. Additional information about this Plan and its administrators may be obtained without charge by writing to the Supervisor, Stock Compensation Plans, Darden Restaurants, Inc., Compensation Department, P.O. Box 593330, Orlando, FL 32859-3330, or by calling (407) 245-4293. DARDEN RESTAURANTS, INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS PART I GENERAL PROVISIONS A. OBJECTIVE AND SUMMARY OF THE PLAN --------------------------------- It is the intent of the Company to provide a compensation program for its non-employee directors which will attract and retain highly qualified individuals to serve in this capacity. This program shall be called the "Darden Restaurants, Inc. Compensation Plan for Non-Employee Directors" (hereinafter the "Plan"). "Compensation" shall mean the annual retainer and meeting fees for each regular or special Board of Directors meeting and any committee meeting attended. Such Compensation may be received in any combination of the following: 1. Cash 2. Deferred Cash 3. Darden Restaurants, Inc. Common Stock ("Common Stock") The combination of alternatives for each non-employee director shall equal the aggregate Compensation earned by each non-employee director. Such Compensation shall be distributed as outlined in Parts II, III, and IV hereof. B. ADMINISTRATION -------------- The Plan shall be administered by the Compensation Committee (hereinafter the "Committee") of the Board of Directors. The Committee shall have full authority and complete discretion to interpret the Plan, to promulgate such rules and regulations with respect to the Plan as it deems desirable and to make all other determinations necessary or appropriate for the administration of the Plan, and such determinations shall be final and binding upon all persons having an interest in the Plan. C. AWARDS UNDER THE PLAN --------------------- The number of shares of Company Common Stock authorized to be issued under Part IV hereof is 50,000, provided that all of such shares shall be issued from shares of Common Stock held in the Company's treasury. In addition, all shares of Common Stock authorized, but unissued under the predecessor Compensation Plan for Non-Employee Directors, effective May 28, 1995, as amended, shall be available and authorized for issuance under Part IV of this Plan. D. EFFECTIVE DATE AND DURATION OF THE PLAN --------------------------------------- The Plan shall be deemed effective October 1, 2000. No awards shall be made hereunder after September 30, 2005. E. AMENDMENT OF THE PLAN --------------------- The Board of Directors may suspend or terminate the Plan or any portion thereof at any time, and the Board of Directors may amend the Plan from time to time as may be deemed to be in the best interests of the Company; provided, however, that no such amendment, suspension or termination shall be made (a) which would impair the rights of a non-employee director with respect to Compensation theretofore earned, without such person's consent, or (b) without the approval of the stockholders, which would materially increase the maximum number of shares subject to this Plan, materially increase the maximum number of shares issuable to any non-employee director under this Plan, or materially change the definition of persons eligible to receive awards under this 1 Plan,or (c) if the Plan has been amended within the preceding six months, unless such amendment is necessary to comply with changes in the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income Security Act of 1974, as amended, or rules promulgated thereunder. F. CHANGE OF CONTROL ----------------- After a "Change in Control," no amendments, suspension to or action to terminate the Plan may be made which would affect Compensation earned prior to such amendments, suspensions or termination without the written consent of a majority of participants determined as of the day before a "Change in Control." Any decision or interpretation adopted by the Committee shall be final and conclusive. A "Change in Control" shall mean the occurrence of any of the following events: 1. if any person (including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) becomes, directly or indirectly, the beneficial owner of twenty percent (20%) or more of the shares of the Company entitled to vote for the election of directors; 2. as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were directors of the Company just prior to such event shall cease to constitute a majority of the Company's Board of Directors; or 3. the stockholders of the Company approve an agreement providing for a transaction in which the Company will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Company occurs. G. PARTICIPATION ------------- 1. Each non-employee director of Darden Restaurants, Inc., may elect by written notice to the Company on or before each annual stockholder meeting, to participate in the Compensation alternative provisions of the Plan. Any combination of the alternatives--Cash, Deferred Cash and/or Company Common Stock--may be elected, provided the aggregate of the alternatives elected equals one hundred percent of the non-employee director's Compensation. 