<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DARDEN RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
DARDEN RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
DARDEN RESTAURANTS, INC.
5900 LAKE ELLENOR DRIVE, ORLANDO, FL 32809
------------------------
1996 NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
---------------------
August 2, 1996
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders,
which will be held at the Hyatt Regency, Orlando International Airport, Orlando,
Florida, on Thursday, September 19, 1996, at 2:00 p.m. Eastern Daylight Savings
Time. All holders of the Company's outstanding common stock as of July 22, 1996
are entitled to vote at the Annual Meeting.
Time will be set aside for discussion of each item of business described in
the accompanying Notice of Annual Meeting and Proxy Statement. A current report
on the business operations of the Company will be presented at the meeting and
stockholders will have an opportunity to ask questions. We plan to adjourn the
meeting at approximately 3:30 p.m. A report of the Annual Meeting will be
included in the mid-year report that will be mailed to all stockholders in
January, 1997.
We hope you will be able to attend the Annual Meeting. If you need special
assistance at the meeting because of a disability, please contact the Secretary
of the Company at the address above. Whether or not you expect to attend, you
are urged to complete, sign, date and return the proxy card in the enclosed
envelope in order to make certain that your shares will be represented at the
Annual Meeting.
Sincerely,
[SIGNATURE]
Joe R. Lee
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
DARDEN RESTAURANTS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 19, 1996
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Darden
Restaurants, Inc. will be held on Thursday, September 19, 1996, at 2:00 p.m.,
Eastern Daylight Savings Time, in the Hyatt Regency at the Orlando International
Airport, Orlando, Florida, for the following purposes:
1. To elect nine directors;
2. To approve the appointment of KPMG Peat Marwick LLP to audit the
consolidated financial statements of Darden Restaurants, Inc. for the
fiscal year beginning May 27, 1996;
3. To approve the Stock Option and Long-Term Incentive Plan of 1995, as
amended;
4. To approve the Stock Option and Long-Term Incentive Conversion Plan, as
amended;
5. To approve the Management Incentive Plan, as amended; and
6. To act upon any other business which may properly be brought before the
meeting.
The close of business on July 22, 1996 has been fixed as the record date for
determining the stockholders entitled to notice of and to vote at the Annual
Meeting.
By Order of the Board of Directors
[SIGNATURE]
Clifford L. Whitehill
SECRETARY
August 2, 1996
<PAGE>
DARDEN RESTAURANTS, INC.
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, SEPTEMBER 19, 1996
------------------------
VOTING PROCEDURES
This Proxy Statement is being sent to holders of record at the close of
business on July 22, 1996 of the common stock, no par value (the "Common
Stock"), of Darden Restaurants, Inc., 5900 Lake Ellenor Drive, Orlando, FL 32809
(the "Company" or "Darden") entitled to vote at the Annual Meeting of
Stockholders on September 19, 1996, in order to furnish information relating to
the business to be transacted. All stockholders of record on July 22, 1996 are
entitled to vote at the meeting and, as of that date, there were 159,789,100
shares of Common Stock outstanding. Each share of Common Stock entitles the
holder to one vote. The 2,065,213 shares of Common Stock held in the Company's
treasury will not be voted and will not be considered present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote.
This Proxy Statement and the accompanying form of proxy is being first
mailed or given to stockholders on or about August 2, 1996.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE, which is postage-paid if mailed in the United States or Canada.
You have three choices on each matter to be voted upon at the Annual
Meeting. For the election of directors, by checking the appropriate box on your
proxy card, you may (i) vote for all of the director nominees as a group; (ii)
withhold authority to vote for all director nominees as a group; or (iii) vote
for all director nominees as a group except those nominees you identify on the
appropriate line. See "General Information" under Item No. 1. Concerning the
other items, by checking the appropriate box, you may (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on the item.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company, by submitting a subsequently dated proxy, or by attending the
meeting and withdrawing the proxy. You may also be represented by another person
present at the meeting by executing a form of proxy designating such person to
act on your behalf. Each unrevoked proxy card properly executed and received
prior to the close of the meeting will be voted as indicated. Where specific
instructions are not indicated, the proxy will be voted FOR the election of all
directors as nominated, FOR the approval of the appointment of KPMG Peat Marwick
LLP as independent auditors, FOR the approval of the Stock Option and Long-Term
Incentive Plan of 1995, as amended, FOR the approval of the Stock Option and
Long-Term Incentive Conversion Plan, as amended, and FOR the approval of the
Management Incentive Plan, as amended.
If an executed proxy card is returned and the stockholder has voted
"abstain" on any matter ( or "withhold authority" as to the election of any
director), the shares represented by such proxy will be considered present at
the meeting for purposes of determining a quorum and for purposes of calculating
the vote, but will not be considered to have been voted in favor of such matter.
If an executed proxy is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority as to certain
shares to vote on one or more matters, such shares will be considered present at
the meeting for purposes of determining a quorum, but will not be considered to
2
<PAGE>
be represented at the meeting for purposes of calculating the vote with respect
to such matters. The affirmative vote of a majority of the shares of Common
Stock entitled to vote, present in person or by proxy at the 1996 Annual Meeting
of Stockholders, will be necessary for the election of directors and the
approval of each other matter herein submitted to the stockholders for approval
at the Annual Meeting.
The expense of preparing, printing and mailing this Proxy Statement will be
paid by the Company. The Company has engaged Georgeson & Company Inc. to assist
in the solicitation of proxies from stockholders at a fee of $8,500 plus
reimbursement of its out-of-pocket expenses. In addition to the use of the mail,
proxies may be solicited personally or by telephone by regular employees of the
Company without additional compensation, as well as by employees of Georgeson &
Company Inc. The Company will reimburse banks, brokers and other custodians,
nominees and fiduciaries for their costs in sending the proxy materials to the
beneficial owners of the Common Stock.
A copy of the 1996 Annual Report to Stockholders, which includes the
consolidated financial statements of the Company as of and for the fiscal year
ended May 26, 1996, is being included in the same mailing package as your proxy
material. If you did not receive the Annual Report, please call the Secretary at
407-245-5215 (collect) and a copy will be forwarded to you.
Shares of Common Stock credited to the accounts of participants in the
Profit Sharing and Savings Plan ("PSSP") of the Company have been added to such
persons' other holdings on their proxy cards and, as to shares of Common Stock
which have been allocated to such person's account in the PSSP, the proxy also
serves as voting instructions to the trustee of the PSSP. The trustee of the
PSSP will vote allocated shares of Common Stock for which it has not received
direction, as well as unallocated shares held by the trustee, in the same
proportion as directed shares are voted.
CERTAIN OWNERS OF COMMON STOCK
The only persons known to the Company to own beneficially (as defined by the
Securities and Exchange Commission for proxy statement purposes) more than 5% of
the outstanding Common Stock of the Company as of May 26, 1996 (based on
Schedule 13G reports dated as of December 31, 1995) are as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------------------ ------------------ ------------
<S> <C> <C>
FMR Corp.
802 Devonshire Street
Boston, Massachusetts 02109 17,755,069(1) 11.2%
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110 11,419,208(2) 7.2%
</TABLE>
- ------------------------
(1) All shares are beneficially owned by FMR Corp., and certain of its
affiliates and subsidiaries, as investment advisor to various investment
company mutual funds. Such entities had sole power to vote 407,115 of such
shares and sole dispositive power with respect to all such shares.
(2) Of such shares, 9,408,807 shares were held as trustee of the PSSP and
2,010,401 shares were held as trustee for various personal trust accounts
and other Company employee benefit plans and index accounts. Such holder had
sole power to vote 1,310,147 of such shares, shared voting power on
9,482,334 shares, sole dispositive power on 1,917,646 shares and shared
dispositive power on 9,501,562 shares.
3
<PAGE>
ITEM NO. 1
ELECTION OF DIRECTORS
GENERAL INFORMATION
Directors will hold office until the next Annual Meeting and until their
successors are duly chosen and qualify, or until their earlier resignation or
removal. The Board of Directors has inquired of each nominee and has ascertained
that each will serve if elected. In the event that any of these nominees should
become unavailable for election, the Board of Directors may designate substitute
nominees, in which event the shares represented by the proxy cards returned will
be voted for such substitute nominees unless an instruction to the contrary is
indicated on the proxy card.
BOARD COMPENSATION AND BENEFITS
Employee directors do not receive additional compensation for serving on the
Board of Directors. Non-employee directors receive an annual retainer of $12,500
plus $1,000 for each Board meeting attended and $700 for each committee meeting
attended. The non-employee directors' remuneration is paid quarterly, unless
payment is deferred. Under the Company's Compensation Plan for Non-Employee
Directors, which has a total of 50,000 shares authorized, each year the
non-employee directors may elect to receive all or a portion of their cash
remuneration (i) in cash payments; (ii) in cash payments deferred until the
director retires, with such amounts earning interest; (iii) in Common Stock
having a market value equal to the remuneration due; or (iv) in a combination of
the foregoing alternatives. In addition to the cash remuneration, under the
Company's Stock Plan for Non-Employee Directors which has a total of 250,000
shares authorized, each such director receives 3,000 shares of restricted Common
Stock annually upon election or re-election, which restrictions lapse at the
earlier of the next year's annual meeting date or the director's retirement from
the Board. Each non-employee director also receives a one-time stock option
grant for 12,500 shares of Common Stock upon election to the Board. Such options
have an exercise price equal to the fair market value on the date of grant and
are exercisable after five years. The Company also pays the premiums on
directors' and officers' liability and business travel accident insurance
policies covering the directors.
COMMITTEES OF THE BOARD
During the fiscal year ended May 26, 1996, the Board of Directors met and/or
took action seven times and the various committees of the Board met a total of
12 times. Attendance at Board meetings and all committee meetings averaged 97%.
Each director attended more than 90% of the Board meetings and the meetings of
Board committees on which the director served.
AUDIT COMMITTEE. The Audit Committee consists of four non-employee
directors: H. B. Atwater, Jr. (Chair), John P. Birkelund, Betty Southard Murphy
and Jack A. Smith. The Audit Committee met twice during fiscal 1996. It meets
separately with representatives of the Company's independent auditors and with
representatives of senior management and the internal auditors. The Committee
reviews (i) the general scope of audit coverages; (ii) the fees charged by the
independent auditors; (iii) matters relating to the internal control systems;
(iv) the value of intangibles; and (v) the expenses of senior executives.
COMPENSATION COMMITTEE. The Compensation Committee consists of three
non-employee directors: Michael D. Rose (Chair), Daniel B. Burke and Jack A.
Smith. The Compensation Committee met seven times during fiscal 1996. The
Committee administers the stock option and incentive plans of the Company, and
in this capacity it makes or recommends all option grants or awards under these
plans. In addition, the Committee makes recommendations to the Board with
respect to the compensation of employee directors and reviews the compensation
paid to other senior executives. The Committee also recommends the establishment
of policies dealing with various compensation and employee benefit plans for the
Company. See page 20 for its report on executive compensation.
EXECUTIVE COMMITTEE. The Executive Committee consists of four directors:
Joe R. Lee (Chair), H. B. Atwater, Jr., Michael D. Rose and Jack A. Smith. The
Executive Committee did not meet in fiscal
4
<PAGE>
1996. Pursuant to the By-Laws, the Executive Committee has the authority to take
all actions that could be taken by the full Board of Directors. It may meet
between regularly scheduled Board meetings to take such action as is necessary
for the efficient operation of the Company.
FINANCE COMMITTEE. The Finance Committee consists of four non-employee
directors: John P. Birkelund (Chair), Betty Southard Murphy, Michael D. Rose and
Daniel B. Burke. The Finance Committee met once during fiscal 1996. It reviews
and makes recommendations relating to public offerings of debt and equity
securities, major borrowing commitments and other significant financial
transactions, including the dividend policy of the Company.
NOMINATING COMMITTEE. The Nominating Committee consists of four
non-employee directors: H. B. Atwater, Jr. (Chair), John P. Birkelund, Betty
Southard Murphy and Michael D. Rose. The Nominating Committee took one action by
unanimous consent during fiscal 1996. The Committee's duties include proposing a
slate of directors for election by the stockholders at each annual meeting and
proposing candidates to fill vacancies on the Board. It conducts research to
identify suitable candidates for Board membership, and seeks individuals who
will make a substantial contribution to the Company. It will consider candidates
proposed by stockholders. Generally, candidates must be highly qualified and be
both willing and affirmatively desirous of serving on the Board. They should
represent the interests of all stockholders and not those of a special interest
group. A stockholder wishing to nominate a candidate should forward the
candidate's name and a detailed background of the candidate's qualifications to
the Secretary of the Company.
PUBLIC RESPONSIBILITY COMMITTEE. The Public Responsibility Committee
consists of four non-employee directors: Betty Southard Murphy (Chair), H. B.
Atwater, Jr., John P. Birkelund and Daniel B. Burke. The Public Responsibility
Committee met once in fiscal 1996. The duties of the Committee are to review and
make recommendations regarding the Company's policies, programs and practices to
assure that they are consistent with social and legal obligations to employees,
consumers and society.
SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth in the following table is the beneficial ownership of Common Stock
as of May 26, 1996 for each director, each officer named in the Summary
Compensation Table on page 17, and all directors and officers as a group. Except
as otherwise indicated, the named beneficial owner has sole voting and
investment power with respect to the shares held by such beneficial owner.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP (1)(2)
- --------------------------------------------------------- -------------------------
<S> <C>
H. B. Atwater............................................ 1,444,997(3)
John P. Birkelund........................................ 28,000
Bradley D. Blum.......................................... 194,828(4)
Daniel B. Burke.......................................... 8,722
Joe R. Lee............................................... 986,725(5)(6)
Betty Southard Murphy.................................... 5,184
Jeffrey J. O'Hara........................................ 420,066(5)
Michael D. Rose.......................................... 7,825
Jack A. Smith............................................ 4,693(3)
Blaine Sweatt, III....................................... 353,889(5)
Clifford L. Whitehill.................................... 264,279
All Directors and Officers as a Group (17 persons)....... 4,290,354
</TABLE>
- ------------------------
(1) As of May 26, 1996, no director or named officer beneficially owned more
than 1% of the outstanding Common Stock of the Company and all directors and
officers as a group beneficially owned 2.72% of the outstanding Common
Stock.
5
<PAGE>
(2) Includes the following shares subject to options exercisable within 60 days
of May 26, 1996: H. B. Atwater, 1,044,184 shares; Bradley D. Blum, 155,642
shares; Joe R. Lee, 703,952 shares; Jeffrey J. O'Hara, 354,958 shares;
Blaine Sweatt, III, 301,912 shares; Clifford L. Whitehill, 197,640 shares
and all Directors and Officers as a group, 3,256,483 shares. Also includes
restricted stock as of May 26, 1996: H. B. Atwater, 12,899 shares; John P.
Birkelund, 3,000 shares; Bradley D. Blum, 33,351 shares; Daniel B. Burke,
3,000 shares; Joe R. Lee, 34,247 shares; Betty Southard Murphy, 3,000
shares; Jeffrey J. O'Hara, 27,782 shares; Michael D. Rose, 3,000 shares;
Jack A. Smith, 3,000 shares; Blaine Sweatt, III, 39,281 shares; and Clifford
D. Whitehill, 2,136 shares.
(3) Includes the following shares held in the common stock fund of the
non-employee Director's deferred compensation plan: H. B. Atwater, 1,573
shares; and Jack A. Smith, 1,693 shares. The named director does not have
voting power with respect to such shares.
(4) Includes 200 shares held in a trust for a family member.
