SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended May 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission File Number 1-13666
DARDEN RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3305930
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
5900 LAKE ELLENOR DRIVE 32809
ORLANDO, FLORIDA (Zip Code)
(Address of principal executive offices)
(407) 245-4000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class On which registered
COMMON STOCK, WITHOUT PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by Reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of Common Stock held by non-affiliates of the
Registrant, based on the closing price of $17.250 per share as reported on the
New York Stock Exchange on August 10, 1998: $2,375 million.
Number of shares of Common Stock outstanding as of August 10, 1998:
139,184,130 (excluding 23,509,546 shares held in the treasury).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement dated August 10, 1998
are incorporated by reference into Part III,
and portions of Registrant's 1998 Annual Report to Stockholders
are incorporated by reference into Parts I, II and IV.
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PART I
ITEM 1. BUSINESS OF DARDEN RESTAURANTS, INC.
INTRODUCTION
Darden Restaurants, Inc. and its subsidiaries (the "Company" or "Darden")
is the world's largest full-service restaurant organization.* In the United
States, as of May 31, 1998, it operated 1,118 restaurants in 49 states (the
exception being Alaska), including 648 Red Lobster(R), 461 The Olive Garden(R),
six The Olive Garden Cafe(R) and three Bahama Breeze(R) restaurants. In
addition, the Company operated 39 restaurants in Canada, including 34 Red
Lobster units and five The Olive Garden units. All of its restaurants in North
America are Company-operated. In Japan, as of May 31, 1998, Red Lobster Japan
Partners, a Japanese retailer unaffiliated with Darden, operated 37 Red Lobster
restaurants pursuant to an Area Development and Franchise Agreement.
The Company, a Florida corporation incorporated in March of 1995, is the
parent company of GMRI, Inc., a Florida corporation ("GMRI"), which owns the
operating assets of the restaurants. GMRI was originally incorporated on March
27, 1968, as Red Lobster Inns of America, Inc.
The Company's principal executive offices and restaurant support center are
located at 5900 Lake Ellenor Drive, Orlando, Florida 32809 (telephone number
(407) 245-4000). Unless the context indicates otherwise, all references to
Darden or the Company include Darden, GMRI and their respective subsidiaries.
BACKGROUND
The Company opened its first restaurant, a Red Lobster, in Lakeland,
Florida in January of 1968. Red Lobster was founded by William B. Darden, for
whom the Company is named. The Company was acquired by General Mills, Inc.
("General Mills") in 1970 and became an independent publicly held company in May
of 1995 when General Mills distributed all outstanding Darden stock to General
Mills stockholders (the "Distribution").
While the expansion of the Company's two largest restaurant chains has
historically been steady, the number of restaurants for both Red Lobster and The
Olive Garden declined in fiscal years 1997 and 1998 due to the closing of
under-performing units and an increased focus on market optimization. Red
Lobster has grown from three restaurants in operation in 1970 to 682 units in
North America by the end of fiscal year 1998. The Olive Garden, an internally
developed concept, opened its first restaurant in December of 1982, and expanded
to 461 restaurants in the United States and five restaurants in Canada by the
end of fiscal year 1998. Additionally, at the end of fiscal year 1998, The Olive
Garden operated six cafes in food courts located in regional shopping malls
within the United States.
The Company's newest restaurant concept is Bahama Breeze, an internally
developed concept with a Caribbean theme. There are currently three Bahama
Breeze restaurants. The first two are operating in Orlando and nearby Altamonte
Springs, Florida. On May 11, 1998, a third Bahama Breeze restaurant opened in
Memphis, Tennessee.
STRATEGY
The Company is a leader in the casual-dining segment of the restaurant
industry. The Company is committed to the following key strategies.
o Developing and operating distinctive restaurant concepts, each with
its own culture, operating practices, physical environment, menu and
marketing approach.
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*Source: Restaurants & Institutions Magazine, July 1, 1997 edition.
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o Expanding its current portfolio of restaurant concepts, and internally
developing or acquiring additional concepts which can be expanded
profitably.
o Attracting, developing and retaining experienced management and
personnel committed to providing customer satisfaction and business
results.
o Achieving operating efficiencies by sharing support services and
infrastructure among its restaurant concepts.
o Maintaining consumer awareness through advertising and consumer
promotions.