2. The election shall remain in effect for a one-year period which shall begin the day of the annual stockholders meeting in September and terminate the day before the succeeding annual stockholders meeting (hereinafter "Plan Year"). The first election hereunder shall be the election made on or before the September 2000 annual stockholders meeting, and such election shall remain effective until the annual stockholders meeting to be held in September 2001. If a non-employee director fails to submit an election prior to the commencement of a new Plan Year, the election from the prior year shall remain in effect. 3. The Plan Year shall include four Plan Quarters. Plan Quarters shall correspond to the Company's fiscal quarters. 4. A director elected to the Board after the September Board meeting may elect, by written notice to the Company before such director's term begins, to participate in the Compensation alternatives for the remainder of that Plan Year, and elections for succeeding years shall be on the same basis as other directors. 5. As soon as possible after the end of each Plan Year, the Company shall supply to each participant an account statement of participation under the Plan. 6. Unless otherwise notified, all notices under this Plan shall be sent in writing to the Company, attention the Supervisor, Management Stock Plans, 5900 Lake Ellenor Dr., Orlando, FL 32809. All correspondence to the participants shall be sent to the address which is their recorded address as listed on the election forms. 2 PART II CASH COMPENSATION PROVISIONS A. Each non-employee director who elects to participate under the Cash Compensation Provision of the Plan shall be paid all or the specified percentage of his or her Compensation for the Plan Year in cash, and such cash payment shall be made as of the end of each Plan Quarter. B. If a participant dies prior to payment in full of all amounts due under the Plan, the balance of the amount due shall be payable in full to such participant's designated beneficiary, or, if none, the estate as soon as possible following death. PART III DEFERRED CASH COMPENSATION PROVISION A. Each non-employee director may elect to have all or a specified percentage of his or her Compensation for the Plan Year deferred until the participant ceases to be a director. B. For each director who has made this Deferred Cash election, the Company shall establish a deferred compensation account and shall credit such account monthly for the Compensation due. Interest shall be credited to each such account monthly at the rate or rates of return of funds or portfolios established under a qualified benefit plan maintained by the Company which the Committee or the Minor Amendment Committee of the Committee (the "Minor Amendment Committee"), or its delegate, in its discretion, may from time to time establish. C. Distribution of the participant's deferred compensation account shall be as follows: 1. at the time, and in the form of payment, elected by the participant at the time of deferral, provided that payments will not commence until the participant ceases to be a director; or 2. in the absence of an election at the time of deferral, in ten substantially equal annual installments beginning on January 1 of each year following the year in which the participant ceases to be a director; or 3. if a participant makes a written request before payments have commenced, and such request is approved by the Minor Amendment Committee, payments may be made in some other lesser number of substantially equal annual installments or in a single sum paid on a date prior to the otherwise scheduled payment commencement date. Each installment or lump sum payment shall also include interest on the outstanding account balance to the first of the month in which the distribution occurs. The method of distribution approved by the Committee shall be irrevocable. D. In the event of a severe financial hardship, a participant may apply to receive a distribution of his or her account earlier than initially elected. The Senior Vice President, Personnel will review the request and make a recommendation to the Minor Amendment Committee which, by majority action, shall either approve or deny the request. The determination made by the Committee will be final and binding on all parties. If the request is granted, the Committee will accelerate payments only to the extent reasonably necessary to alleviate the financial hardship. E. If a participant dies prior to payment in full of all amounts due under the Plan, the balance of the amount due shall be payable in full to the participant's designated beneficiary, or, if none, the estate as soon as possible following death. 