(5) Includes the following shares allocated to the PSSP accounts of the named
officer as of May 26,1996: Joe R. Lee, 955 shares; Jeffrey J. O'Hara, 1,945
shares; and Blaine Sweatt, III, 1,415 shares.
(6) Includes 800 shares owned by Joe R. Lee's wife.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The investment banking firm of Dillon, Read & Co. Inc. acted as an advisor
to General Mills, Inc. in connection with the distribution to its shareholders
of the Company's Common Stock on May 28, 1995. Dillon Read was one of the
underwriters in the Company's public debt offering in January 1996, and may,
from time to time, perform other investment banking services for the Company.
John P. Birkelund, a director of the Company, is Chairman of Dillon, Read & Co.
Inc.
During fiscal year 1996, the Company employed the law firm of Baker &
Hostetler in which director Betty Southard Murphy is a partner.
INFORMATION CONCERNING NOMINEES
<TABLE>
<S> <C>
H. B. Atwater, Jr. H. B. Atwater, Jr., age 65, retired on June 1, 1995 as Chairman
Director since 1995 and Chief Executive Officer and as a director of General Mills,
Inc., the former parent company of Darden Restaurants, Inc. Mr.
Atwater joined General Mills, Inc. in 1958 and he was elected
President in 1977, Chief Executive Officer in 1981, and Chairman
of the Board in 1982. Mr. Atwater is a director of Merck & Co.,
Inc. He is on the Board of the Mayo Foundation.
John P. Birkelund John P. Birkelund, age 66, has been a Managing Director and a
Director since 1995 Director of Dillon, Read & Co. Inc., an investment banking firm,
since 1981, and has been Chairman since 1988. He served as Chief
Operating Officer from 1981 through 1985, as Co-Chairman and
Co-Chief Executive Officer from 1986 through 1988, and from 1988
through 1993 he was Chief Executive of the firm. Mr. Birkelund is
a director of NAC Re Corporation, a member of the Advisory Board,
ORIX USA Corporation, and serves as Chairman of the
Polish-American Enterprise Fund.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Daniel B. Burke Daniel B. Burke, age 67, retired in February, 1994 as President
Director since 1995 and Chief Executive Officer of Capital Cities/ABC, Inc., a
broadcasting company, a position he had held since 1990. Mr.
Burke joined Capital Cities in 1961 as General Manager of
WTEN-TV. He was elected Executive Vice President and Director of
Capital Cities in 1967 and served as President of the Publishing
Division from 1969 until his election as President and Chief
Operating Officer of Capital Cities in 1972. Mr. Burke became
President and Chief Operating Officer of Capital Cities/ABC, Inc.
in 1986 when Capital Cities completed its acquisition of American
Broadcasting Companies, Inc. Mr. Burke is a Director of
Consolidated Rail Corporation, Morgan Stanley Groups, Inc., Rohm
and Haas Company and the Washington Post Company.
Joe R. Lee Joe R. Lee, age 55, is currently Chief Executive Officer and
Director since 1995 Chairman of the Board of the Company. Mr. Lee joined Red Lobster
in 1967 as a member of its opening management team, and was named
its President in 1975. He was elected a Vice President of General
Mills, Inc. in 1976, a Group Vice President in 1979, an Executive
Vice President in 1981, named Executive Vice President, Finance
and International Restaurants in 1991 and was elected a Vice
Chairman in 1992 with responsibility for various consumer foods
businesses and corporate staff functions. Mr. Lee was elected a
director of General Mills, Inc. in 1985. He was named as the
Chief Executive Officer of the Company in December of 1994. Mr.
Lee has been invited to serve on the Board of Directors of
Tupperware Corporation as of August 1996.
Betty Southard Murphy Betty Southard Murphy, age 63, has been a partner in the law firm
Director since 1995 of Baker & Hostetler since 1980, where she chairs the firm's
employment law and benefits practice group. She previously served
as Chairman and Member of the National Labor Relations Board from
1975 to 1979 and as Administrator of the Wage & Hour Division of
the U.S. Department of Labor from 1974 to 1975. She has had five
additional Presidential appointments to special commissions,
including the Commission on the Bicentennial of the U.S.
Constitution. Ms. Murphy is a trustee of The American University,
Washington, D.C.
Jeffrey J. O'Hara Jeffrey J. O'Hara, age 48, is presently President and Chief
Director since 1995 Operating Officer and, during fiscal year 1995, served as Vice
Chairman of the Board of the Company. Mr. O'Hara joined General
Mills, Inc. in 1970 and was named Vice President of Marketing and
Menu Planning for Red Lobster in 1978. He was named President of
The Good Earth in 1981, Executive Vice President of Marketing and
Development for Restaurants in 1984, President of Red Lobster in
1986, was elected a Senior Vice President of General Mills, Inc.
in 1989 and an Executive Vice President of General Mills, Inc. in
1993. From 1986 to December of 1994, he was President of Red
Lobster. In December of 1994, he was elected Executive Vice
President, Established Restaurant Operations. He was elected to
his current positions in July of 1995.
</TABLE>
7
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<TABLE>
<S> <C>
Michael D. Rose Michael D. Rose, age 54, is Chairman of the Board of The Promus
Director since 1995 Companies Incorporated. Promus, the publicly-traded parent
company of Harrah's Casinos and Embassy Suites, Hampton Inn and
Homewood Suites hotels, was spun-off from Holiday Corporation in
1990. Mr. Rose joined Holiday Corporation in 1974. He was elected
President in 1979 and held that position until 1984. He was
elected Chief Executive Officer in 1981 and held that position
until 1994. He was elected Chairman of the Board in 1984. In
1988, he resumed the position of President, which he held until
1991. Mr. Rose is a director of Ashland Oil, Inc., First
Tennessee National Corp. and General Mills, Inc.
Jack A. Smith Jack A. Smith, age 61, is Chairman and Chief Executive Officer of
Director since 1995 The Sports Authority, Inc., a chain of sporting goods stores,
which he founded in 1987. He previously served as Chief Operating
Officer of Herman's Sporting Goods, President and Chief Executive
Officer of Diana Shops, a national women's apparel chain, and
held other management positions with Sears, Roebuck & Co. and
Montgomery Ward Holding Corporation. He is a director of The
Sports Authority, Inc., the National Sporting Goods Association
and Nova Southeastern University.
Blaine Sweatt Blaine Sweatt, age 48, is President, New Business Development,
Director since 1995 and an Executive Vice President of the Company. He joined the Red
Lobster organization in 1976 and was named director of new
restaurant concept development in 1981. Mr. Sweatt led the teams
that developed The Olive Garden, China Coast and Bahama Breeze
concepts. He was named a Vice President of General Mills, Inc. in
1985 and a Senior Vice President in 1994.
</TABLE>
THESE NINE (9) PERSONS WILL BE PLACED IN NOMINATION FOR ELECTION TO THE
BOARD OF DIRECTORS. THE SHARES REPRESENTED BY THE PROXY CARDS RETURNED WILL BE
VOTED FOR THE ELECTION OF THESE NOMINEES UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 2
APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The stockholders are asked to consider and approve the appointment by the
Board of Directors of KPMG Peat Marwick LLP ("KPMG"), an independent certified
public accounting firm, to audit the consolidated financial statements of the
Company for the fiscal year beginning May 27, 1996. KPMG has audited the
financial statements of the Company since 1995. Representatives of the firm will
attend the Annual Meeting and have the opportunity to make a statement if they
desire, and will also be available to answer questions.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE APPOINTMENT OF KPMG PEAT
MARWICK LLP AS THE INDEPENDENT AUDITORS AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE.
BACKGROUND INFORMATION, ITEMS NO. 3, NO. 4 AND NO. 5
The Stock Option and Long-Term Incentive Plan of 1995 (the "1995 Plan"), the
Stock Option and Long-Term Incentive Conversion Plan (the "Conversion Plan") and
the Management Incentive Plan (the "MIP") were approved and adopted by General
Mills, Inc. ("General Mills") on February 27, 1995 as the sole stockholder of
the Company and became effective on the distribution of all of the Common Stock
of the Company to the stockholders of General Mills (the "Distribution") on May
28, 1995 (the "Distribution Date"). The 1995 Plan, the Conversion Plan and the
MIP were amended by the Board of Directors of the Company effective May 23, 1996
as hereinafter described (the "Amendments").
8
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Notwithstanding that each of these plans were duly adopted by General Mills
and in full force and effect since the Distribution Date, the Omnibus Budget
Reconciliation Act of 1993 (the "1993 Budget Act") requires that such plans also
be submitted for stockholder approval at the first annual meeting of
stockholders of the Company following the Distribution. The 1993 Budget Act and
the corresponding Section 162(m) of the Internal Revenue Code (the "Code")
created a new tax limitation on the deductibility of compensation by a
corporation in excess of $1 million paid to any of the executive officers of a
publicly traded company whose compensation is required to be disclosed in such
company's proxy statement unless certain conditions (including stockholder
approval) are met. Although the Board of Directors does not believe that
compensation levels of the executive officers named in the Summary Compensation
Table on page 17 will reach the Section 162(m) deductibility limits in fiscal
1997 (nor were such levels reached in fiscal 1996), the Board of Directors
believes that it is important for the Company to take all steps reasonably
necessary to ensure that the Company will be able in the future to take all
available tax deductions with respect to compensation resulting from awards
under the 1995 Plan, the Conversion Plan and the MIP.
THE AMENDMENTS
Effective May 23, 1996, the Compensation Committee recommended and the Board
of Directors approved amendments to the Change of Control provisions of the 1995
Plan, the Conversion Plan and the MIP. If under this provision a person becomes
a beneficial owner of 20% or more of the shares of the Company entitled to vote
for the election of directors, a "Change of Control" occurs and certain other
provisions thereby become effective. Prior to the amendment, the ownership
threshold was 15% (see Section 12(i) of the 1995 Plan, Section 7(a)(v) of the
Conversion Plan and Part V(a) of the MIP as contained in Exhibits I, II and III
respectively). Also effective May 23, 1996, the Compensation Committee
recommended and the Board of Directors approved an amendment to the 1995 Plan
(Exhibit I) granting authority to the Compensation Committee to approve stock
options which may be exercised on or after three years from the date of the
grant. Prior to the amendment, stock options vested only after five years. The
Committee and the Board of Directors, upon advice of consultants (see Report of
Compensation Committee, page 20) concluded that the amendment better reflected
industry practice.
If the plans are approved by the Company's stockholders, such approval will
be effective as of May 23, 1996.
ITEM NO. 3
APPROVAL OF THE STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995
The number of shares of Common Stock for which stock options, restricted
stock and restricted stock units (available to employees of foreign operations
only) may be granted under the 1995 Plan is 15,000,000, of which 12,000,000
shares are available for regular option grants and 3,000,000 shares are
designated exclusively for use as salary replacement stock options ("SRO's")
described below. A copy of the 1995 Plan is attached as Exhibit I.
Subject to the preceding, shares of Common Stock to be issued under the 1995
Plan may be made available from the authorized but unissued Common Stock, from
shares of Common Stock held in the treasury, or from shares purchased on the
open market. In the event of a stock split or stock dividend, reorganization,
recapitalization or other similar event affecting the price of Common Stock, or
when appropriate to prevent dilution or enlargement of the benefits under the
1995 Plan, then the number of shares subject to the 1995 Plan, the number of
shares then subject to awards and the price per share payable on exercise of
stock options may be appropriately adjusted by the Compensation Committee of the
Company's Board of Directors (the "Committee").
The closing price of the Company's Common Stock on the New York Stock
Exchange on July 22, 1996 was $8.75.
9
<PAGE>
STOCK OPTIONS. The number of shares of Common Stock subject to stock
options granted to any single participant in the 1995 Plan cannot exceed 10% of
the total number of shares which may be issued under the 1995 Plan. It is
expected that officers and other management of the Company will receive stock
option grants under the 1995 Plan on a periodic basis. The number of stock
options which have been issued under the 1995 Plan totals 5,480,508.
The term of the stock options granted under the 1995 Plan may not exceed ten
years after the date of grant, and the term may be for shorter periods at the
discretion of the Committee. Options will terminate three months after the
termination of employment except in the event of the Participant's death or
retirement. A stock option may be exercised at such times as may be set by the
Committee at the time of grant, provided that stock options may become
exercisable no sooner than five years for executive officers and no sooner than
three years for other participants from the date of grant. The exercise price of
a stock option may not be less than 100 percent of the fair market value of the
Common Stock on the grant date.
No stock options issued under the 1995 Plan are transferable by a
participant other than by his or her last will and testament or by the laws of
descent and distribution, and all stock options may be exercised during the
participant's lifetime only by the participant or his or her guardian or legal
representative.
If a participant should die while in the employ of the Company, any stock
option theretofore granted to the participant under the 1995 Plan may be
exercised by the person designated in such participant's last will and testament
or, in the absence of such designation, by the participant's estate, to the full
extent that such stock option could have been exercised by such deceased
participant immediately prior to the participant's death. In addition, a
pro-rata portion of stock options not exercisable as of the date of death (based
on the number of months of employment completed during the full vesting period)
shall become exercisable.
Upon retirement, the participant may thereafter exercise a stock option,
subject to the original term of the stock option, in such manner as determined
by the Committee at the grant date.
A stock option may only be exercised upon full payment to the Company of the
option price. Payments can be made (i) in cash; (ii) through the delivery of
shares of Common Stock owned by the participant; or (iii) by a combination of
cash and Common Stock. The Common Stock so delivered will have a value for
determining payment equal to the mean of the high and low price of the Common
Stock on the New York Stock Exchange on the exercise date.
SALARY REPLACEMENT STOCK OPTIONS. Under the 1995 Plan, the Committee also
may grant SRO's to key employees of the Company and its subsidiaries as a
replacement for Company-provided benefits, as an alternative to eligibility for
a merit increase in salary or in lieu of other compensation such as an earned
bonus. The size of the SRO grant in lieu of a merit increase is based on the
estimated present value of the merit increase and pay-related benefits forgone
over the term of the option and the present value of an assumed growth rate in
the Company Common Stock. An SRO grant in lieu of an earned bonus is based on
the dollar amount of the bonus multiplied by the value of each stock option as
determined by the Committee, which, for grants in fiscal 1996, equaled
approximately 30% of the current market price of the Common Stock. SRO's may be
exercised as determined by the Committee, in its discretion. All other terms of
the 1995 Plan also govern SRO's.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The 1995 Plan authorizes the
Committee to make awards of restricted stock and, to employees of foreign
operations, restricted stock units ("RSU's") and to determine the number of
shares to be awarded (subject to the aggregate limitation of 10%, and an
individual limitation of 2%, of the total shares authorized under the 1995
Plan). A portion of the restricted stock and RSU's awarded from the 1995 Plan
will be granted as part of the incentive stock matching program, which requires
that the participant place on deposit with the Company one share of
personally-owned Common Stock for each share of restricted stock or each RSU
awarded.
10
<PAGE>
The 1995 Plan also authorizes the Committee to establish the length of the
restricted period (provided that no such period shall be less than one year),
the purchase price, if any, to be paid by the participant, and whether any other
restrictions will be imposed in respect of such awards. Regular dividends are
paid on restricted stock and dividend equivalents are paid with respect to the
RSU's. Restricted stock and RSU's may vest (in whole or on a pro-rata basis)
prior to the completion of the restricted period in the event of a retirement,
death, change of control or certain terminations of employment, as described in
the 1995 Plan. Restricted stock and RSU's may not be sold, exchanged,
transferred or pledged during the restricted period. The numbers of shares of
restricted stock and RSU's awarded under the 1995 Plan total, respectively,
393,440 and 14,366.