The following table lists the number of restaurants and total sales by year
of the Red Lobster, The Olive Garden and Bahama Breeze concepts. The table also
includes information about the now closed China Coast concept as its operations
are reflected in the Company's Five-Year Financial Summary (see Part II, Item
6).
COMPANY-OPERATED RESTAURANTS OPEN AT FISCAL YEAR-END
<TABLE>
<CAPTION>
FISCAL RED THE OLIVE CHINA BAHAMA TOTAL TOTAL SALES
YEAR LOBSTER GARDEN(a) COAST(b) BREEZE RESTAURANTS(a) (IN MILLIONS)
- ------ -------- --------- -------- ------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1970 6 6 $3.5
1971 24 24 9.1
1972 47 47 27.1
1973 70 70 48.0
1974 97 97 72.6
1975 137 137 108.5
1976 174 174 174.1
1977 210 210 229.2
1978 236 236 291.4
1979 244 244 337.5
1980 260 260 397.6
1981 291 291 528.4
1982 328 328 614.3
1983 360 1 361 718.5
1984 368 2 370 782.3
1985 372 4 376 842.2
1986 401 14 415 917.3
1987 433 52 485 1,097.7
1988 443 92 535 1,300.8
1989 490 145 635 1,621.5
1990 521 208 1 730 1,927.7
1991 568 272 1 841 2,212.3
1992 619 341 1 961 2,542.0
1993 638 400 5 1,043 2,737.0
1994 675 458 25 1,158 2,963.0
1995 715 477 51 1,243 3,163.3
1996 729 487 0 1 1,217 3,191.8
1997 703 477 0 2 1,182 3,171.8
1998 682 466 0 3 1,151 3,287.0
</TABLE>
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(a) These numbers do not include the six The Olive Garden Cafes in operation as
of May 31, 1998.
(b) In August 1995, the Company approved the closing of all China Coast
restaurants.
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INDUSTRY OVERVIEW
In the United States, the restaurant industry generates approximately $225
billion in annual sales, or roughly one-third of total consumer food
expenditures.* Expenditures for restaurant dining and other meals prepared away
from home have increased from 25% of the food dollar in 1955 to 44% in 1995.*
Over the past 20 years, restaurant sales have grown at a rate one to two
percentage points faster than the growth of food-at-home sales.* The industry is
highly fragmented and is characterized by the presence of thousands of
independent operators and small chains. While chain restaurants dominate the
fast-food segment with a combined market share of 62%, chains account for just
22% in the full-service segment.* The Company believes that capable operators of
strong multi-unit concepts will continue to increase their share of the
full-service restaurant market.
Casual dining is the fastest growing segment of the full-service restaurant
market, with sales increasing at a 6.8% annual compound growth rate since 1991
and a 7.1% annual compound growth rate since 1992.* Today, casual dining
represents 36% of full-service restaurant sales, or $37 billion.* Darden is a
leader in the casual-dining segment, with approximately a nine percent market
share.* Management believes that casual-dining concepts will benefit from
favorable demographic trends, most notably the maturing population. Forty to
sixty year olds are the most frequent users of casual-dining restaurants, and
through this decade and the next, the population aged forty-five or older is
projected to increase by approximately 34 million. In addition, "baby-boomers"
(i.e., thirty-three to fifty-one year olds) tend to eat out more than
generations before them, so, as they age, their casual dining frequency may
become even higher. Finally, this group includes a high proportion of two-income
families, which the Company believes could increase the demand for
food-away-from-home due to a combination of more discretionary income and less
discretionary time.
Restaurants face growing competition from the supermarket industry which is
offering improved entrees and side dishes from the deli section. Supermarkets'
renewed emphasis on such "convenient meals" may have the most impact on segments
of the restaurant industry in which the meals fulfill a primarily physiological
objective, such as in the "quick serve" and "midscale" segments. Casual dining
offers a more significant social component with the meal, a feature that the
supermarkets' "convenient meals" do not readily confer.
RESTAURANT CONCEPTS
Red Lobster
Red Lobster is the largest chain of full-service, seafood-specialty
restaurants in the United States. It offers an extensive menu featuring fresh
fish, shrimp, crab, lobster, scallops, and other seafood in a casual atmosphere.
The menu includes a variety of specialty seafood and non-seafood appetizers and
desserts. For the tenth consecutive year, Red Lobster was named Best Seafood
Chain in America in the 1998 America's Choice In Chains national consumer survey
published in the March 1, 1998 issue of Restaurants & Institutions magazine.