3 F. Notwithstanding any other provision of this Plan to the contrary, the Committee, by majority approval, may, in its sole discretion, direct that payments be made before such payments are otherwise due if, for any reason (including, but not limited to, a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his or her delegate, or a decision by a court of competent jurisdiction involving a participant or beneficiary), it believes that a participant or beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plan before they are paid to him. In making this determination, the Committee shall take into account the hardship that would be imposed on the participant or beneficiary by the payment of federal income taxes under such circumstances. PART IV DRI COMMON STOCK PROVISIONS A. Each participant may elect to receive all or a specified percentage of his or her Compensation in shares of Darden Restaurants, Inc. Common Stock, which will be issued at the end of each Plan Quarter. B. The Company shall ensure that an adequate number of Darden Restaurants, Inc. shares of Common Stock are available for distribution to those participants making this election. C. Only whole number of shares will be issued, with any fractional share amounts paid in cash. D. For purposes of computing the number of shares earned each Plan Quarter, the value of each share shall be equal to the mean of the high and low price of shares of Darden Restaurants, Inc. Common Stock on the New York Stock Exchange on the last Business Day of each Plan Quarter. For the purposes of this Plan, "Business Day" shall mean a day on which the New York Stock Exchange is open for trading. E. If a participant dies prior to payment in full of all amounts due under the Plan, the balance of the amount due shall be payable in full to the participant's designated beneficiary, or, if none, to the participant's estate, in cash, as soon as possible following death. Effective October 1, 2000 4 EX-10 5 exhibit10c.txt EXHIBIT10(C)STOCK PLAN FOR DIRECTORS EXHIBIT 10(c) DARDEN RESTAURANTS, INC. STOCK PLAN FOR DIRECTORS (effective October 1, 2000) THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. Additional information about this Plan and its administrators may be obtained without charge by writing to the Supervisor, Stock Compensation Plans, Darden Restaurants, Inc., Compensation Department, P.O. Box 593330, Orlando, FL 32859-3330, or by calling (407) 245-4293. DARDEN RESTAURANTS, INC. STOCK PLAN FOR DIRECTORS 1. Purpose. The purpose of the Darden Restaurants, Inc. Stock Plan (the "Plan") for Directors is to increase the proprietary interest of Directors in Darden Restaurants, Inc. (the "Company") by granting them non-qualified options to purchase Common Stock of the Company ("Common Stock") and shares of Common Stock subject to the restrictions described herein ("Restricted Stock") that will promote long-term shareholder value through ownership of Common Stock. 2. Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company. Grants of options to purchase Common Stock under the Plan and the amount and nature of the awards of Restricted Stock shall be made automatically or by the Board of Directors as provided in Section 4. However, the Compensation Committee shall have full authority to interpret the Plan, to promulgate such rules and regulations with respect to the Plan as it deems desirable and to make all other determinations necessary or appropriate for the administration of the Plan, and such determinations shall be final and binding upon all persons having an interest in the Plan. 3. Participation. Each person who is a Director of the Company or any of its subsidiaries at the date of each grant or award shall be eligible to participate in the Plan. A "Director" for purposes of this Plan is defined as a person who has been elected to the Board of Directors of the Company and does not have an employee status with the Company. 4. Awards under the Plan. The number of shares of Common Stock authorized for grants under the Plan is 250,000, provided that all such shares shall be issued from Common Stock held in the Company's treasury. In addition, all shares of Common Stock authorized, but unissued under the predecessor Stock Plan for Directors effective May 28, 1995, as amended, shall be available and authorized for issuance under this Plan. (a) Non-qualified Stock Options (i) Grant of Options. Each person who becomes a Director for the first time after the effective date of the Plan shall be awarded an option ("Option") to purchase 12,500 shares of Common Stock, effective as of the date such person becomes a Director. In addition, at the close of business on each annual shareholders' meeting, each Director elected or re-elected to the Board shall be granted an Option to purchase 3000 shares of Common Stock. The written agreement evidencing such Options granted under the Plan shall be dated as of the applicable date of each grant. Each Director receiving an Option grant shall execute and return a copy of the agreement to the Company. All Options granted under the Plan shall be non-qualified stock options governed by Section 83 of the Internal Revenue Code of 1986, as amended. (ii) Option Exercise Price. The per share price to be paid by the Director at the time an Option is exercised shall be 100% of the Fair Market Value of the Common Stock on the date of grant. "Fair Market Value" shall equal the mean of the high and low price for the Common Stock on the New York Stock Exchange on the relevant date or, if the New York Stock Exchange is closed on that date, on the last preceding date on which the Exchange was open for trading. (iii) Term of Option. Each Option shall expire ten (10) years from the date of grant. (iv) Exercise of Option. Options shall be exercisable only after one year from the date the Option is granted, except that (1) "SRO's" may be exercised after a period of six months or longer if so determined by the Board of Directors at the date of the grant of the SRO and (2) the 12,500 Options granted to a Director upon his or her first election to the Board of Directors shall be exercisable only after three years from the date the Options are granted. 