ADMINISTRATION. The 1995 Plan is administered by the Committee, appointed
from time to time by the Board of Directors and composed of non-employee,
independent members of the Board who are ineligible to receive awards under the
1995 Plan (see the description of the Committee on page 4). Subject to the terms
and conditions of the 1995 Plan, the Committee may prescribe, amend and rescind
rules and regulations relating to the 1995 Plan, select the employees to whom
awards will be made, determine the number of shares to be optioned or awarded
and interpret, construe and implement the provisions of the 1995 Plan. The
Committee may delegate its duties to the Chief Executive Officer and other
members of senior management, subject to the requirement that awards to
executive officers shall be made solely by the Committee and subject to
compliance with Rule 16b-3 of the Securities Exchange Act of 1934. The Board of
Directors may terminate, modify or amend the 1995 Plan, and, subject to the
approval of the Board of Directors, the Committee may terminate, modify or
suspend the operation of the 1995 Plan, provided that no such modification
without the approval of the stockholders shall (i) materially increase the
number of shares which may be issued under the 1995 Plan; (ii) materially
increase the benefits accruing to participants under the 1995 Plan; or (iii)
materially modify the requirements as to eligibility for participating in the
1995 Plan.
TAX CONSEQUENCES. Stock option grants under the 1995 Plan will be
non-qualified stock options governed by Section 83 of the Code. Generally, no
federal income tax is payable by a participant upon the grant of a stock option.
Under current tax law, if a participant exercises a non-qualified stock
option, he or she will be taxed on the difference between the fair market value
of the Common Stock on the exercise date and the option price. The Company,
subject to Section 162(m) of the Code, will be entitled to a corresponding
deduction on its income tax return (see "Background Information").
Unless a participant elects otherwise under the Code, participants will be
taxed on the fair market value of restricted stock and RSU's on the date the
restrictions lapse or when the shares are otherwise not subject to substantial
risk of forfeiture. The Company, subject to Section 162(m) of the Code, will be
entitled to a corresponding deduction on its income tax return (see "Background
Information").
Participants are responsible for the payment of all federal, state, local
and foreign withholding and income taxes in respect of the exercise of a stock
option or the vesting of restricted stock or RSU's, and to the extent permitted
by law and Committee rules, participants may authorize the Company to withhold
shares to be issued from a restricted stock award (provided the number of shares
to be issued equals or exceeds 500) or a stock option exercise in satisfaction
of the withholding obligation.
CHANGE OF CONTROL. All outstanding stock options become fully exercisable
for six months and restricted stock and RSU's become immediately vested
following a Change of Control as defined in the 1995 Plan. Also, if a
participant is terminated within two years after such an event, that person's
outstanding stock options at the date of termination shall become fully
exercisable for three months.
11
<PAGE>
AWARDS. Awards of stock options, SRO's and restricted stock for fiscal 1996
to the five most highly compensated executive officers are set forth on the
Summary Compensation Table on page 17. Awards were made to the following groups
during fiscal 1996 under the 1995 Plan:
<TABLE>
<CAPTION>
STOCK OPTIONS SRO'S RESTRICTED STOCK RSU'S
------------- ----------------- ------------------- -----------------
(#) (#) ($) (#) ($) (#) ($)
------------- ------- -------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
All current executive officers, as
a group........................... 1,525,000 188,058 $660,103 34,629 $ 406,891 0 0
All current non-employee directors,
as a group (1).................... 0 0 0 0 0 0 0
All employees who are not executive
officers, as a group.............. 3,767,450 0 0 358,811 $4,216,029 14,366 $168,801
</TABLE>
- ------------------------------
(1) All stock options and restricted stock awarded to non-employee directors
were granted under the Company's Stock Plan for Non-Employee Directors (see
Board Compensation and Benefits, page 4).
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSAL TO APPROVE THE
STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995, AS AMENDED, AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 4
APPROVAL OF THE STOCK OPTION AND
LONG-TERM INCENTIVE CONVERSION PLAN
At the time of the Distribution, certain holders of outstanding options to
purchase General Mills common stock and holders of unvested General Mills
restricted stock, restricted stock units ("RSU's") and performance units (the
"General Mills stock programs") had their interests adjusted by the Compensation
Committee of General Mills in the manner hereinafter specified. Under the terms
of the Conversion Plan, these holders of General Mills awards received, in
addition to an adjusted General Mills award, or in lieu thereof, an award of
Company stock options, restricted stock or RSU's, in accordance with a formula
which substantially preserved without exceeding, the net accumulated
appreciation in the General Mills stock programs. A copy of the Conversion Plan
is attached as Exhibit II.
The closing price of the Company's Common Stock on the New York Stock
Exchange on July 22, 1996 was $8.75.
STOCK OPTIONS. Except as described below, employees of the Company who were
holders of General Mills stock options retained the option to purchase General
Mills common stock, subject to the following adjustments to the exercise price
and number of shares subject to the option ("the Adjusted GMI Stock Option").
Such adjustments were dependent upon the number of corresponding Company stock
options granted under the Conversion Plan. The aggregate gain of both the
General Mills and the Conversion Plan options approximately equaled and did not
exceed the aggregate gain that existed in the General Mills stock option prior
to the Distribution, and such gain was allocated between the Adjusted GMI Stock
Option and the Company stock option on a 2-to-1 basis. The exercise price of the
Adjusted GMI Stock Option was determined by multiplying the General Mills option
exercise price prior to the Distribution by the factor (the "General Mills Stock
Conversion Ratio") where the numerator is the composite volume weighted average
price of General Mills common stock trading without the Company for the ten
trading days beginning on the record date for the Distribution (the "Record
Date"), May 15, 1995, (the "Per Share Post-Split GMI Stock Price") and the
denominator is the composite volume weighted average price of General Mills
common stock trading with the Company for the ten trading days beginning on the
Record Date (the "Per Share Pre-Split GMI Stock Price"). The number of shares
subject to the Adjusted GMI Stock Option equaled the number of shares subject to
the General Mills option prior to the Distribution multiplied by .67 and divided
by the General Mills Stock Conversion Ratio. The exercise price of the Company
stock options was determined by multiplying the General Mills option exercise
price prior to the Distribution by the factor (the "Company Stock Conversion
Ratio") where the numerator is the composite volume weighted average price of
the Company Common Stock for the ten trading days beginning on the
12
<PAGE>
Record Date (the "Per Share Company Stock Price") and the denominator is the Per
Share Pre-Split GMI Stock Price. The number of shares of Company Common Stock
subject to the Company stock option equals the number of shares subject to the
General Mills option prior to the Distribution multiplied by .33 and divided by
the Company Stock Conversion Ratio.
Employees and retirees of the Company who received a General Mills stock
option in connection with grants made on June 1, 1994 and employees of the
Company who received a General Mills stock option on September 20, 1993 and on
September 19, 1994, had such General Mills stock options entirely converted into
Company stock options. For these converted options, the exercise price of the
Company stock option equaled the exercise price of the General Mills stock
option prior to the Distribution, multiplied by the Company Stock Conversion
Ratio, and the number of shares subject to the Company stock option equaled the
current number of shares which were under General Mills options prior to the
Distribution divided by the Company Stock Conversion Ratio.
Except as to General Mills stock options granted on June 1, 1994, holders of
the General Mills stock options who retired from the Company on or prior to the
Distribution Date were entitled to make an election either (i) to retain an
Adjusted GMI Stock Option and receive a Company stock option where the aggregate
gain in the General Mills stock option prior to the Distribution was split
between the General Mills stock option and the Company stock option in
proportion to the market value of the separate stocks ("Retiree Split Option"),
or (ii) to forfeit the outstanding General Mills stock option and receive an
option to purchase Company Common Stock. If the Retiree Split Option was
elected, the exercise price of the Adjusted GMI Stock Option was determined by
multiplying the General Mills stock option exercise price prior to the
Distribution by the General Mills Stock Conversion Ratio. The number of shares
subject to the Adjusted GMI Stock Option equaled the number of shares of General
Mills common stock which were under the option prior to the Distribution
multiplied by the factor where the numerator was the Per Share Pre-Split GMI
Stock Price and the denominator was the sum of (i) the Per Share Post-Split GMI
Stock Price and (ii) the Per Share Company Stock Price. The exercise price of
the Company stock options was determined by multiplying the General Mills option
exercise price prior to the Distribution by the Company Stock Conversion Ratio.
The number of shares of Company Common Stock subject to the Company stock option
equaled the number of General Mills shares which were under the Adjusted GMI
Stock Option. If the Retiree Split Option was not elected, the exercise price of
the Company stock option equaled the General Mills option exercise price prior
to the Distribution multiplied by the Company Stock Conversion Ratio and the
number of shares subject to the Company stock option equaled the number of
shares which were under the General Mills option prior to the Distribution
divided by the Company Stock Conversion Ratio.
Holders of General Mills stock options who retired from any business of
General Mills except the Company on or prior to the Distribution Date were
entitled to make an election either (i) to receive a Retiree Split Grant
described above, or (ii) to receive an adjustment in the price and number of
shares which were under their General Mills stock options such that the exercise
price of the General Mills option prior to the Distribution was multiplied by
the General Mills Stock Conversion Ratio and the number of shares subject to the
General Mills stock option prior to the Distribution was divided by the General
Mills Stock Conversion Ratio.
PERFORMANCE UNIT ACCOUNTS, RESTRICTED STOCK AND RESTRICTED STOCK
UNITS. Performance unit accounts which were associated with certain grants of
General Mills stock options were allocated between General Mills and the Company
on the same basis that the corresponding stock option was split or converted.
All unvested General Mills restricted stock and RSU's were canceled on the last
trading day on the New York Stock Exchange prior to the Record Date. Holders of
General Mills restricted stock or RSU's who were employed by the Company on the
Distribution Date received in their name or in book-entry form in lieu of the
canceled restricted stock or RSU's a number of shares of Company restricted
stock or RSU's equal to the number of shares of unvested General Mills
restricted stock or RSU's issued and outstanding in their name immediately prior
to cancellation divided by the Company Stock Conversion Ratio ("Company
Converted Restricted Stock"). Holders of
13
<PAGE>
unvested General Mills restricted stock and RSU's who retired from the Company
on or prior to the Distribution Date were entitled to make a choice to have
issued in their name or issued in book-entry form either (i) Company Converted
Restricted Stock or (ii) a Retiree Split Stock Grant. The Retiree Split Stock
Grant consisted of General Mills restricted stock or RSU's and Company
restricted stock or RSU's each covering the number of shares which were subject
to the then existing General Mills restricted stock or RSU's immediately prior
to cancellation. Holders of unvested General Mills restricted stock and RSU's
who retired from any business of General Mills except the Company on or prior to
the Distribution Date were entitled to make a choice to have issued in their
name or issued in book-entry form either (i) Modified GMI Restricted Stock or
RSU's or (ii) a Retiree Split Stock Grant.
Under the Conversion Plan, pursuant to which only rights to Company Common
Stock were granted, except as hereafter noted, the other terms and conditions of
the Company stock options, restricted stock and RSU's are the same as applied to
the General Mills stock options, restricted stock and RSU's from which they were
derived. Such terms and conditions are substantially the same as those contained
in the 1995 Plan, (described above), as the 1995 Plan was modeled on the option
plan of the former parent corporation, General Mills. Where the General Mills
Compensation Committee had required the deposit of personally-owned shares of
General Mills common stock as a condition to vesting of stock options,
restricted stock or RSU's, no additional shares were required to be placed on
deposit as a result of the adjustment in the number of unvested options,
restricted stock or RSU's held as a result of the Distribution. Nevertheless,
employees and retirees of the Company may be required, as a condition to
continued vesting of Company stock options, restricted stock and RSU's, to place
on deposit a number of Company shares equal to the number of General Mills
shares previously required to be on deposit.
The number of shares of Common Stock for which stock options, restricted
stock and RSU's may be granted under the Conversion Plan is limited to the
number of shares for which options, restricted stock or RSU's were granted under
the above described formulas. These grants total 15,323,952 stock options,
410,346 shares of restricted stock and 7,342 RSU's. Since all of the grants of
Company stock options, restricted stock or RSU's covered by the Conversion Plan
have now been issued under the terms of the Plan, no further or additional
grants of stock options, restricted stock or RSU's may be made and the
Conversion Plan is therefore closed. Accordingly, if a stock option, restricted
stock or RSU expires or is forfeited, canceled or terminated without the
delivery of Common Stock, such number of shares of Common Stock covered by such
stock option, restricted stock or RSU shall not be available for future grants
under the Conversion Plan.
ADMINISTRATION. The Conversion Plan is administered by the Committee (see
the description of the Compensation Committee at page 4). Subject to the terms
of the Conversion Plan, the Committee interprets and administers the Conversion
Plan and may establish, amend or waive rules and regulations relating to the
Conversion Plan. The Committee has no discretion relating to the timing, price
and size of awards made under the Conversion Plan, which were determined by the
application of formulas described above. The Board of Directors may amend,
suspend or terminate the Conversion Plan, provided that (i) no amendment will be
made without stockholder approval if such approval is necessary to comply with
any regulatory requirement, and (ii) no amendment which would adversely affect a
Participant's right under an award will be made without the Participant's
consent. In the event of a reorganization, stock split, merger, spin-off,
combination or other similar corporate transaction where the Committee
determines such adjustments are appropriate to prevent dilution or enlargement
of the benefits made available under the Conversion Plan, the number and type of
awards under the Conversion Plan and the exercise price with respect to an award
may be adjusted.
TAX CONSEQUENCES. The description of federal income tax consequences to the
participants of non-qualified stock options, restricted stock and RSU's under
the 1995 Plan (contained on page 11) applies equally to stock options,
restricted stock and RSU's granted to participants under the Conversion Plan.
14
<PAGE>
CHANGE OF CONTROL. All outstanding stock options become fully exercisable
for six months and all restricted stock and RSU's immediately vest following a
Change of Control as defined in the Conversion Plan.
AWARDS. Awards of stock options, restricted stock and RSU's in fiscal 1996
to the five most highly compensated executive officers are set forth on the
Summary Compensation Table on page 17. Awards were made to the following groups
during fiscal 1996 under the Conversion Plan:
<TABLE>
<CAPTION>
STOCK OPTIONS RESTRICTED STOCK RSU'S
------------- ------------------------ --------------------
(#) (#) ($) (#) ($)
------------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
All current executive officers, as a group............. 3,003,913 144,918 $ 1,702,787 0 0
All current non-employee directors, as a group......... 1,409,084 9,899 $ 116,313 0 0
All employees who are not executive officers, as a
group................................................. 10,910,955 255,529 $ 3,002,466 7,342 $ 86,269
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSAL TO APPROVE THE
STOCK OPTION AND LONG-TERM INCENTIVE CONVERSION PLAN, AS AMENDED, AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 5
APPROVAL OF THE MANAGEMENT INCENTIVE PLAN
Payment of bonuses to executive officers and management of the Company is
determined by the Committee pursuant to the terms and conditions of the MIP. A
copy of the MIP is attached as Exhibit III. Awards under the MIP are based on
the following factors: corporate performance, business unit performance and
personal performance. The corporate performance rating is based on percentage
growth in earnings per share over the prior year and the return on capital such
earnings generated in the current year. Business unit ratings are based
primarily on profit performance, while market share performance, workplace
diversity and other factors are also considered. Personal ratings include such
factors as the quality of the strategic plan, progress in organizational and
management development and involvement in industry, civic and public affairs.
Both business unit and personal ratings are heavily dependent on achievement of
financial objectives.