Dinner entree prices range from $6.99 to $18.99, with fresh fish and
certain lobster items available at market price. Lunch entree prices range from
$4.99 to $7.99. During fiscal year 1998, the average check per person was
between $13.50 to $14.75, with alcoholic beverages accounting for approximately
eight percent of sales. Red Lobster also offers a lower-priced children's menu.
The Company maintains approximately 100 different menus to reflect geographic
differences in consumer preferences, prices and selections in its trade areas.
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* Source: United States Department of Commerce Census of Retail Trade (1996);
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National Restaurant Association Annual Foodservice Forecast (1997); and CREST
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Annual Household Summary (1997).
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The Olive Garden
The Olive Garden is the largest chain of casual, full-service Italian
restaurants in the United States. The moderately priced menu features recipes
from both northern and southern Italy. For the ninth consecutive year, The Olive
Garden was named Best Dinnerhouse Chain in America in the 1998 America's Choice
In Chains national consumer survey published in the March 1, 1998 issue of
Restaurants & Institutions magazine.
Dinner entree prices range from $6.95 to $13.95, and lunch entree prices
range from $4.95 to $7.95. During fiscal year 1998, the average check per person
was between $11.00 and $12.30, with alcoholic beverages accounting for slightly
more than eight percent of sales.
The Olive Garden places importance on brand building and, as a result, is
(like Red Lobster) one of the largest advertisers in the full-service restaurant
industry. The Olive Garden Cafe concept, which is a limited-menu cafe in food
court settings of regional shopping malls, operated in six locations at the end
of fiscal year 1998. The Company also regularly experiments with new restaurant
decor and additional menu improvements.
EXPANSION STRATEGY
During fiscal year 1998, the Company opened eight restaurants (excluding
pre-existing restaurants relocated to other sites). It plans to open
approximately 13 new Red Lobster, The Olive Garden and Bahama Breeze restaurants
during fiscal year 1999 (excluding relocations). The Company's new store
openings by concept are shown below.
ACTUAL PROJECTED
FISCAL 1998 FISCAL 1999
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Red Lobster.............. 1 6
The Olive Garden......... 6 4
Bahama Breeze............ 1 3
-- --
Totals................... 8 13
== ==
The Company's objective is to continue to expand its current portfolio of
restaurant concepts, and to develop internally or acquire additional concepts
which can be expanded. It is currently testing new ideas and concepts, including
Bahama Breeze, its Caribbean-themed restaurant. The Company also regularly
evaluates potential acquisition candidates on whether they would satisfy the
Company's strategic and financial objectives. At present, the Company has not
identified any specific acquisitions.
The Company will continue to focus on improving operational returns at The
Olive Garden and Red Lobster, and limit new restaurant expansion to the
highest-potential sites. In addition, the Company plans to expand Bahama Breeze
at the proper pace so that each new restaurant captures the concept's full
potential. The specific number of openings will also depend upon a number of
factors, including the Company's ability to locate appropriate sites, negotiate
acceptable purchase or lease terms, obtain necessary local governmental permits,
complete construction, and recruit and train restaurant management and hourly
personnel.
Darden considers location to be a critical factor in determining a
restaurant's long-term success and devotes significant effort to the site
selection process for new locations. Prior to entering a market, a thorough
study is conducted to determine the optimal number and placement of restaurants.
The Company's site selection process utilizes a variety of analytical techniques
to evaluate a number of important factors. These factors include trade area
demographics, such as target population density and household income levels;
competitive influences in the trade area; the site's visibility, accessibility,
and traffic volume; and proximity to activity centers such as shopping malls,
hotel/motel complexes, offices and universities. Members of senior management
evaluate, inspect and approve each restaurant site prior to its acquisition.
After site acquisition and receipt of permits, it typically takes 120 to 180
days to construct and open a new restaurant.
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The following table illustrates the approximate average capital investment,
size and dining capacity of the one Red Lobster and six The Olive Garden
openings (excluding relocations of existing restaurants) during fiscal year
1998.
CAPITAL SQUARE DINING DINING
INVESTMENT FEET SEATS TABLES
---------- ------ ------ ------
Red Lobster.............. $2,555,000 5,633 178 48
The Olive Garden......... $2,897,000 7,484 236 58
During fiscal year 1998, Red Lobster opened one restaurant in a smaller
market. Therefore, the Red Lobster figures in the preceding table reflect the
capital investment, size and dining capacity of a single restaurant in a
relatively small market.