1 (v) Method of Exercise and Tax Obligations. Each notice of exercise shall be accompanied by the full purchase price of the shares being purchased. Such payment may be made in cash, check, shares of Common Stock valued using the Fair Market Value as of the exercise date or a combination thereof. The Company may also require payment of the amount of any federal, state or local withholding tax attributable to the exercise of an Option or the delivery of shares of Common Stock upon lapse of the Restricted Period described below. (vi) Non-transferability. An Option shall be non-assignable and non-transferable by a Director other than by (i) the Director's last will and testament, or (ii) the applicable laws of descent and distribution, or (iii) by gift by a Director to a "family member" defined by the Compensation Committee. Such Option may be exercised only by such Director or his or her guardian or legal representative or the donee family member. A Director shall forfeit any Option assigned or transferred, voluntarily or involuntarily, other than as permitted under this subsection. (vii) Notwithstanding anything contained herein to the contrary, upon retirement of a Director or other cessation of service on the Board of Directors, the Director's Options will vest and be exercisable according to the following schedules. (1) For a Director with at least five years of Board service, including service on the predecessor General Mills, Inc. Board of Directors, unvested Options granted prior to September 1999 will continue to vest. Once vested, Options will be exercisable for the full term of the Option. (2) For a Director with less than five years of Board service, including service on the predecessor General Mills, Inc. Board of Directors, unvested Options will be forfeited. Options granted prior to September 1999 that have vested will be exercisable for the full Option term. Options granted beginning with and after the September 1999 grant if vested, must be exercised within ninety days of the end of Board service or, otherwise, will be forfeited. (b) Restricted Stock. ---------------- (i) Awards. Each Director on the effective date of the Plan shall be granted an award of 3,000 shares of Common Stock, restricted as described below ("Restricted Stock"). At the close of business on each successive annual stockholders' meeting date thereafter, each Director then elected or re-elected to the Board shall be granted an award of 3,000 shares of Restricted Stock. Notwithstanding the foregoing, a Director may elect (1) to defer all or any portion of his or her Restricted Stock award until a date that is on or after the cessation of Board service, or (2) to receive the equivalent of 1,000 of the 3,000 shares of any Restricted Stock award in cash. (ii)Restricted Period. The restrictions set forth shall apply from the date of each grant until the earlier of the following: (1) the last day on which the New York Stock Exchange is open for trading immediately prior to the annual stockholders meeting next succeeding the grant of such Restricted Stock, or (2) completion of the Director's term of service on the Board of Directors by retirement, death or disability (the "Restricted Period"). Until the expiration of the Restricted Period, none of the Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of, and all of the Restricted Stock shall be forfeited and all further rights of the Director to or with respect to such Restricted Stock shall terminate without any obligation on the part of the Company unless the Director has remained a Director throughout the Restricted Period applicable to such Restricted Stock. (iii) Other Terms and Conditions. Any shares of Restricted Stock granted hereunder may be evidenced in such manner as the Committee deems appropriate, including, without limitation, book-entry registration or issuance of stock certificates, and may be held in escrow. If certificated, each such certificate shall bear a legend giving notice of the restrictions. Each Director must also endorse in blank and return to the Company a stock power for each grant of Restricted Stock. During the Restricted Period, each Director shall have all the rights and privileges of a shareholder with respect to the Restricted Stock, including the right to vote the shares and to receive dividends thereon. At the expiration of the Restricted Period, a stock certificate free of all restrictions for the number of shares of Restricted Stock so registered shall be delivered to the Director or his or her estate. 