Corporate and business unit ratings can range from 0.5 to 1.8 with top
quartile performance, primarily based on the S&P Restaurant Index, represented
by a 1.5 or higher rating. Personal ratings can range from 0.0 to 1.8. For
executive officers, the participant's target incentive participation rate (a
percentage of base salary which increases for positions of greater
responsibility within the Company) is multiplied both by the individual's
performance rating and by the corporate and/or a unit rating weighted according
to the following schedule to determine the cash incentive award:
<TABLE>
<CAPTION>
CORPORATE POSITION UNIT POSITION
--------------------- ---------------
<S> <C> <C>
Senior Corporate Officer.................................... 100% 0%
Vice Chairman............................................... 40% 60%
Restaurant Concept Presidents............................... 25% 75%
Restaurant Concept Officers................................. 0% 100%
Corporate Staff Officers.................................... 100% 0%
</TABLE>
Under the MIP, incentive awards are made annually to key executives as
determined and approved by the Committee (see the description of Compensation
Committee on page 4). Receipt of cash awards under the MIP may be deferred to a
subsequent date or to retirement. Each year, if approved by the Committee, a MIP
participant is able to deposit personally-owned shares of Common Stock with a
value equal to 15% or 25% (depending on position level) of the participant's
cash award with the Company. Participants age 55 or over may elect not to
participate fully in the stock matching provisions of the MIP. If such election
is made, those participants will receive an additional cash award (which may
also be deferred). A participant under age 55 who elects not to deposit shares
will not receive an additional cash award. The Company will issue one share of
restricted stock from the 1995
15
<PAGE>
Plan (described above) for each share that the participant originally deposits.
The shares vest in three years, provided the participant's deposit shares remain
with the Company throughout the vesting period. Restricted shares vest in full
in the event there is a Change of Control as defined in the MIP.
CHANGE OF CONTROL. Under the provisions of the MIP, if a Change of Control
occurs, such plan cannot thereafter be amended or terminated.
AWARDS. Cash incentive paid in fiscal 1996 to the five most highly
compensated executive officers is set forth on the Summary Compensation Table on
page 17. Cash incentives were paid under the MIP to the following groups during
fiscal 1996:
<TABLE>
<CAPTION>
TOTAL
CASH
INCENTIVE
($)
-------------
<S> <C>
All current executive officers, as a group..................................... $ 929,600
All current non-employee directors, as a group................................. 0
All employees who are not executive officers, as a group....................... $ 3,539,629
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSAL TO APPROVE THE
MANAGEMENT INCENTIVE PLAN, AS AMENDED, AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE.
OTHER BUSINESS
The Company is not aware of any business to be acted upon at the annual
meeting other than that which is explained in this Proxy Statement. In the event
that any other business calling for a vote of the stockholders is properly
presented at the meeting, the holders of the proxies will vote your shares in
accordance with their best judgment.
16
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
(ANNUAL COMPENSATION)
------------------------------------ ----------------------------
OTHER ANNUAL RESTRICTED STOCK STOCK ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR (1) ($) ($) ($)(2) ($)(3)(4) (#)(5) ($)(6)
- ------------------------- -------- -------- ----------- ------------ ----------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. R. LEE................ 1996 $575,000 $140,500(7) $33,866 $70,241 539,858 $325,041
Chairman of the Board 1995 438,734 $ 0 $ 0 149,314 $ 81,172
and Chief Executive
Officer
J. J. O'HARA............. 1996 $444,231 $189,300 $47,317 350,000 $ 99,442
President and Chief 1995 $321,154 $190,200 $47,543 82,009 $ 71,110
Operating Officer
B. D. BLUM............... 1996 $233,750 $115,100 $19,985 $28,764 144,900 $ 65,397
President, The Olive 1995 $178,961 $ 61,800 $23,495 44,712 $ 22,170
Garden, N.A.
C. L. WHITEHILL.......... 1996 $239,000 $100,400 $ 1,661 $25,098 71,100 $ 97,124
Senior Vice President, 1995 $231,571 $ 50,000 $ 0 30,188 $ 27,381
General Counsel
B. SWEATT, III........... 1996 $256,538 $ 41,200 $10,293 186,500 $ 71,054
President, New Business 1995 $219,711 $ 41,400 $10,348 61,696 $ 31,926
Division
</TABLE>
- ------------------------
* No years prior to fiscal 1995 are reported as the Company was a wholly-owned
subsidiary of General Mills, a corporation subject to the reporting
requirements of the Securities Exchange Act of 1934.
(1) Compensation for fiscal 1995 was determined solely by General Mills and
prior to the Distribution Date when the Company became an independent New
York Stock Exchange corporation.
(2) These amounts relate to tax gross-ups for relocation expenses.
(3) Amounts under this column for fiscal 1996 are based on the fair market value
($11.75) of Common Stock as of May 23, 1996, which determined the value of
restricted stock granted on that date under the MIP. Under the MIP,
participants must deposit with the Company one personally-owned share of
Common Stock for each share of restricted stock awarded which vest 100% at
three years, provided the participant's shares remain on deposit until the
end of the corresponding restricted period. Regular dividends are paid on
all restricted shares. Restricted stock immediately vests in the event of a
change of control. As of May 24, 1996, the number and value of aggregate
restricted stock holdings, including awards under this column, total: J. R.
Lee -- 34,247 shares ($402,402); J. J. O'Hara -- 27,782 shares ($326,439);
B. D. Blum -- 33,351 shares ($391,874); C. L. Whitehill -- 2,136 shares
($25,098); and B. Sweatt, III -- 39,281 shares ($461,552).
(4) Amounts in this column for fiscal 1995 are based on the value ($10.6239) of
Common Stock as of the Distribution Date for Darden restricted stock issued
upon conversion of General Mills restricted stock.
(5) The above named officers were awarded double their annual number of stock
options in fiscal 1996. As a result, these officers will not receive stock
option grants in fiscal 1997. For the following officers, the amounts shown
also include the following salary replacement option grants; B. D. Blum --
24,900; C. L. Whitehill -- 11,100; and B. Sweatt, III -- 26,500. For J. R.
Lee, the amount shown includes a grant of 39,858 bonus replacement options
(see also footnote 7). The
17
<PAGE>
stock option grants shown in this column for fiscal 1995 represent stock
options for Darden Common Stock granted under the Conversion Plan as a
result of the conversion of General Mills stock options granted to the named
officers in fiscal 1995.
(6) These amounts for fiscal 1996 include the following components: (1)
allocations relating to FlexComp, the Company's deferred compensation plan,
(2) reimbursement for unused vacation time, (3) an income imputation for a
gift of 100 Darden shares of Common Stock received as a result of the
spin-off from General Mills, and (4) reimbursement of relocation expenses.
For the following officers, the amounts for these components are: Joe R. Lee
-- $216,186 (1), $44,231 (2), $1,619 (3), and $63,004 (4); J. J. O'Hara --
$92,630 (1), $5,192 (2), and $1,619 (3); B. D. Blum -- $33,239 (1), $1,619
(3), and $30,538 (4); C. L. Whitehill -- $81,233 (1), $9,192 (2), $1,619
(3), and $5,079 (4); B. Sweatt -- $63,435 (1), $6,000 (2), and $1,619 (3).
(7) The fiscal 1996 annual incentive for J. R. Lee was reduced by 50% in lieu of
a grant of 39,858 bonus replacement options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT
INDIVIDUAL GRANTS (1) ASSUMED ANNUAL RATES OF
- -------------------------------------------------------------------------------------- STOCK PRICE APPRECIATION
NUMBER OF FOR OPTION TERM ($)(2)
SECURITIES UNDERLYING % OF TOTAL OPTIONS EXERCISE ----------------------------
OPTIONS GRANTED GRANTED TO EMPLOYEES PRICE EXPIRATION 5% 10%
NAME (#) IN FISCAL YEAR ($/SHARE) DATE ($) ($)
- --------------- --------------------- -------------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. R. Lee...... 500,000(3) 9.00% 10.9375 5/30/05 $3,439,247 $8,715,765
39,858(4) 0.72% 11.7500 5/23/06 $ 294,529 $ 746,398
J. J. O'Hara... 300,000(3) 5.40% 10.9375 5/30/05 $2,063,548 $5,229,459
50,000(5) 0.90% 11.0625 7/6/05 $ 347,855 $ 881,537
B. D. Blum..... 120,000(3) 2.16% 10.9375 5/30/05 $ 825,419 $2,091,783
24,900(6) 0.45% 11.3750 9/14/05 $ 178,125 $ 451,406
C. L.
Whitehill..... 60,000(3) 1.08% 10.9375 5/30/05 $ 412,709 $1,045,891
11,100(6) 0.20% 11.3750 9/14/05 $ 79,405 $ 201,229
B. Sweatt,
III........... 160,000(3) 2.88% 10.9375 5/30/05 $1,100,559 $2,789,044
26,500(6) 0.48% 11.3750 9/14/05 $ 189,571 $ 480,412
</TABLE>
- ------------------------
(1) All options are granted at the fair market value of the Common Stock on the
grant date and generally expire 10 years from the grant date. All options
vest immediately in the event of a change of control.
(2) These assumed values result from certain prescribed rates of stock price
appreciation. The actual value of these option grants is dependent on future
performance of the Common Stock and overall stock market conditions. There
is no assurance that the values reflected in this table will be achieved.
(3) The above named officers were awarded double their annual number of stock
options in fiscal 1996. As a result, these officers will not receive stock
option grants in fiscal 1997. This stock option grant under the 1995 Plan
becomes exercisable on May 30, 2000.
(4) This bonus replacement option, granted under the 1995 Plan, benefits the
Company by reducing the cash bonus of this officer (see footnote 5 of the
Summary Compensation Table). This option becomes exercisable on November 23,
1996.
(5) This stock option grant under the 1995 Plan becomes exercisable on July 6,
2000.
18
<PAGE>
(6) These salary replacement options, granted under the 1995 Plan, benefit the
Company by reducing the future cash compensation paid to the officers, with
corresponding reductions in cash bonuses and similar effects on benefits
which are tied to base salary. These options become exercisable over a
four-year period beginning on the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL YEAR END (#)
---------------------------------------------------------
SHARES VALUE CONVERSION PLAN (1) 1995 PLAN (2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE # ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. R. Lee........... 0 0 629,462 341,242 -- 539,858(5)
J. J. O'Hara........ 0 0 317,713 167,107 -- 350,000
B. D. Blum.......... 0 0 132,040 81,419 4,980(4) 139,920
C. L. Whitehill..... 0 0 175,420 80,548 2,220(4) 68,880
B. Sweatt, III...... 0 0 266,816 138,182 5,300(4) 181,200
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT FISCAL YEAR END ($)(3)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------------
<S> <C> <C>
J. R. Lee........... $2,575,122 $684,790
J. J. O'Hara........ $1,302,112 $424,621
B. D. Blum.......... $ 499,251 $183,971
C. L. Whitehill..... $ 622,329 $116,350
B. Sweatt, III...... $1,208,221 $252,988
</TABLE>
- ------------------------
(1) These options were granted as a result of the conversion of General Mills
stock options granted to the named officers in 1995. General Mills options
were adjusted so that two-thirds of the aggregate economic value of each
stock option grant was retained in adjusted General Mills stock options
(both the price and number of options were adjusted). General Mills stock
options retained by the named officers are not reported in this table. One
third of the aggregate economic value of each stock option grant was
converted into newly issued stock options for Company Common Stock. The
economic value at the date of conversion of each named officer's stock
option grants was neither increased nor decreased as a result of these
adjustments, other than small differences due to rounding of whole shares.
(2) These options were granted from the 1995 Plan.
(3) Value of all unexercised options equals the fair market value at May 24,
1996 ($11.6875) of the shares underlying in-the-money options, less the
exercise price, times the number of in-the-money options outstanding.
(4) These salary replacement options, granted under the 1995 Plan, benefit the
Company by reducing the future cash compensation paid to the named officers,
with corresponding reductions in cash bonuses and similar effects on
benefits which are tied to base salary.
(5) For J. R. Lee, the amount shown includes 39,858 bonus replacement options
(see footnote 5 of the Summary Compensation Table).
19
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into management continuity agreements with eleven of
its executive officers, including those named in the Summary Compensation Table
on page 17, providing for guaranteed severance payments equal to three times the
annual compensation of the officer (salary plus cash bonus award) and
continuation of health and similar benefits for a three-year period if the
officer is terminated without cause within two years after a change of control.
These agreements also provide that the severance payment shall be reduced by an
amount necessary to insure that the foregoing payments are not subject to any
excise taxes that might otherwise be payable under Code Section 4999 or any
similar tax. The Company also has entered into related trust agreements to
provide for payment of amounts under its non-qualified deferred compensation
plans, including the directors' compensation plans, the MIP and the management
continuity agreements. Full funding is required in the event of a change of
control. To date, only a nominal amount has been paid into each trust.
In addition, as discussed above, stock options, restricted stock and RSU's
issued under the 1995 Plan and the Conversion Plan all immediately vest in full
in the event of a Change of Control, as defined in such Plans.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors (see page 4). The Committee
is responsible for setting and administering the policies that govern both
annual compensation and stock ownership programs. The Committee annually
certifies corporate performance objectives and evaluates the Company's corporate
performance for incentive plans.
From time to time the Committee will use outside, independent consultants to
provide it with background information in performing its duties. During fiscal
1996, the Committee engaged the services of two nationally known compensation
consulting firms to review and analyze the Company's pay program. Those firms
found that:
- The current program is sound in its focus on performance.
- The current program has a good mix of short and long-term incentives, and
- The current program places more emphasis on long-term incentives than the
Company's peers, and as a result, has strong alignment with stockholders.
The Company uses cash and stock-based compensation for three purposes: (1)
to focus executives on short and long-term business strategy; (2) to reward
individual, business unit and corporate performance; and (3) to align
executives' interests with those of stockholders. Ultimately, the goal is to
maximize the success of the Company. As detailed in the Summary Compensation
Table (see page 17) a significant portion of the Company's pay for executives is
variable and is linked to performance.
CASH COMPENSATION
The Company's goal for cash compensation is to pay competitive base
salaries, coupled with an annual incentive plan (MIP). If individual, as well as
corporate and/or unit performance, is above average compared to the compensation
peer group described below, then total cash compensation also will be above
average within that group. Conversely, if performance is below average compared
to the compensation peer group, then total cash compensation will also be below
average.
The peer group against which compensation and performance are compared is
publicly-traded chain restaurant companies with substantial capitalization.
Supplemental pay data is obtained from hospitality, retail and other general
industry companies.
20
<PAGE>
The compensation peer group is a broader group than the S&P Restaurant Index
used in the Total Shareholder Return (TSR) performance graph on page 24. The S&P
Restaurant Index is the only published index suitable for TSR purposes, but does
not include all appropriate comparable companies for compensation purposes.
The Company also encourages executives to trade-off cash compensation for
stock-based compensation. This is discussed below under "Stock-Based
Compensation".
BASE SALARY INCREASES
Base salary increases for executive officers are determined annually by the
Committee based on the individual performance of the executive officer and where
the executive's pay stands competitively compared to the compensation peer
group. The budgeted salary increase for all employees is also considered in
determining base salary increases for executive officers.
MANAGEMENT INCENTIVE PLAN
Annual cash incentive awards are made by the Committee to executive officers
under the MIP based on the following factors: corporate performance, business
unit performance and individual performance. A description of the MIP is
contained in Item No. 5 (see page 15), and the full text of the MIP is attached
as Exhibit III. As stated in the MIP, awards to key executives shall be based on
the comparative impact of the individual's position to the overall corporate
results as measured by the position level, base salary of the individual, and
the degree to which such individual is able to affect the division, group or
overall corporate result.