During fiscal year 1998, The Olive Garden opened six restaurants. The Olive
Garden figures in the preceding table reflect the average of three building
sizes which the Company utilizes to expand in trade areas of varying sizes. The
building sizes for new restaurants opened in fiscal 1998 (excluding relocations)
range from 6,014 to 9,300 square feet; the numbers of dining seats range from
185 to 293; and the numbers of dining tables range from 42 to 76.
Bahama Breeze opened its third restaurant in Memphis, Tennessee, in May,
1998. The Company hopes to open up to three additional Bahama Breeze restaurants
during fiscal year 1999, but the actual number of openings may vary due to the
factors previously discussed.
The Company systematically reviews the performance of its restaurant sites
to ensure that each unit meets its standards. When a unit falls below minimum
standards, a thorough analysis is completed to determine the causes, and
marketing and operational plans are implemented to improve that unit's
performance. If performance does not improve to acceptable levels, the site is
evaluated for relocation, closing or conversion to one of the Company's other
concepts.
In fiscal year 1998, the Company permanently closed four Red Lobster
restaurants in the United States and 17 Red Lobster restaurants in Canada. An
additional Red Lobster restaurant in the United States was temporarily closed at
the end of fiscal 1998, but was scheduled to re-open in fiscal 1999. During the
same period, The Olive Garden permanently closed six restaurants in the United
States and 11 restaurants in Canada. For a discussion of restructuring and asset
impairment charges related to these restaurant closings, see Management's
Discussion of Results of Operations and Financial Condition and Note 3 of Notes
to Consolidated Financial Statements on pages 5 and 14, respectively, of the
1998 Financial Statements booklet in the Company's 1998 Annual Report to
Stockholders.
During fiscal 1998, Red Lobster relocated or rebuilt 11 restaurants (not
included in the numbers of new store openings or permanent closings stated
above). These actions repositioned older Red Lobster restaurants to better
locations and/or more contemporary buildings.
RESTAURANT OPERATIONS
The Company believes that high-quality restaurant management is critical to
its long-term success. It also believes that its leadership position, strong
success-oriented culture and various short-term and long-term incentive
programs, including stock options, help attract and retain highly-motivated
restaurant managers committed to providing superior customer satisfaction and
outstanding business results.
The Company's restaurant management structure varies by concept and
restaurant size. Each restaurant is led by a general manager and one to four
additional managers, depending on the operating complexity and sales volume of
the restaurant. Each restaurant also employs approximately 65 to 140 hourly
employees, most of whom work part-time. The Company issues detailed operations
manuals covering all aspects of restaurant operations as well as food and
beverage manuals which detail the preparation procedures of the Company's
formulated recipes. The restaurant management teams are responsible for the
day-to-day operation of each restaurant and for ensuring
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compliance with the Company's operating standards. Restaurant general managers
report to directors at Red Lobster and The Olive Garden, and each director is
responsible for seven to 14 restaurants. Restaurants are visited regularly by
all levels of supervision to ensure strict adherence to all aspects of the
Company's standards.
Each concept's vice president or director of training, together with senior
operations executives, is responsible for developing and maintaining that
concept's operational training programs. These efforts include a 12-to-15 week
training program for management trainees, and continuing development programs
for managers, supervisors and directors. The emphasis of the training and
development programs varies by restaurant concept, but includes improvement of
leadership, restaurant business management and culinary skills. The Company also
utilizes a highly structured training program to open new restaurants, including
training teams consisting of groups of employees experienced in all aspects of
restaurant operations. The opening training teams typically begin on-site
training one week prior to opening and remain on location one week following the
opening. They are phased out when appropriate to ensure a smooth transition to
the restaurant's operating staff.
QUALITY ASSURANCE
The Company's Quality Assurance Department helps ensure that all
restaurants provide high-quality food products in a clean and safe environment.
The Company ensures that all seafood purchased meets or exceeds its
specifications through rigorous physical evaluation and testing. Since 1976, the
Company has maintained a microbiological laboratory to routinely test seafood
and commodity products for quality. In addition, quality assurance managers
visit each restaurant location periodically throughout the year to ensure that
food is properly handled, and to provide education and training in food safety
and sanitation. The quality assurance managers also serve as a liaison to
regulatory agencies on issues relating to food safety. The Company uses
independent third party auditors to inspect and evaluate vendors of commodity
food products to ensure that its suppliers are operating under good
manufacturing practices with the comprehensive industry standard Hazard Analysis
Critical Control Points programs in place.