2 (c) "SRO's". ------ In addition to the Options for 12,500 shares and the annual grant of 3000 shares of Common Stock described in Section 4(a)(i) above, the Board of Directors also shall grant salary replacement options ("SRO's") to one or more of the Directors pursuant to the annual decision of each Director in lieu of all or part of an annual retainer or for directors fees for attendance at Board or Committee meetings or other compensation for services as a Director. Such grants shall be made on the last day of each fiscal quarter of the Company for compensation accrued during such quarter and be valued by the same formula as used by the Compensation Committee for awards of SRO's to employees of the Company. (d) Change of Control. ----------------- The Options granted hereunder shall become exercisable and the restrictions on the Restricted Stock shall lapse upon the occurrence of a "Change of Control." Each of the following shall constitute a "Change of Control": (i) if any person (including a group as defined in Section 13(d)(3) of the 1934 Act) becomes, directly or indirectly, the beneficial owner of 20% or more of the shares of the Company entitled to vote for the election of directors; (ii)as a result of or in connection with any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, the persons who were Directors of the Company just prior to such event cease to constitute a majority of the Company's Board of Directors; or (iii) the stockholders of the Company approve an agreement providing for a transaction in which the Company will cease to be an independent publicly-owned corporation or a sale or other disposition of all or substantially all of the assets of the Company occurs. 5. Adjustments. In the event of a stock dividend or stock split, or combination or other reduction in the number of issued shares of Common Stock, a merger, consolidation, reorganization, recapitalization, sale or exchange of substantially all assets or dissolution of the Company, or whenever the Committee determines such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then appropriate adjustments shall be made in the shares and number of shares of Common Stock subject to and authorized by this Plan and the number of Options and Restricted Stock previously granted hereunder and the exercise price of Options previously granted hereunder, in order to prevent dilution or enlargement of the rights of the Directors under the Plan. 6. Amendment of the Plan. The Board of Directors may suspend or terminate the Plan or any portion thereof at any time, and the Board of Directors may amend the Plan from time to time as may be deemed to be in the best interests of the Company; provided, however, that no such amendment, alteration or discontinuation shall be made (a) that would impair the rights of a Director with respect to Options and Restricted Stock theretofore awarded, without such person's consent, or (b) without the approval of the stockholders, (i) if such approval is necessary to comply with any legal, tax or statutory requirement, including any approval requirement which is a prerequisite for exemptive relief from Section 16 of the Securities Exchange Act of 1934 (the "1934 Act") or (ii) would materially change the definition of persons eligible to receive awards under this Plan, or (c) unless such amendment is necessary to comply with changes in the Internal Revenue Code of 1986, as amended, or the Employment Retirement Income Security Act of 1974, as amended, or rules promulgated thereunder. 3 7. Miscellaneous Provisions. Neither the Plan nor any action taken hereunder shall be construed as giving any Director any right to be nominated for re-election to the Board. The Plan shall be governed by the laws of the state of Florida. 8. Effective Date and Duration of Plan. The Plan shall be deemed effective as of the effective date of the distribution of Common Stock to the holders of General Mills, Inc. Common Stock. No awards shall be made hereunder after September 30, 2005. 9. Section 16. With respect to persons subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Effective October 1, 2000 4 EX-12 6 exhibit12.txt EXHIBIT12 - EXHIBIT 12 DARDEN RESTAURANTS, INC. COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES (Dollar Amounts in Thousands)
Thirteen Weeks Ended -------------------------------------------------------------------------------------------------------------------- August 26, 2001 August 27, 2000 -------------------------------------------------------------------------------------------------------------------- Consolidated Earnings from Operations Before Income Taxes.... $ 95,577 $ 87,838 Plus Fixed Charges........................................... 14,753 12,005 Less Capitalized Interest.................................... (886) (833) --------- --------- Consolidated Earnings from Operations Before Income Taxes Available to Cover Fixed Charges.................... $ 109,444 $ 99,010 ========= ========= Ratio of Consolidated Earnings to Fixed Charges.............. 7.42 8.25 ========= =========
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