The Company sets its business plan aggressively each year, such that
achievement of the plan represents approximately 75th percentile performance
measured against the compensation peer group for both the Company and its
business units.
Pursuant to the terms and conditions of the MIP, the Committee met on May
23, 1996 to evaluate and determine a corporate rating for the Company based upon
earnings per share growth and return on average capital for the 1996 fiscal year
compared to targets established by the Committee at the inception of the fiscal
year. Corporate ratings can range from 0.5 to 1.8, with top quartile performance
represented by a 1.5 or higher rating.
In view of the results for fiscal 1996 of an EPS growth of 10.3% and an ROC
of 7.8%, the Committee determined that the corporate rating should be .85. This
.85 corporate rating, weighted with unit and individual performance ratings
approved by the Committee, resulted in the bonus payments to the five most
highly compensated executive officers as reported in the Summary Compensation
Table (see page 17).
STOCK-BASED COMPENSATION
The Committee and management believe that broad and deep employee stock
ownership effectively motivates the building of stockholder wealth and aligns
the interests of employees with those of the stockholders. At the end of fiscal
1996, over 17% of the Company's outstanding shares were either owned by
employees and non-employee members of the Board of Directors, under options
granted to employees and non-employee members of the Board of Directors, or
owned by the Employee Stock Ownership Plan.
Please refer to Item No. 3 (see page 9) for a description of the 1995 Plan.
The Committee uses the 1995 Plan to attract and retain able employees by the
awarding of stock options, restricted stock and RSU's. Such employees are
defined as those who are responsible for the growth and sound development of the
business of the Company, and to align the interests of such employees with those
of the stockholders.
Regular stock options are granted by the Committee to the executive officers
and other employees based on their potential impact on corporate results (i.e.
the person's level of responsibility in the organization) and on their
individual performance. A total of 4,174 employees were granted options under
that program in fiscal 1996. The size of regular stock option grants to the
Chief Executive
21
<PAGE>
Officer and other executive officers is periodically reviewed against option
grants made by other larger restaurant companies in the compensation peer group
previously described to their CEO and other senior executives. The stock option
grant made to executive officers in fiscal 1996 was two times an annual
competitive grant and is intended to cover two years. No grant is expected to be
made to these executives in fiscal 1997.
The salary replacement option program enables an executive to receive stock
options in lieu of cash compensation. In fiscal 1996, salary replacement option
grants were offered to the executive officers as an alternative to eligibility
for part or all of a merit increase. The size of the option grant is based on
the estimated present value of the merit increase and pay-related benefits
foregone over the term of the option and the present value of the projected
stock option value. Because of the difficulties in determining the estimated
present value of such factors, the practice of offering salary replacement
options in lieu of merit increases will be discontinued in the future.
In lieu of granting salary replacement options, the Company will now allow
an executive to trade-off part of their annual cash incentive payout in return
for an additional stock option grant, referred to as a "bonus replacement
option" or "BRO". The size of the option grant is based on the value of the
foregone incentive payout and the present value of the projected stock option
value. In fiscal 1996, the Compensation Committee reduced the annual cash
incentive payout to the Chief Executive Officer by 50% and granted 39,858 bonus
replacement options instead. In the future, executive officers will elect the
percent (up to 50%) by which they wish to reduce their annual cash incentive
payout for a grant of bonus replacement options.
The 1995 Plan also authorizes the Committee to make awards to selected
employees of restricted stock of up to 10% of the shares authorized under the
1995 Plan, and in that connection to determine the number of shares to be
awarded, the length of the restricted period, the purchase price, if any, to be
paid by the participant, and whether any other restrictions will be imposed in
respect of such awards.
The majority of restricted shares have been and will be granted as part of
the stock matching program for participants in the MIP, described above,
requiring the participant to place on deposit one share of Common Stock owned
for each share of restricted stock awarded. The size of each restricted stock
award in that program is equal in value to 15% or 25% (depending on position
level) as specified under the 1995 Plan of the participant's annual cash
incentive award. If the deposit shares are withdrawn prior to the end of
three-year vesting period, then the unvested restricted stock award is
forfeited.
The Summary Compensation Table on page 17 summarizes the options and
restricted stock awards granted in fiscal 1996 to the five most highly
compensated executive officers. Included in the totals are options granted as
salary replacement options and bonus replacement options.
FLEX COMP BENEFITS
None of the Company's executive officers presently participate in an ERISA
qualified retirement plan. Instead, they participate in FlexComp, a nonqualified
deferred compensation arrangement. The Company's annual FlexComp contribution
equals 3% of the executive's eligible annual earnings plus an additional percent
of the executive's eligible annual earnings; the additional percent is based on
the executive's age and years of service with the Company during which the
officer may have been a participant in an ERISA qualified retirement plan.
FlexComp participants elect to have their FlexComp contributions credited with
rates of return based on several investment alternatives. Therefore, the plan
does not have a guaranteed retirement benefit. The annual FlexComp contributions
made by the Company for the accounts of the five most highly compensated
executive officers are shown in the Other Annual Compensation column of the
Summary Compensation Table on page 17.
22
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's base salary was established by the
Compensation Committee of General Mills at $575,000 in May, 1995, and this rate
continued during fiscal 1996. This amount is lower than the size-adjusted market
average, reflecting the fact that the Company places more emphasis on long-term
equity-based incentives than it does on cash compensation.
The Committee met (without the Chief Executive Officer) on May 23, 1996 to
evaluate the CEO's performance for fiscal 1996 and their evaluation was reported
to the independent directors of the Board.
Mr. Lee's bonus for fiscal 1996 under the MIP was determined by the
Committee to be $281,000. The Compensation Committee then reduced this bonus by
50% and granted 39,858 bonus replacement options to him instead, consistent with
the Committee's decision to use a BRO (See "Stock Based Compensation").
Mr. Lee also received a grant of 500,000 stock options in fiscal 1996. This
grant represented a two-year grant of regular stock options, based on the
Company's competitive grant guidelines.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Unless the conditions specified in the regulations under Section 162(m) of
the Internal Revenue are met, the Code limits the Company's ability to deduct,
for federal income tax purposes, certain compensation in excess of $1 million
per year paid to persons named in the Summary Compensation Table. One of those
conditions as applied to the Company is stockholder's approval of the plans
described in Items 3, 4 and 5 of this Proxy. The amount of compensation which
was paid in fiscal 1996 to individual officers was less than $1 million. The
Company believes that it meets all other requirements for deductibility of
executive compensation and will monitor whether its plans require any future
amendments to continue to meet the deductibility requirements of the tax law
without compromising the flexibility needed to design effective compensation
plans that meet the Company's executive compensation goals as described above.
SUMMARY
The Compensation Committee is satisfied that the compensation and long-term
incentive plans provided to the CEO and the other executive officers of the
Company are structured and operated so as to support the Company's business
strategy and to create strong linkage and alignment with the long-term best
interests of the Company and its stockholders. The Committee will periodically
reevaluate these programs to ensure they continue to do so.
COMPENSATION COMMITTEE
Michael D. Rose, Chair
Daniel B. Burke
Jack A. Smith
23
<PAGE>
COMPARISON OF ONE-YEAR TOTAL RETURN
DARDEN RESTAURANTS, INC., S&P 500 STOCK INDEX AND S&P RESTAURANT INDEX
BASED ON A $100 INVESTMENT ON THE DISTRIBUTION DATE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DARDEN S&P 500 S&P RESTAURANT INDEX
<S> <C> <C> <C>
May-95 100.00 100.00 100.00
Aug-95 95.40 107.56 101.61
Nov-95 103.81 115.93 119.33
Feb-96 114.19 128.06 138.20
May-96 108.75 132.61 132.12
</TABLE>
<TABLE>
<CAPTION>
(TOTAL RETURN INDEX) MAY 95 AUG 95 NOV 95 FEB 96 MAY 96
- ------------------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Darden Restaurants, Inc....... 100.00 95.40 103.81 114.19 108.75
S&P 500....................... 100.00 107.56 115.93 128.06 132.61
S&P Restaurant Index.......... 100.00 101.61 119.33 138.20 132.12
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors and executive officers are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership of the Company's Common Stock with the Securities and Exchange
Commission and the New York Stock Exchange. During fiscal 1996 all such reports
were filed on a timely basis.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Any stockholder proposal intended to be presented for consideration at the
1997 Annual Meeting and to be included in the Company's proxy statement must be
received at the principal executive offices of the Company by the close of
business on April 5, 1997. Proposals should be sent to the attention of the
Secretary.
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your proxy in the enclosed envelope.
24
<PAGE>
EXHIBIT I
DARDEN RESTAURANTS, INC.
STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995
(AS AMENDED MAY 23, 1996)
1. PURPOSE OF THE PLAN
The purpose of the Darden Restaurants, Inc. Stock Option and Long-Term
Incentive Plan of 1995 (the "Plan") is to attract and retain able employees by
rewarding employees of Darden Restaurants, Inc., its subsidiaries and affiliates
(defined as entities in which Darden Restaurants, Inc. owns an equity interest
of 25% or more) (collectively, the "Company") who are responsible for the growth
and sound development of the business of the Company, and to align the interests
of all employees with those of the stockholders of the Company and to compensate
certain management employees of the Company by granting stock options in lieu of
salary increases or other compensation or employee benefits.
2. EFFECTIVE DATE, DURATION AND SUMMARY OF PLAN
A. EFFECTIVE DATE AND DURATION
This Plan shall become effective as of the effective date of the
distribution of Darden Restaurants, Inc. Common Stock to the holders of General
Mills, Inc. common stock. Awards may be made under the Plan until September 30,
2000.
B. SUMMARY OF OPTION PROVISIONS FOR PARTICIPANTS
The stock option that will be awarded to employees under this Plan gives a
right to an employee to purchase at a future date shares of Darden Restaurants,
Inc. Common Stock at a fixed price. As an employee, you will receive an "option
agreement" in your own name, which will contain the term and other conditions of
the option grant. In general, each option agreement will state the number of
shares of Darden Restaurants, Inc. Common Stock that you can purchase from the
Company, the price at which you can purchase the shares, and the last date you
can make your purchase. You will not have any taxable income when you receive
the option agreement.
The price at which you may buy the Darden Restaurants, Inc. shares will be
equal to the market price of the Company shares on the New York Stock Exchange
as of the day the option was awarded to you. If after the period that you must
hold the option (at least three years), the price of Darden Restaurants, Inc.
Common Stock has risen, you will be able to make a gain on exercising the option
equal to the difference between the exercise price of the option and the market
price of Darden Restaurants, Inc. shares on the date you use your option to buy
shares under the terms of the option certificate. This gain will be taxable to
you.
You will never be obligated to buy shares of the Company if you do not wish
to do so. After the required holding period before you can exercise the option,
you can continue to hold the option certificate as an employee for up to seven
years before making the decision whether or not to buy shares of the Company.
Thereafter, the rights under the option will lapse and cannot then be used by
the employee.
You cannot sell or assign the option to any other person, and the specific
provisions which cover your rights in the option are covered in the full text of
the Plan.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee shall be comprised solely of non-employee,
independent members of the Board of Directors (the "Board") appointed in
accordance with the Company's Articles of Incorporation. Subject to the
provisions of Section 14, the Committee shall have authority to adopt rules and
regulations for
1
<PAGE>
carrying out the purpose of the Plan, select the employees to whom Awards will
be made ("Participants"), determine the number of shares to be awarded and the
other terms and conditions of Awards in accordance with the Plan provisions and
interpret, construe and implement the provisions of the Plan; provided that if
at any time Rule 16b-3 or any successor rule ("Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), so permits, without adversely
affecting the ability of the Plan to comply with the conditions for exemption
from Section 16 of the 1934 Act (or any successor provisions) provided by Rule
16b-3, the Committee may delegate its duties under the Plan in whole or in part,
on such terms and conditions, to the Chief Executive Officer and to other senior
officers of the Company; provided further, that only the Committee may select
and make other decisions as to Awards to Participants who are subject to Section
16 of the 1934 Act and to other executives of the Company. The Committee (or its
permitted delegate) may correct any defect or supply any omission or reconcile
any inconsistency in any agreement relating to any Award under the Plan in the
manner and to the extent it deems necessary. Decisions of the Committee (or its
permitted delegate) shall be final, conclusive and binding upon all parties,
including the Company, stockholders and Participants.
4. COMMON STOCK SUBJECT TO THE PLAN
The shares of common stock of the Company (without par value) ("Common
Stock") to be issued upon exercise of a Stock Option, awarded as Restricted
Stock, or issued upon expiration of the restricted period for Restricted Stock
Units, may be made available from the authorized but unissued Common Stock,
shares of Common Stock held in the Company's treasury, or Common Stock purchased
by the Company on the open market or otherwise. Approval of the Plan by the sole
shareholder of the Company shall constitute authorization to use such shares for
the Plan.
The Committee, in its discretion, may require as a condition to the grant of
Stock Options, Restricted Stock or Restricted Stock Units (collectively,
"Awards"), the deposit of Common Stock owned by the Participant receiving such
grant, and the forfeiture of such Awards, if such deposit is not made or
maintained during the required holding period or the applicable restricted
period. Such shares of deposited Common Stock may not be otherwise sold, pledged
or disposed of during the applicable holding period or restricted period. The
Committee may also determine whether any shares issued upon exercise of a Stock
Option shall be restricted in any manner.
The maximum aggregate number of shares of Common Stock authorized under the
Plan for which Awards may be granted under the Plan is 15,000,000. Upon the
expiration, forfeiture, termination or cancellation, in whole or in part, of
unexercised Stock Options, or forfeiture of Restricted Stock or Restricted Stock
Units on which no dividends or dividend equivalents have been paid, the shares
of Common Stock subject thereto shall again be available for Awards under the
Plan.
The number of shares subject to the Plan, the outstanding Awards and the
exercise price per share of outstanding Stock Options may be appropriately
adjusted by the Committee in the event that:
(i) the number of outstanding shares of Common Stock shall be changed by
reason of split-ups, spin-offs, combinations or reclassifications of shares;
(ii) any stock dividends are distributed to the holders of Common Stock;
(iii) the Common Stock is converted into or exchanged for other shares as
a result of any merger or consolidation (including a sale of assets) or
other recapitalization, or other similar events occur which affect the value
of the Common Stock; or
(iv) 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 the Plan.
2
<PAGE>
5. ELIGIBLE PERSONS
Only persons who are employees of the Company shall be eligible to receive
Awards under the Plan ("Participants"). No Award shall be made to any member of
the Committee or any other non-employee director of the Company.
6. PURCHASE PRICE OF STOCK OPTIONS
The purchase price for each share of Common Stock issuable under a Stock
Option shall not be less than 100% of the Fair Market Value of the shares of
Common Stock on the date of grant. "Fair Market Value" as used in the Plan shall
equal the mean of the high and low price of the Common Stock on the New York
Stock Exchange on the applicable date.
7. STOCK OPTION TERM AND TYPE
The term of any Stock Option as determined by the Committee shall not exceed
10 years from the date of grant and shall expire as of the close of business on
the last day of the designated term, unless terminated earlier under the
provisions of the Plan. All Stock Option grants under the Plan shall be
non-qualified stock options governed by Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code") .
8. EXERCISE OF STOCK OPTIONS
A. Of the 15,000,000 shares of Common Stock authorized for issuance
hereunder, not less than 3,000,000 shall be issued only as salary replacement
Stock Options ("SRO's") in lieu of salary increases, compensation or other
employee benefits. Except as provided in Sections 12 and 13, each Stock Option
issued as an SRO may be exercised as determined by the Committee in its
discretion.