PURCHASING AND DISTRIBUTION
The Company's ability to ensure a consistent supply of high-quality food
and supplies at competitive prices to all of its restaurant concepts depends
upon procurement from reliable sources. The Company's purchasing staff sources,
negotiates and buys internally specified food and supplies from more than 3,276
suppliers in 44 countries. To ensure the quality of all food products, suppliers
are required to meet strict quality control standards in the development,
harvest, catch and/or production of food products. Competitive bids, long-term
contracts and long-term vendor relationships are routinely used to ensure
availability of products and stability of costs.
The Company believes that its seafood purchasing capabilities are a
significant competitive advantage. The Company's purchasing staff routinely
travels within the United States and internationally to source over 100
varieties of top-quality seafood at competitive prices. Red Lobster is the
single largest buyer in the United States of many seafood products. The Company
believes that it has established excellent long-term relationships with key
seafood vendors, and sources product directly when possible. It employs an agent
in South America to provide timely information on local seafood market trends,
identify purchasing opportunities and inspect product at the source. It also
operates a procurement office in Singapore to source products directly from
Asia. While the supply of certain seafood species is volatile, the Company
believes that it has demonstrated the ability to identify alternative seafood
products and to adjust its menus as required. All other essential food products
are available, or can be made available upon short notice, from alternative
qualified suppliers. Because of the relatively rapid turnover of perishable food
products, inventories in the restaurants have a modest aggregate dollar value in
relation to revenues. Controlled inventories of specified products are
distributed to all restaurants through a national distribution company. See Note
2 of Notes to Consolidated Financial Statements on page 13 of the 1998 Financial
Statements booklet in the Company's 1998 Annual Report to Stockholders.
ADVERTISING AND MARKETING
The Company believes that it has developed significant advertising and
marketing capabilities. The Company's size enables it to be the dominant
advertiser in the full-service segment of the restaurant industry. The
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Company leverages the efficiency of national network television advertising and
supplements it with local market television advertising. The Company's
restaurants appeal to a broad spectrum of consumers and it uses advertising and
product promotions to attract customers. The Company implements periodic
promotions as appropriate to maintain and increase its sales and profits. It
also relies on radio and newspaper advertising, as well as newspaper and direct
mail couponing programs to attract customers. The Company has developed and
consistently utilizes sophisticated consumer marketing research techniques to
monitor customer satisfaction and customers' evolving expectations.
EMPLOYEES
At the end of fiscal year 1998, the Company employed 114,800 persons. Of
these employees, 1,067 were corporate personnel, 5,283 were restaurant
management personnel, and the remainder were hourly restaurant personnel. Of the
1,067 corporate employees, 588 were in management and 479 were administrative or
office employees. The operating executives of the Company have an average of
more than 19.7 years of experience with the Company. The restaurant general
managers average 9.8 years with the Company. The Company believes that it
provides working conditions and compensation that compare favorably with those
of its competition. Most employees, other than restaurant management and
corporate management, are paid on an hourly basis. None of the Company's
employees are covered by a collective bargaining agreement. The Company
considers its employee relations to be good.
MANAGEMENT INFORMATION SYSTEMS
The Company strives for leadership in the restaurant business by utilizing
technology as a competitive advantage. Since 1975, in-store computers have been
used to assist in the management of the restaurants. The Company has implemented
systems targeted at improved financial control, cost management, enhanced guest
service and improved employee effectiveness. Management information systems are
designed to be used across restaurant concepts, yet are flexible enough to meet
the unique needs of each restaurant chain. Restaurant support is provided from
the restaurant support center in Orlando, Florida, seven days a week, 24 hours a
day. A communications network sends and receives critical business data to and
from the restaurants each night, providing timely and extensive information each
morning on business activity in every location. The restaurant support center
houses the Company's data center, which contains sufficient computing power to
process information from all restaurants quickly and efficiently. The Company
uses internally developed proprietary software, as well as purchased software,
with proven, non-proprietary hardware. This allows processing power in terms of
hardware and software to be distributed effectively to each of the Company's
restaurant locations.
The Company's management believes these systems have well positioned the
Company to support current needs as well as future growth. The Company is
committed to maintaining an industry leadership position in information systems
and computing technology. The Company utilizes a strategic information systems
plan that is prepared internally and reviewed with senior management. The plan
is a result of projects approved by the Executive Information Systems Steering
Committee. This plan prioritizes information systems projects based upon
financial, regulatory and other business advantage criteria.
The Company has committed the resources necessary to ensure that its
critical information systems and technology are "Year 2000 compliant" in advance
of the next millennium. "Year 2000 compliant" refers to information systems and
technology that accurately process date/time data (including calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries and, in particular, the years 1999 and 2000. As of May 31, 1998,
approximately 50% of the Company's systems either have been modified to be Year
2000 compliant or have been eliminated due to changes in business requirements.
Remaining applications are expected to be Year 2000 compliant over the next
fiscal year. The total cost to the Company of achieving Year 2000 compliant
systems is not expected to have a material impact on the Company's financial
condition or results of operations. For additional discussion of the Year 2000
issue, see the subsection entitled "Impact of Year 2000" in Management's
Discussion of Results of Operations and Financial Condition on page 6 of the
1998 Financial Statements booklet in the Company's 1998 Annual Report to
Stockholders.
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COMPETITION
The restaurant industry is intensely competitive with respect to food
quality, price, service, restaurant location, concept, the attractiveness of
facilities, and the effectiveness of advertising and marketing programs. The
restaurant business is often affected by changes in consumer tastes; national,
regional or local economic conditions; demographic trends; traffic patterns; the
type, number and location of competing restaurants; and consumers' discretionary
purchasing power. The Company competes within each market with national and
regional chains as well as locally-owned restaurants, not only for customers but
also for management and hourly personnel and suitable real estate sites.
Restaurants face growing competition from the supermarket industry, which is
offering "convenient meals" in the form of improved entrees and side dishes from
the deli section. The Company expects intense competition to continue in all of
these areas.
TRADEMARKS AND RELATED AGREEMENTS
The Company regards its Red Lobster(R), The Olive Garden(R) and Bahama
Breeze(R) servicemarks as having significant value and as being important in
marketing the restaurants. The Company's policy is to pursue registration of its
important servicemarks and trademarks whenever possible and to oppose vigorously
any infringement of them.
The only restaurant operations outside of North America historically have
been conducted through Red Lobster Japan Partners, a partnership venture with
the Japanese retailer JUSCO that was established in 1982. The historical
financial results of Darden exclude the results of such operations. On April 26,
1995, the Darden subsidiary, GMRI, Inc., entered into an Area Development and
Franchise Agreement with Red Lobster Japan Partners, which operated 37 Red
Lobster restaurants in Japan as of May 31, 1998. Darden does not have an
ownership interest in Red Lobster Japan Partners. Royalty income is not expected
to be material.
SEASONALITY
The Company's sales volumes fluctuate seasonally, and are generally higher
in the spring and summer months, and lower in the fall and winter months. Severe
weather, storms and similar conditions may impact sales volumes seasonally in
some operating regions.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws affecting
its business. Each of the Company's restaurants must comply with licensing
requirements and regulations by a number of governmental authorities, which
include health, safety and fire agencies in the state or municipality in which
the restaurant is located. The development and operation of restaurants depend
on selecting and acquiring suitable sites, which are subject to zoning, land
use, environmental, traffic and other regulations. To date, the Company has not
been significantly affected by any difficulty, delay or failure to obtain
required licenses or approvals.
Presently about 8.2% of restaurant revenues are attributable to the sale of
alcoholic beverages. Regulations governing their sale require licensure by each
site (in most cases, on an annual basis) and licenses may be revoked or
suspended for cause at any time. These regulations relate to many aspects of
restaurant operation, including the minimum age of patrons and employees, hours
of operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages. The failure of a restaurant to
obtain or retain these licenses would adversely affect the restaurant's
operations. The Company is also subject in certain states to "dram-shop"
statutes, which generally provide an injured party with recourse against an
establishment that wrongfully serves alcoholic beverages to an intoxicated
person causing the injury. The Company carries liquor liability coverage as part
of its comprehensive general liability insurance.
The Company is also subject to federal and state minimum wage laws and
other laws governing such matters as overtime, tip credits, working conditions,
safety standards, and hiring and employment practices. Changes in these laws
during the fiscal year ended May 31, 1998, have not had a material effect on the
Company's operations.
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The Company is currently operating under a Tip Rate Alternative Commitment
("TRAC") agreement with the Internal Revenue Service. The TRAC agreement reduces
the likelihood of future chain-wide employer-only FICA assessments for
previously unreported tips through increased educational and other efforts in
the restaurants.