B. Except as provided in Sections 12 and 13 (Change of Control and
Termination of Employment), each Stock Option, other than an SRO, may be
exercised no sooner than three years from the date of grant and subject to the
Participant's continued employment with the Company and in accordance with the
terms prescribed by the Committee.
C. The number of shares of Common Stock subject to Stock Options granted
under the Plan to any single Participant shall not exceed 10% of the total
number of shares of Common Stock which may be issued under this Plan.
D. A Participant exercising a Stock Option shall give notice to the Company
of such exercise and of the number of shares elected to be purchased prior to
5:00 P.M. EST/EDT on the day of exercise, which must be a business day at the
executive offices of the Company. At the time of purchase, the Participant shall
tender the full purchase price of the shares purchased. Until such payment has
been made and a certificate or certificates for the shares purchased has been
issued in the Participant's name, the Participant shall possess no stockholder
rights with respect to such shares. Payment of such purchase price shall be made
to the Company, subject to any applicable rule or regulation adopted by the
Committee:
(i) in cash (including check, draft, money order or wire transfer made
payable to the order of the Company);
(ii) through the delivery of shares of Common Stock owned by the
Participant; or
(iii) by a combination of (i) and (ii) above.
For determining the amount of the payment, Common Stock delivered pursuant
to (ii) or (iii) shall have a value equal to the Fair Market Value of the Common
Stock on the date of exercise.
9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
With respect to Awards of Restricted Stock and Restricted Stock Units, the
Committee shall:
(i) select Participants to whom Awards will be made, provided that
Restricted Stock Units may only be awarded to those employees of the Company
who are employed in a country other than the United States;
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(ii) determine the number of shares of Restricted Stock or the number of
Restricted Stock Units to be awarded;
(iii) determine the length of the restricted period, which shall be no
less than one year;
(iv) determine the purchase price, if any, to be paid by the Participant
for Restricted Stock or Restricted Stock Units; and
(v) determine any restrictions other than those set forth in this
Section 9.
Any shares of Restricted Stock granted under the Plan 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.
Subject to the restrictions set forth in this Section 9, each Participant
who receives Restricted Stock shall have all rights as a stockholder with
respect to such shares, including the right to vote the shares and receive
dividends and other distributions.
Each Participant who receives Restricted Stock Units shall be eligible to
receive, at the expiration of the applicable restricted period, one share of
Common Stock for each Restricted Stock Unit awarded, and the Company shall issue
to and register in the name of each such Participant a certificate for that
number of shares of Common Stock. Participants who receive Restricted Stock
Units shall have no rights as stockholders with respect to such Restricted Stock
Units until such time as share certificates for Common Stock are issued to the
Participants; provided, however, that quarterly during the applicable restricted
period for all Restricted Stock Units awarded hereunder, the Company shall pay
to each such Participant an amount equal to the sum of all dividends and other
distributions paid by the Company during the prior quarter on that equivalent
number of shares of Common Stock.
Subject to the provisions of Section 12, for awards of Restricted Stock or
Restricted Stock Units which have a deposit requirement, a Participant will be
eligible to vest only in those shares of Restricted Stock or Restricted Stock
Units for which personally-owned shares are on deposit with the Company as of
the date the Participant's employment with the Company terminates.
The total number of shares of Common Stock issued upon vesting of Restricted
Stock or Restricted Stock Units granted under the Plan shall not exceed 10% of
the total number of shares of Common Stock which may be issued under this Plan,
and no single Participant shall receive under the Plan Restricted Stock or
Restricted Stock Units which, upon vesting, would exceed 2% of the total number
of shares of Common Stock which may be issued under the Plan.
10. NON-TRANSFERABILITY
Except as otherwise provided in Section 9, no shares of Restricted Stock and
no Restricted Stock Units shall be sold, exchanged, transferred, pledged, or
otherwise disposed of during the restricted period. No Stock Options granted
under this Plan shall be transferable by a Participant otherwise than (i) by the
Participant's last will and testament or (ii) by the applicable laws of descent
and distribution, and such Stock Options shall be exercised during the
Participant's lifetime only by the Participant or his or her guardian or legal
representative. Other than as set forth herein, no Award under the Plan shall be
subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void.
11. WITHHOLDING TAXES
It shall be a condition to the obligation of the Company to deliver shares
upon the exercise of a Stock Option, the vesting of Restricted Stock or
Restricted Stock Units and the corresponding issuance of shares of unrestricted
Common Stock, that the Participant pay to the Company cash in an amount equal to
all federal, state, local and foreign withholding taxes required to be collected
in respect thereof.
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Notwithstanding the foregoing, to the extent permitted by law and pursuant
to such rules as the Committee may adopt, a Participant may authorize the
Company to satisfy any such withholding requirement by directing the Company to
withhold from any shares of Common Stock to be issued, all or a portion of such
number of shares as shall be sufficient to satisfy the withholding obligation,
provided that in the case of the vesting of Restricted Stock or Restricted Stock
Units, the number of shares of Common Stock to be issued equals or exceeds 500.
12. CHANGE OF CONTROL
Each outstanding Stock Option shall become immediately and fully exercisable
for a period of 6 months following the date of the following occurrences, each
constituting 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.
After such 6-month period the normal option exercise provisions of the Plan
shall govern. In the event a Participant is terminated as an employee of the
Company within 2 years after any of the events specified in (i), (ii) or (iii),
his or her outstanding Stock Options at that date of termination shall become
immediately exercisable for a period of 3 months.
With respect to Stock Option grants outstanding as of the date of any such
Change of Control which require the deposit of owned Common Stock as a condition
to obtaining rights: (a) said deposit requirement shall be terminated as of the
date of the Change of Control and any such deposited stock shall be promptly
returned to the Participant; and (b) any restrictions on the sale of shares
issued in respect of any such Stock Option shall lapse.
In the event of a Change of Control, a Participant shall vest in all shares
of Restricted Stock and Restricted Stock Units, effective as of the date of such
Change of Control, and any deposited shares of Common Stock shall be promptly
returned to the Participant.
13. TERMINATION OF EMPLOYMENT
A. TERMINATION OF EMPLOYMENT
If the Participant's employment by the Company terminates for any reason
other than as specified herein or in subsections B, C or D, the Participant's
Stock Options shall terminate 3 months after such termination and all shares of
Restricted Stock and all Restricted Stock Units which are subject to restriction
as of said termination date shall be forfeited by the Participant to the
Company. In the event a Participant's employment with the Company is terminated
for the convenience of the Company, as determined by the Committee, the
Committee, in its sole discretion, may vest such Participant in all or any
portion of outstanding Stock Options (which shall become exercisable) and/or
shares of Restricted Stock or Restricted Stock Units awarded to such
Participant, effective as of the date of such termination.
B. DEATH
If a Participant should die while employed by the Company, any Stock Option
previously granted under this Plan may be exercised by the person designated in
such Participant's last will and testament or, in the absence of such
designation, by the Participant's estate, to the full extent that such Stock
Option could have been exercised by such Participant immediately prior to death.
Further, with
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respect to outstanding Stock Option grants which, as of the date of death, are
not yet exercisable, any such option grant shall vest and become exercisable in
a pro-rata amount, based on the full months of employment completed during the
full vesting period of the Stock Option from the date of grant to the date of
death.
With respect to Stock Option grants which require the deposit of owned
Common Stock as a condition to obtaining exercise rights, in the event a
Participant should die while employed by the Company, said Stock Options may be
exercised as provided in the first paragraph of this Section 13B, subject to the
following special conditions:
(i) any restrictions on the sale of shares issued in respect of any such
Stock Option shall cease; and
(ii) any owned Common Stock deposited by the Participant pursuant to
said grant shall be promptly returned to the person designated in such
Participant's last will and testament or, in the absence of such
designation, to the Participant's estate, and all requirements regarding
deposit by the Participant shall be terminated.
A Participant who dies during any applicable restricted period shall vest in
a proportionate number of shares of Restricted Stock or Restricted Stock Units,
effective as of the date of death. Such proportionate vesting shall be pro-rata,
based on the number of full months of employment completed during the restricted
period prior to the date of death, as a percentage of the applicable restricted
period.
C. RETIREMENT
The Committee shall determine, at the time of grant, the treatment of the
Stock Option upon the retirement of the Participant. Unless other terms are
specified in the original Stock Option grant, if the termination of employment
is due to a Participant's retirement on or after age 55 with 10 years of service
with the Company, the Participant may exercise a Stock Option, subject to the
original terms and conditions of the Stock Option. With respect to Stock Option
grants which require the deposit of owned Common Stock as a condition to
obtaining rights, any restrictions on the sale of shares issued in respect of
any such Stock Option shall lapse at the date of any such retirement.
A Participant who retires on or after the date he or she attains age 65
shall fully vest in all shares of Restricted Stock or Restricted Stock Units,
effective as of the date of retirement (unless any such award specifically
provides otherwise).
A Participant who takes early retirement (after age 55, but prior to age 65)
during any applicable restricted period may elect either of the following
alternatives with respect to Restricted Stock or Restricted Stock Units (unless
any such award specifically provides otherwise):
(a) Leave owned shares on deposit with the Company and vest in all
shares of Restricted Stock or Restricted Stock Units, effective as of the
earlier of the date the Participant attains age 65 or the termination date
of the applicable restricted period; or
(b) Withdraw owned shares and vest in a proportionate number of shares
of Restricted Stock or Restricted Stock Units, effective as of the date the
shares on deposit are withdrawn. Such proportionate vesting shall be
pro-rata, based on the number of full months of employment completed during
the restricted period prior to the date of early retirement, as a percentage
of the applicable restricted period.
D. SPIN-OFFS
If the termination of employment is due to the cessation, transfer, or
spin-off of a complete line of business of the Company, the Committee, in its
sole discretion, shall determine the treatment of all outstanding Awards under
the Plan.
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14. AMENDMENTS OF THE PLAN
The Plan may be terminated, modified, or amended by the Board of Directors
of the Company. The Committee may from time to time prescribe, amend and rescind
rules and regulations relating to the Plan. Subject to the approval of the Board
of Directors, the Committee may at any time terminate, modify, or suspend the
operation of the Plan, provided that no action shall be taken by the Board of
Directors or the Committee without the approval of the stockholders of the
Company which would:
(i) materially increase the number of shares which may be issued under
the Plan;
(ii) materially increase the benefits accruing to Participants under the
Plan; or
(iii) materially modify the requirements as to eligibility for
participating in the Plan.
The Board of Directors shall have authority to cause the Company to take any
action related to the Plan which may be required to comply with the provisions
of the Securities Act of 1933, as amended, the 1934 Act, and the rules and
regulations prescribed by the Securities and Exchange Commission. Any such
action shall be at the expense of the Company.
No termination, modification, suspension, or amendment of the Plan shall
alter or impair the rights of any Participant pursuant to a prior Award without
the consent of the Participant. There is no obligation for uniformity of
treatment of Participants under the Plan.
15. FOREIGN JURISDICTIONS
The Committee may adopt, amend, and terminate such arrangements, not
inconsistent with the intent of the Plan, as it may deem necessary or desirable
to make available tax or other benefits of the laws of any foreign jurisdiction,
to employees of the Company who are subject to such laws and who receive Awards
under the Plan.
16. NOTICE
All notices to the Company regarding the Plan shall be in writing, effective
as of actual receipt by the Company, and shall be sent to:
Darden Restaurants, Inc.
5900 Lake Ellenor Dr.
Orlando, FL 32809
Attn: General Counsel
Effective May 28, 1995
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EXHIBIT II
DARDEN RESTAURANTS, INC.
STOCK OPTION AND LONG-TERM INCENTIVE CONVERSION PLAN
(AS AMENDED MAY 23, 1996)
1. PURPOSE OF THE PLAN
The purpose of the GM Restaurants, Inc. Stock Option and Long-Term Incentive
Conversion Plan (the "Plan") is to provide for the issuance and administration
of certain awards relating to Common Stock of Darden Restaurants, Inc. (the
"Company") issued to employees and officers of General Mills, Inc. ("GMI"), the
Company, and other GMI Subsidiaries, in connection with the Distribution by GMI
to its stockholders of all of the Common Stock of the Company.
2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
"Adjusted GMI Stock Option" shall mean a GMI Stock Option which, as a result
of the Distribution, has been adjusted by the GMI Compensation Committee as to
its exercise price and/or the number of shares of GMI Common Stock it covers,
such adjustment to each GMI Stock Option being dependent on the number of
corresponding Company Stock Options granted by the Company, if any.
"Award" shall mean any Stock Option, Restricted Stock, Restricted Stock Unit
or Performance Unit Account granted under this Plan.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Bridge Grant" shall mean a GMI Stock Option granted on June 1, 1994 under
the General Mills, Inc. 1990 Salary Replacement Stock Option Plan in the award
known as "90-S10" in GMI's internal stock option management system.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not fewer than two directors, each of which
directors, to the extent necessary to comply with Rule 16b-3 only, is a
"disinterested person" within the meaning of Rule 16b-3. Until otherwise
determined by the Board, the Committee shall be the Compensation Committee of
the Board.
"Common Stock" shall mean the common stock of the Company (without par
value).
"Company" shall mean Darden Restaurants, Inc., a Florida corporation.
"Company Conversion Ratio" shall mean the factor where the numerator is the
Per Share Company Stock Price and the denominator is the Per Share Pre-Split GMI
Stock Price.
"Distribution" shall mean the transfer by GMI of all the then outstanding
Shares owned by GMI to the distribution agent for the benefit of, and ultimate
distribution to, the holders of GMI common stock as of the Record Date, as
described in the Information Statement.
"Distribution Date" shall mean the effective date of the Distribution.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" shall mean the mean of the high and low price of the
Common Stock on the New York Stock Exchange on the applicable date.
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"Food Retirees" shall mean persons retiring from GMI on or prior to the
Distribution Date who are not Restaurant Retirees.
"GMI" shall mean General Mills, Inc., a Delaware corporation.
"GMI Award" shall mean any of the GMI Stock Options, GMI Restricted Stock or
Restricted Stock Units or GMI Performance Units.
"GMI Compensation Committee" shall mean the Compensation Committee of the
Board of Directors of GMI.
"GMI Performance Unit" shall mean a performance unit granted by GMI and
outstanding on the Record Date.
"GMI Restricted Stock or Restricted Stock Unit" shall mean a share of GMI
common stock or the right to receive a share of GMI common stock which is
subject to certain restrictions on the last trading day on the New York Stock
Exchange immediately prior to the Record Date.
"GMI Stock Option" shall mean an option to purchase GMI common stock granted
by GMI to a present or former officer or employee of GMI that is outstanding and
unexercised on the Record Date.
"Information Statement" shall mean the information statement dated May 5,
1995 distributed to GMI stockholders in connection with the transactions
relating to the Distribution.
"Participant" shall mean an individual eligible to receive a Company Award
who is granted an Award under the Plan.
"Per Share Company Stock Price" shall mean the composite volume weighted
average price of the Company's Common Stock as published by Bloomberg L.P. for
the period beginning on the later of (i) the second trading day on which "when
issued" trading in Company Common Stock takes place on the New York Stock
Exchange and (ii) the twentieth trading day prior to the Distribution Date and
ending on the Distribution Date.