The Company is subject to federal and state environmental regulations, but
these rules have not had a material effect on the Company's operations.
The Company continues to monitor its facilities for compliance with the
Federal Americans With Disabilities Act ("ADA") and related state statutes in
order to conform to their requirements. Under the ADA and related state laws,
the Company could be required to expend funds to modify its restaurants to
better provide service to, or make reasonable accommodation for the employment
of, disabled persons.
EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this report are as
follows.
Joe R. Lee, age 57, is Chief Executive Officer and Chairman of the Board of
Darden. 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 in 1976, a Group Vice President in 1979, and an Executive Vice
President in 1981, was named Executive Vice President, Finance and International
Restaurants in 1991, and was elected a Vice Chairman of General Mills in 1992
with responsibility for various consumer foods businesses and corporate staff
functions. Mr. Lee was elected a director of General Mills in 1985. He was named
Chief Executive Officer of Darden in December of 1994.
Blaine Sweatt, III, age 50, is President, New Business Development and an
Executive Vice President of Darden. He joined General Mills in 1976 in the Red
Lobster organization and was named Director of New Restaurant Concept
Development in 1981. Mr. Sweatt led the teams that developed the concepts for
The Olive Garden and Bahama Breeze concepts, among others. He was named Vice
President in 1985 and Senior Vice President in 1994. Mr. Sweatt has been
Executive Vice President and a director of Darden since 1995.
Bradley D. Blum, age 44, is President of The Olive Garden and an Executive
Vice President of Darden. Mr. Blum joined General Mills in 1978. He was named
Director of Marketing in 1984, responsible for Big G Cereals, and he became Vice
President of Big G New Enterprises in 1989. In 1990, he was named Vice President
of Marketing for Cereal Partners Worldwide, General Mills' joint venture with
Nestle, headquartered in Switzerland. He joined the Company in 1994 as Senior
Vice President of Marketing for The Olive Garden and was named President of The
Olive Garden in December of 1994. He was named Senior Vice President of Darden
in September of 1995 and Executive Vice President and a director of Darden in
September of 1997.
Richard E. Rivera, age 51, was named President of Red Lobster and Executive
Vice President of Darden in December of 1997. Mr. Rivera began his career with
Steak and Ale Restaurants of America and has held many management positions
within the industry over the past 25 years. Prior to joining Red Lobster, from
1994 to 1996, Mr. Rivera served as President and Chief Executive Officer of RARE
Hospitality International, Inc., owner of LongHorn Steakhouse restaurants. Mr.
Rivera has been a director of Darden since joining the Company in December of
1997.
Linda J. Dimopoulos, age 48, is Senior Vice President, Corporate Controller
and Business Information Systems of Darden with overall responsibility for
corporate reporting, accounting, information services, internal audit and
quality assurance. Ms. Dimopoulos joined the Company in 1982. She was named
Director, Corporate Analysis in 1985. In 1986, she was named Vice President,
Controller for Red Lobster, and then Vice President, Information System
Services. She was named Senior Vice President, Financial Operations in August
1993, and assumed her present position in July 1998.
Daniel Lyons, age 45, is Senior Vice President, Human Resources of the
Company with overall responsibility for all personnel, including compensation,
benefits, staffing, corporate security, diversity management
9
<PAGE>
and aviation. Mr. Lyons joined the Company in 1993 as Senior Vice President of
Personnel for The Olive Garden. He was elected to his present position in
January of 1997. Prior to joining The Olive Garden, Mr. Lyons spent 18 years
with the Quaker Oats Company.
Robert W. Mock, age 46, is Executive Vice President, Operations of The
Olive Garden and Senior Vice President of Darden. Mr. Mock joined the Company in
1969 and, through the years, held management positions in various areas of the
Company. In 1992, Mr. Mock was named Executive Vice President and General
Manager of Red Lobster Canada. In 1994, Mr. Mock was named Executive Vice
President, Operations for The Olive Garden. He was named to the additional
position of Senior Vice President of Darden in July 1998.
Clarence Otis, Jr., age 42, is Senior Vice President, Finance and Treasurer
of the Company. Mr. Otis joined the Company in 1995 as Vice President and
Treasurer. In July of 1997, he assumed responsibility for investor relations and
was named Senior Vice President, Investor Relations and Treasurer. In July 1998,
Mr. Otis assumed additional responsibilities in the area of finance and was
named to his present position. Prior to joining the Company, Mr. Otis was
employed by Chemical Securities, Inc. in New York where he had been Managing
Director and Manager of Public Finance since 1991. Prior to his work at Chemical
Securities, Mr. Otis was employed by Siebert Municipal Capital Group as Managing
Director and Principal.