"Per Share Post-Split GMI Stock Price" shall mean the composite volume
weighted average price of GMI common stock trading without due bills as
published by Bloomberg L.P. for the period beginning on the later of (i) the
second trading day on which "when issued" trading in Company Common Stock takes
place on the New York Stock Exchange and (ii) the twentieth trading day prior to
the Distribution Date and ending on the Distribution Date.
"Per Share Pre-Split GMI Stock Price" shall mean the composite volume
weighted average price as of GMI common stock trading with due bills published
by Bloomberg L.P. for the period beginning on the later of (i) the second
trading day on which "when issued" trading in Company Common Stock takes place
on the New York Stock Exchange and (ii) the twentieth trading day prior to the
Distribution Date and ending on the Distribution Date.
"PUP Account" shall mean any account established by GMI in connection with
the granting of a GMI Performance Unit.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Record Date" shall mean May 5, 1995.
"Restaurant Retirees" shall mean persons retiring from the Company on or
prior to the Distribution Date.
"Restricted Stock and Restricted Stock Unit" shall mean any award of
restricted stock or restricted stock units granted under Section 9 of the Plan.
"Retiree Split Option Grant" shall have the meaning set forth in Section
7(a)(iii) of the Plan.
"Retiree Split Stock Grant" shall have the meaning set forth in Section 9(b)
of the Plan.
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"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange
Act, or any successor rule or regulation thereto as in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission, including the staff
thereof, or any successor thereto.
"Shares" shall mean the shares of Common Stock (without par value) of the
Company and such other securities of the Company or a Subsidiary as the
Committee may from time to time designate.
"Special Grant" shall mean a GMI Stock Option granted on September 20, 1993
and September 19, 1994 under the General Mills, Inc. Stock Option and Long-Term
Incentive Plan of 1993.
"Split Grant Conversion Ratio" shall mean the factor where the numerator is
the Per Share Pre-Split GMI Stock Price and the denominator is the sum of the
Per Share Post-Split GMI Stock Price and the Per Share Company Stock Price.
"Stock Option" shall mean a stock option granted under Section 7 of the
Plan.
"Subsidiary" shall mean any corporation or other entity in which the Company
possesses directly or indirectly equity interests representing at least 25% of
the total ordinary voting power or at least 25% of the total value of all
classes of equity interests of such corporation or other entity.
3. EFFECTIVE DATE AND DURATION
EFFECTIVE DATE
This Plan shall become effective as of the Distribution Date. Subject to
paragraph 6(b), no Award shall be granted under the Plan except the Awards
provided for in Sections 7, 9 and 10. Awards granted hereunder shall continue
until their respective expiration dates.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to interpret and administer the Plan and any instrument
or agreement relating to, or Award made under, the Plan; establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. The Committee shall have no
discretion relating to the timing, price and size of Awards granted under the
Plan, which shall be determined in accordance with the provisions of Sections 7,
9 and 10. Unless otherwise expressly provided in the Plan, all designations,
determination, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon all Persons,
including the Company, any Subsidiary, any Participant, any holder or
beneficiary of any Award, any stockholder of the Company and any Participant.
The authority of the Committee to administer, interpret, amend, alter, adjust,
suspend, discontinue, or terminate, in accordance with the provisions of the
Plan, any Award or to waive any conditions or rights under any Award shall
extend until the expiration date of such Award.
5. ELIGIBLE PERSONS
Only persons employed by the Company or a Subsidiary on the Distribution
Date and Food Retirees and Restaurant Retirees who, on the Distribution Date,
hold an outstanding GMI Stock Option or on the Record Date have issued and
outstanding in their name GMI Restricted Stock or Restricted Stock Units shall
be eligible to receive Awards under the Plan. Each Participant shall be granted
an Award in accordance with the provisions of the Plan.
6. SHARES SUBJECT TO THE PLAN
(a) SHARES AVAILABLE FOR AWARDS. Subject to adjustment as provided in
Section 6(b):
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(i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The number of Shares
with respect to which Awards may be granted under the Plan shall be such
number of Shares as results from the application of the award formulas set
forth in Sections 7, 9 and 10. If, after the effective date of the Plan, an
Award granted under the Plan expires or is exercised, forfeited, cancelled
or terminated without the delivery of Shares, then the Shares covered by
such Award or to which such Award relates, or the number of Shares otherwise
to which Awards may be granted, to the extent of any such expiration,
exercise, forfeiture, cancellation or termination, shall not thereafter be
available for grants or Awards under the Plan.
(ii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered
pursuant to an Award may consist of authorized and unissued Shares, Shares
held in the Company's treasury and Shares acquired in the open market or
otherwise obtained by the Company or a Subsidiary.
(b) ADJUSTMENTS. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, Subsidiary
securities, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in its sole discretion and in such manner as it may deem equitable, adjust any
or all of (i) the number and type of Shares subject to outstanding Awards, and
(ii) the grant or exercise price with respect to any Award and, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; PROVIDED, that the number of Shares subject to any Award denominated in
Shares shall always be a whole number.
7. STOCK OPTIONS
(a) NUMBER OF STOCK OPTIONS. Each holder of a GMI Stock Option who is a
Company employee, a Food Retiree or a Restaurant Retiree on the Distribution
Date shall receive either a Company Stock Option, an Adjusted GMI Stock Option
or an election to receive either a Company Stock Option or a Company Stock
Option and an Adjusted GMI Stock Option in accordance with the following:
(i) Active employees of the Company on the Distribution Date who hold
GMI Stock Options, except Bridge Grants or Special Grants shall receive, in
addition to an Adjusted GMI Stock Option, a Company Stock Option with an
exercise price for the shares of Common Stock equal to the exercise price of
the GMI Stock Option prior to the Distribution multiplied by the Company
Conversion Ratio and for a number of shares of Common Stock equal to the
number of shares subject to the GMI Stock Option prior to the Distribution
multiplied by .33 divided by the Company Conversion Ratio.
(ii) Active employees of the Company on the Distribution Date holding
Bridge Grants or Special Grants and Restaurant Retirees holding Bridge
Grants shall, as to such options, receive a Company Stock Option with an
exercise price for the shares of Common Stock equal to the exercise price of
the GMI Stock Option prior to the Distribution multiplied by the Company
Conversion Ratio and for a number of shares of Common Stock equal to the
number of shares subject to the GMI Stock Option prior to the Distribution
divided by the Company Conversion Ratio.
(iii) Restaurant Retirees holding GMI Stock Options, other than Bridge
Grants, shall be given, as to such GMI Stock Options, an election, prior to
the Record Date, to receive either (a) a Company Stock Option as described
in (ii) above or (b) a Retiree Split Option Grant. The Retiree Split Option
Grant shall mean an Adjusted GMI Stock Option, as determined by the GMI
Compensation Committee, plus a Company Stock Option with an exercise price
for the shares of Common Stock equal to the exercise price of the GMI Stock
Option prior to the Distribution
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multiplied by the Company Conversion Ratio and for a number of shares of
Common Stock equal to the number of shares subject to the GMI Stock Option
prior to the Distribution multiplied by the Split Grant Conversion Ratio.
(iv) Food Retirees holding GMI Stock Options shall be given an election,
prior to the Record Date, either to receive a Retiree Split Option Grant as
described in (iii) above or receive an Adjusted GMI Stock Option, as
determined by the GMI Compensation Committee.
(v) Each Company Stock Option shall have the same remaining term and
other terms and conditions (whether such terms and conditions are contained
in the related GMI Stock Option agreement or in the plan under which such
GMI Stock Option was granted, subject that a "Change of Control" as defined
in such related agreement or plan shall be amended to provide that a
"beneficial owner" is an owner of 20% or more of the shares of the Company
entitled to vote for the election of directors) and shall be exercisable to
the same extent as the GMI Stock Option from which it was derived, with such
changes and modifications as necessary to substitute the Company for GMI, as
the issuer of the Stock Option.
8. EXERCISE OF STOCK OPTIONS
A Participant exercising a Company Stock Option shall give notice to the
Company of such exercise and of the number of shares elected to be purchased
prior to 5:00 P.M. EST/EDT on the day of exercise, which must be a business day
at the executive offices of the Company. At the time of purchase, the
Participant shall tender the full purchase price of the shares purchased. Until
such payment has been made and a certificate or certificates for the shares
purchased has been issued in the Participant's name, the Participant shall
possess no stockholder rights with respect to such shares. Payment of such
purchase price shall be made to the Company, subject to any applicable rule or
regulation adopted by the Committee:
(i) in cash (including check, draft, money order or wire transfer made
payable to the order of the Company);
(ii) through the delivery of shares of Common Stock owned by the
Participant; or
(iii) by a combination of (i) and (ii) above.
For determining the amount of the payment, Common Stock delivered pursuant
to (ii) or (iii) shall have a value equal to the Fair Market Value of the Common
Stock on the date of exercise.
9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a) Holders of unvested GMI Restricted Stock or Restricted Stock Units who
are employees of the Company on the Distribution Date shall have issued in their
name, or in book entry form as reflected on the master stockholder record of the
Company immediately following the Distribution Date, a number of shares of
Company Restricted Stock or Restricted Stock Units equal to the number of shares
of GMI Restricted Stock or Restricted Stock Units issued and outstanding in
their name on the last trading day on the New York Stock Exchange prior to the
Record Date divided by the Company Stock Conversion Ratio.
(b) Holders of unvested GMI Restricted Stock or Restricted Stock Units and
who are Restaurant Retirees shall be given a choice, prior to the Record Date,
to elect to have issued in their name, or in book entry form as reflected on the
master stockholder record of the Company immediately following the Distribution
Date either (i) a Retiree Split Stock Grant or (ii) the number of shares of
Company Restricted Stock or Restricted Stock Units described in (a) above. The
Retiree Split Stock Grant shall consist of GMI Restricted Stock or Restricted
Stock Units, as determined by the GMI Compensation Committee, and Company
Restricted Stock or Restricted Stock Units covering the number of shares which
were subject to the GMI Restricted Stock or Restricted Stock Units on the last
trading day on the New York Stock Exchange prior to the Record Date.
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<PAGE>
(c) Holders of unvested GMI Restricted Stock or Restricted Stock Units who
are Food Retirees shall be given a choice, prior to the Record Date, to elect to
have issued in their name, or in book entry form as reflected on the master
stockholder record of the Company, either (i) a Retiree Split Stock Grant
described in (b) above or (ii) a modified grant of GMI Restricted Stock or
Restricted Stock Units as determined by the GMI Compensation Committee.
(d) Each share of Restricted Stock or Restricted Stock Unit shall have the
same remaining vesting period and other terms and conditions (whether such terms
and conditions are contained in the related GMI Restricted Stock or Restricted
Stock Unit agreement or in the plan under which such GMI Restricted Stock or
Restricted Stock Unit was granted) and shall vest to the same extent and at the
rate as the share of GMI Restricted Stock or Restricted Stock Unit from which it
was derived, with such changes and modifications as necessary to substitute the
Company for GMI as the issuer of the Restricted Stock or Restricted Stock Unit;
provided, however, that as to Stock Options, Restricted Stock or Restricted
Stock Units which require a deposit of Participant-owned shares as a condition
to vesting, the Committee may, in its discretion, make such adjustments to the
deposit requirements as it deems appropriate.
10. PERFORMANCE UNITS
The value on the Distribution Date of PUP Accounts shall be transferred to
the Company in the proportion that the Company Stock Options, having a related
PUP Account, bear to the corresponding Adjusted GMI Stock Options, if any. If no
corresponding Adjusted GMI Stock Options are issued, the entire value of the PUP
Account shall be transferred to the Company. Withdrawals of PUP Account amounts
transferred to the Company shall reduce the outstanding Company Stock Options
held by a Participant; exercises of Company Stock Options shall reduce the
amount of the corresponding transferred PUP Account to the same extent as
provided in the grant of the GMI Performance Unit.
11. AMENDMENTS TO PLAN AND AWARDS
(a) AMENDMENTS TO THE PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any approval
requirement that is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act or any successor provision thereto. Notwithstanding anything to
the contrary contained herein, (i) the Committee may amend the Plan in such
manner as may be necessary for the Plan to conform with local rules and
regulations in any jurisdiction outside the United States, and (ii) any
amendment, suspension or termination made in accordance with this paragraph
11(a) that would adversely affect a Participant's rights under an Award made
under the Plan may not be made without such Participant's consent and (iii) no
amendment to the provisions of Sections 7, 9 and 10 of the Plan relating to the
amount, price and timing of Awards under the Plan may be made more often than
once every six months, except to comport with the provisions of the Code or the
regulations thereunder.
(b) AMENDMENTS TO AWARDS. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to payment or
exercise in any manner not inconsistent with the terms of the Plan, including
without limitation to change the date or dates as of which an Award becomes
exercisable.
(c) ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in paragraph 6(b) hereof) affecting the Company, or the financial
statements of the Company or any Subsidiary, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan.
6
<PAGE>
(d) CANCELLATION. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder to
be cancelled in consideration of a cash payment or alternative Award made to the
holder of such cancelled Award. The determinations of value under this
subparagraph shall be made by the Committee in its sole discretion.
12. MISCELLANEOUS
(a) AWARD AGREEMENTS. Awards hereunder may be evidenced by a writing
delivered to the Participant that shall specify the terms and conditions thereof
and any rules applicable thereto and that shall, in accordance with the
provisions of the Plan, replicate as closely as possible the terms, conditions
and other contractual attributes of the GMI Award from which the Award is
derived, as in effect on the Distribution Date.
(b) SHARE CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan or the rules, regulations, and other requirements
of the SEC, any stock exchange upon which such Shares or other securities are
then listed, and any applicable federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of
options, stock appreciation rights and other types of Awards provided for
hereunder (subject to stockholder approval of any such arrangement if approval
is required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) NO RIGHT TO EMPLOYMENT. The grant of any Award shall not be construed
as giving a Participant the right to be engaged or employed by or retained in
the employ of the Company or any Subsidiary. The Company or any Subsidiary may
at any time dismiss a Participant from engagement or employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan or in any Award Agreement or any agreement relating to the engagement
or employment of the Participant by the Company or any Subsidiary.
(e) GOVERNING LAW. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall, to the
extent not governed by federal law, be determined in accordance with the laws of
the State of Florida.
(f) SEVERABILITY. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
(g) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company
pursuant to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company.
(h) NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine,
in accordance with the terms of the Plan, as applicable, whether cash, other
securities or other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any rights thereto shall
be cancelled, terminated, or otherwise eliminated.
7
<PAGE>
(i) HEADINGS. Headings are given to the subsections of the Plan solely as
a convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.
13. NON-TRANSFERABILITY
No shares of Restricted Stock and no Restricted Stock Units shall be sold,
exchanged, transferred, pledged, or otherwise disposed of during the restricted
period. No Stock Options granted under this Plan shall be transferable by a
Participant otherwise than (i) by the Participant's last will and testament or
(ii) by the applicable laws of descent and distribution, and such Stock Options
shall be exercised during the Participant's lifetime only by the Participant or
his or her guardian or legal representative. Other than as set forth herein, no
Award under the Plan shall be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to do so
shall be void.
14. WITHHOLDING TAXES
It shall be a condition to the obligation of the Company to deliver shares
upon the exercise of a Stock Option, the vesting of Restricted Stock or
Restricted Stock Units and the corresponding issuance of shares of unrestricted
Common Stock, that the Participant pay to the Company cash in an amount equal to
all federal, state, local and foreign withholding taxes required to be collected
in respect thereof.
Notwithstanding the foregoing, to the extent permitted by law and pursuant
to such rules as the Committee may adopt, a Participant may authorize the
Company to satisfy any such withholding requirement by directing the Company to
withhold from any shares of Common Stock to be issued, all or a portion of such
number of shares as shall be sufficient to satisfy the withholding obligation,
provided that in the case of the vesting of Restricted Stock or Restricted Stock
Units, the number of shares of Common Stock to be issued equals or exceeds 500.
15. FOREIGN JURISDICTIONS
The Committee may adopt, amend, and terminate such arrangements, not
inconsistent with the intent of the Plan, as it may deem necessary or desirable
to make available tax or other benefits of the laws of any foreign jurisdiction,
to employees of the Company who are subject to such laws and who receive Awards
under the Plan.
16. NOTICE
All notices to the Company regarding the Plan shall be in writing, effective
as of actual receipt by the Company, and shall be sent to:
GM Restaurants, Inc.
5900 Lake Ellenor Dr.
Orlando, FL 32809
Attn: General Counsel
Effective May 28, 1995
8
<PAGE>
EXHIBIT III
DARDEN RESTAURANTS, INC.
MANAGEMENT INCENTIVE PLAN
(AS AMENDED MAY 23, 1996)
PART I
GENERAL PROVISIONS
A. OBJECTIVE OF THE PLAN
It is the intent of Darden Restaurants, Inc. (the "Company") to provide
financial rewards to key executives in recognition of individual contributions
to the success of the Company under the provisions of this Management Incentive
Plan (the "Plan").
Participant awards shall be based on the comparative impact of the position
to the overall corporate results as measured by the position level, salary of
the Participant, and the degree to which the individual is able to affect
division/subsidiary, group and corporate results.
B. ELIGIBILITY
Any active key management employee of the Company or any of its
subsidiaries, including such members of the Board and the Chairman as are
actively employed by the Company or its subsidiaries, shall be eligible to
participate in the Plan. Eligibility shall not carry any rights to participation
nor to any fixed awards under the Plan.
Employees on a commission basis, those who are members of any other company
incentive compensation plan, except the Stock Option and Long-Term Incentive
Plans of the Company, and persons acting in a consulting capacity shall not be
eligible.
C. PARTICIPATION
As early as possible in each fiscal year (the "Plan Year"), management shall
recommend from those eligible a list of proposed Participants in the Plan, and
the Compensation Committee of the Board of Directors (the "Committee") thereupon
shall determine and cause to be notified those who have been selected as
Participants for the current Plan Year. Participants shall be those persons
holding positions which most significantly affect operating results and provide
the greatest opportunity to contribute to current earnings and the future
success of the Company. During the year, other Participants may be added because
of promotion or for other reasons warranting their inclusion, or Participants
may be excluded from active participation because of demotion or other reasons
warranting their exclusion.
PART II
BASE CASH AWARDS
The size of a Participant's base cash incentive award ("Base Cash Award")
under this Plan shall be preliminarily determined by the following formula:
(Eligible Base Salary Earnings) x (Target Incentive Percent) x
(Individual Performance Rating) x (Corporate/Unit Composite Rating) =
(Base Cash Award)
A. ELIGIBLE BASE SALARY EARNINGS
The Eligible Base Salary Earnings is the total amount of regular base pay
actually paid to a Plan Participant during the portion of the year the
Participant is covered by the Plan.
1
<PAGE>
B. TARGET INCENTIVE PERCENT
The Target Incentive Percent shall be determined by the Senior Vice
President-Personnel using the following guidelines:
The Target Incentive Percent will be determined based on job level at the
time participation in the Plan commences. Persons transferred to a higher or
lower job level during a Plan Year will have their Target Incentive Percent
revised as of the effective date of the change in position.
C. INDIVIDUAL PERFORMANCE RATING
Individual performance for the Plan Year will be determined as follows:
1. At the beginning of each Plan Year, each Participant will develop
written objectives for the year which are directly related to specific job
accountabilities.
2. The individual objectives will be reviewed with each Participant's
supervisor for acceptance and will become the primary basis for establishing the
Individual Performance Rating for the year. For the Chief Executive Officer,
such objectives will be reviewed and approved by the Committee.
3. Near the end of each Plan Year, each Participant will submit to his or
her supervisor, a Summary of Accomplishments related to individual performance
during the year. Based on this information and other information related to
individual performance or job accountabilities, the supervisor will assign an
individual rating from the following range:
<TABLE>
<C> <S>
0 - .50 Unsatisfactory Performance
.50 - .90 Objectives Partially Met
.90 - 1.20 Objectives Met
1.20 - 1.40 Superior Performance
1.40 - 1.80 Outstanding & Exceptional Performance
</TABLE>
D. UNIT/CORPORATE PERFORMANCE RATING
1. UNIT RATING
Near the end of the Plan Year, each Participant will submit to his or her
supervisor, a Unit Achievement Summary, which outlines the performance of his or
her respective unit during the Plan Year and relates directly to annual program,
the Company's long-range plans and other key operating objectives. This Unit
Achievement Summary will be used, along with other information related to unit
performance, in establishing a unit rating with a range of .0 (Unsatisfactory)
to 1.8 (Outstanding and Exceptional Performance) in the same manner or ratings
for Individual Performance Ratings.
2. CORPORATE RATING
At the beginning of each Plan Year, the Committee shall establish a rating
schedule based upon the Company's growth in Earnings Per Share (Pre-LIFO) and
the Company's Return on Capital for the Plan Year. Based on this schedule, the
Committee will, at the end of each Plan Year, establish a corporate rating for
the year.
Individual and unit ratings will be recommended by the Participant's manager
and reviewed by one additional level of management. All individual and unit
ratings for Plan Participants will be submitted to the Company's Incentive
Committee for review and approval.
2
<PAGE>
3. UNIT/CORPORATE WEIGHTINGS
The ratings established in 1. and 2. above shall be weighted based on job
level according to the following schedule:
<TABLE>
<CAPTION>
CORPORATE UNIT
PORTION PORTION
----------- -----------
<S> <C> <C>
Senior Corporate Officers.......................................................... 100% 0%
Vice Chairmen...................................................................... 40% 60%
Restaurant Concept Presidents...................................................... 25% 75%
Restaurant Concept Officers........................................................ 0% 100%
Corporate Staff Officers........................................................... 100% 0%
</TABLE>
E. REVIEW AND APPROVAL OF RATINGS
All individual and unit ratings will be determined by the Participant's
manager and reviewed and approved by one additional level of management. In
addition, the Incentive Committee shall review and approve all ratings prior to
their submissions to the Committee.
The final ratings and incentive award amounts shall be reviewed and approved
by the Committee which shall have full authority and discretion to set all final
Base Cash Awards.
PART III
STOCK MATCHING PROVISIONS
A. ALTERNATIVES FOR PARTICIPATION IN STOCK MATCHING
Subject to the provisions set forth below (the "Stock Matching Provisions"),
Participants under age 55 are eligible to receive additional incentive
compensation in the form of common stock of the Company ("Common Stock")
contributed by the Company ("Stock Matching") under the terms of the Company's
Stock Option and Long-Term Incentive Plans, and Participants age 55 or over may
elect to receive all or a portion of their additional incentive compensation in
the form of Stock Matching and/ or an "Additional Cash Award."
1. Participants under age 55 as of the last day of the Plan Year are
eligible to participate in the Stock Matching Provisions of the Plan by
depositing shares of Common Stock with a Fair Market Value equal to either 15%
or 25% of their Base Cash Award, depending on job level.
2. Participants age 55 or over as of the last day of the Plan Year may
elect full, partial, or no participation in the Stock Matching Provisions
according to the following schedule:
<TABLE>
<CAPTION>
25% MATCH 15% MATCH
------------------------------ ------------------------------
FAIR MARKET FAIR MARKET
VALUE OF SHARES VALUE OF SHARES
TO BE DEPOSITED TO BE DEPOSITED
AS % OF BASE ADDITIONAL AS % OF BASE ADDITIONAL
LEVEL OF STOCK MATCHING PARTICIPATION CASH AWARD CASH AWARD CASH AWARD CASH AWARD
- ---------------------------------------------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Full Participation.................................. 25% 0% 15% 0%
15% 6% 9% 3%
Partial Participation............................... 10% 9% 6% 5%
5% 12% 3% 7%
No Participation in Stock Matching.................. 0% 15% 0% 9%
</TABLE>
3. On or before the December 31 immediately preceding the end of the Plan
Year, Participants must notify the Company in writing of the applicable
participation alternatives elected under the Stock Matching Provisions.
Elections regarding Stock Matching participation are effective for the current
Plan Year.
3
<PAGE>
B. PARTICIPATION IN STOCK MATCHING
1. The Company shall notify each Participant who participates in the Stock
Matching Provisions of the maximum number of shares of Common Stock which they
are permitted to deposit under the Plan, and Participants may choose to deposit
all or any portion of the number of shares so permitted to be deposited (the
"Original Deposit"). Participants can make their Original Deposit at any time
after they receive their Base Cash Award, but Participants must deposit such
shares with the Company (the "Agent") no later than the December 1 immediately
following the end of the Plan Year.
2. Any Participant who dies, retires on or after age 65, elects early
retirement after age 55, or is permanently disabled and unable to work as
determined by the Committee, either during a Plan Year or prior to the final
date for depositing the Original Deposit shares for such Plan Year (December 1),
shall not be eligible to participate in the Stock Matching Provisions, but
instead, such Participant, or the Participant's legal representative, shall
receive an Additional Cash Award for the Plan Year in an amount equal to fifteen
percent (15%) or twenty-five percent (25%) of any Base Cash Award paid or
payable for that Plan Year.
C. DISTRIBUTIONS AND WITHDRAWALS
1. RESTRICTED STOCK
As soon as practical following the Original Deposit by a Participant, the
Company shall, under the terms of the Company's Stock Option and Long Term
Incentive Plans, match these shares and either deposit with the Agent for the
Participant's account one share of Common Stock for each share of the Original
Deposit or evidence issuance of one share of Common Stock for each share of the
Original Deposit in book entry form as reflected on the master stockholder
records of the Company. The Company matching shares (the "Restricted Stock")
shall vest and be delivered to the Participant in accordance with the terms of
the plan under which they are issued and as determined by the Committee.
2. TEMPORARY WITHDRAWAL FOR OPTION EXERCISE
A Participant may temporarily withdraw all or a portion of the shares on
deposit for all Plan Years (other than Restricted Stock) in order to exercise
Company stock options, subject to an equal number of shares of Common Stock
being promptly redeposited with the Agent after such exercise.
D. DEFINITION OF PLAN YEAR
For stock matching purposes, the Plan Year shall be defined as the Company's
fiscal year.
PART IV
DEFERRAL OF PAYMENT OF CASH INCENTIVE AWARDS
Subject to rules adopted by the Committee, a Participant may elect to defer
all or a portion of a Base Cash Award and any additional cash award received
(collectively "Cash Award") during each calendar year in accordance with the
terms and conditions of the Company's FlexComp Plan.
In order to defer all or a portion of the Cash Award for a particular
calendar year, a Participant must make a valid election by executing and filing
a Deferral Election Form with the Company on or before the December 31
immediately preceding the end of the Plan Year.
PART V
PLAN ADMINISTRATION
This Plan shall be effective in each fiscal year of the Company and shall be
administered by the Committee and the Committee shall have full authority to
interpret the Plan. Such interpretations of the Committee shall be final and
binding on all parties, including the Participants, survivors of the
Participant, and the Company.
4
<PAGE>
The Committee shall have the authority to delegate the duties and
responsibilities of administering the Plan, maintaining records, issuing such
rules and regulations as it deems appropriate, and making the payments hereunder
to such employees or agents of the Company as it deems proper.
The Board, or if specifically delegated, its delegate, may amend, modify or
terminate the Plan at any time, provided, however, that no such amendment,
modification or termination shall adversely affect any accrued benefit under the
Plan to which a Participant, or the Participant's beneficiary, is entitled prior
to the date of such amendment or termination, unless the Participant, or the
Participant's beneficiary, becomes entitled to an amount equal to the value of
such benefit under another plan, program or practice adopted by the Company.
Notwithstanding the above, no amendment, modification, or termination which
would affect benefits accrued under this Plan prior to such amendment,
modification or termination may occur after a Change of Control without the
written consent of a majority of the Participants determined as of the day
before such Change of Control.
A Change of 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) becoming, directly or indirectly, the
beneficial owner of twenty percent (20%) or more of the shares of stock of
the Company 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, 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
(c) 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.
In the event the Company shall effect one or more changes, split-ups or
combinations of shares of Common Stock or one or more other like transactions,
the Board or the Committee may make such adjustment, upward or downward, in the
number of shares of Common Stock to be deposited by the Participants as shall
appropriately reflect the effect of such transactions.
In the event the Company shall distribute shares of a subsidiary of the
Company to its stockholders in a spin-off transaction, the shares of stock of
the subsidiary distributed to Participants which are attributable to Restricted
Stock shall be vested and delivered to the Participants subject to any specific
instructions of the Committee.
Neither any benefit payable hereunder nor the right to receive any future
benefit under the Plan may 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 person eligible for any benefits becomes
bankrupt, the interest under the Plan of the person affected may be terminated
by the Committee 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 person or make
any other disposition of such benefits that it deems appropriate.
All questions pertaining to the construction, validity and effect of the
Plan shall be determined in accordance with the laws of the United States and
the laws of the State of Florida.
Effective as of May 28, 1995
5
<PAGE>
DARDEN RESTAURANTS, INC.
ANNUAL MEETING
HYATT REGENCY, ORLANDO INTERNATIONAL AIRPORT, ORLANDO, FLORIDA 32827
SEPTEMBER 19, 1996, 2:00 P.M. EASTERN DAYLIGHT SAVINGS TIME
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED
"FOR" ITEMS 1, 2, 3, 4 AND 5.
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5
<TABLE>
<S> <C> <C> <C>
1. Election of Directors / / FOR all listed / / WITHHOLD AUTHORITY TO VOTE FOR ALL LISTED NOMINEES
nominees
</TABLE>
H. B. Atwater, Jr.; John P. Birkelund; Daniel B. Burke; Joe R. Lee; Betty
Southard Murphy;
Jeffrey J. O'Hara; Michael D. Rose; Jack A. Smith; Blaine Sweatt
/ / LISTED NOMINEES except the following
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NAME OF SUCH NOMINEE(S) IN THE SPACE PROVIDED BELOW.)
________________________________________________________________________________
<TABLE>
<S> <C>
2. Approval of appointment of KPMG Peat Marwick LLP as independent auditors
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the Stock Option and Long-Term Incentive Plan of 1995, as amended
/ / FOR / / AGAINST / / ABSTAIN
4. Approval of the Stock Option and Long-Term Incentive Conversion Plan, as amended
/ / FOR / / AGAINST / / ABSTAIN
5. Approval of the Management Incentive Plan, as amended
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.R. Lee, J.J. O'Hara and C.L. Whitehill,
and each of them, as proxies with full power of substitution, to vote all shares
of common stock which the undersigned has power to vote at the Annual Meeting of
Stockholders to be held on September 19, 1996 at Orlando, Florida, and at any
adjournment thereof, in accordance with the instructions set forth herein and
with the same effect as though the undersigned were present in person and voting
such shares. The proxies are authorized in their discretion to vote upon such
other business as may properly come before the meeting.
Dated: ___________________________
__________________________________
(Signature)
__________________________________
(Signature)
PLEASE SIGN EXACTLY AS NAME
APPEARS ABOVE. JOINT OWNERS SHOULD
EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC.
SHOULD SO INDICATE WHEN SIGNING.
IF SIGNER IS A CORPORATION, PLEASE
SIGN FULL NAME BY DULY AUTHORIZED
OFFICER.