James D. Smith, age 55, is Senior Vice President, Real Estate, Design and
Construction of the Company. Mr. Smith joined General Mills in 1982 and was
named Senior Vice President and Controller of the restaurant operations in 1988.
In December 1994, Mr. Smith was named Senior Vice President, Finance.
Subsequently, he assumed increasing responsibilities in connection with the
Company's real estate development activities and was named to his present
position in July of 1998.
Richard J. Walsh, age 46, is Senior Vice President, Corporate Relations,
with responsibility for all corporate communications, environmental relations,
media and government, public and community relations, including the Darden
Restaurants, Inc. Foundation. Mr. Walsh joined General Mills in 1984 as Manager
of Government Affairs for Red Lobster. He was named Vice President of Government
Relations in 1987 and was promoted to his present position in December of 1994.
Clifford L. Whitehill, age 67, was named a Senior Vice President of the
Company in December of 1994. Mr. Whitehill joined General Mills in 1962 as an
attorney in the Law Department. He was appointed Assistant General Counsel in
1968, elected Vice President in 1971, named General Counsel in 1975, elected
Senior Vice President in 1981 and elected Secretary of General Mills in 1983.
Mr. Whitehill retired from General Mills immediately prior to the Distribution,
and on that date he assumed his responsibilities at Darden as Senior Vice
President, General Counsel and Secretary.
10
<PAGE>
ITEM 2. PROPERTIES
As of May 31, 1998, the Company operated 1,157 restaurants, including 682
Red Lobster, 466 The Olive Garden, six The Olive Garden Cafe and three Bahama
Breeze restaurants in the following locations:
Alabama (18) Arizona (24) Arkansas (10) California (95)
Colorado (21) Connecticut (12) Delaware (4) Florida (111)
Georgia (36) Hawaii (1) Idaho (5) Illinois (49)
Indiana (34) Iowa (15) Kansas (10) Kentucky (13)
Louisiana (10) Maine (5) Maryland (19) Massachusetts (8)
Michigan (42) Minnesota (18) Mississippi (8) Missouri (26)
Montana (2) Nebraska (7) Nevada (9) New Hampshire (4)
New Jersey (27) New Mexico (8) New York (47) North Carolina (24)
North Dakota (4) Ohio (67) Oklahoma (18) Oregon (10)
Pennsylvania (52) Rhode Island (2) South Carolina (18) South Dakota (3)
Tennessee (26) Texas (100) Utah (9) Vermont (2)
Virginia (37) Washington (20) West Virginia (5) Wisconsin (21)
Wyoming (2) Canada (39)
Of the Company's 1,157 restaurants open on May 31, 1998, 735 were on owned
sites and 422 were on leased sites. The 422 leases are classified as follows:
Land-Only Leases (Darden owns buildings and equipment)....... 287
Ground and Building Leases................................... 76
Space/In-Line/Other Leases................................... 59
---
Total 422
===
The Company owns its executive offices, culinary center and training
facilities in Orlando, Florida. Except in limited instances, the Company's
restaurant sites and other facilities are not subject to mortgages or
encumbrances securing money borrowed by the Company.
See also Notes 5 and 13 of Notes to Consolidated Financial Statements on
pages 15 and 18, respectively, of the 1998 Financial Statements booklet in the
Company's 1998 Annual Report to Stockholders.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time made a party to legal proceedings arising
in the ordinary course of business. The Company does not believe that the
results of such legal proceedings, even if unfavorable to the Company, will have
a materially adverse impact on its financial condition or the results of its
operations. See the section entitled "Government Regulation" for a discussion of
various federal, state and local regulatory matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock (no par value) has been registered and is traded
on the New York Stock Exchange. As of July 27, 1998, the number of record
holders of common stock was 33,863. Trading of the Company's common stock began
on a "when issued" basis on May 9, 1995, at a price per share of $9.375. The
following table sets forth the high and low sales prices for the Company's
common stock for each full quarterly period from the Distribution to the end of
fiscal year 1998.
PER SHARE SALES PRICE OF COMMON STOCK
<TABLE>
<CAPTION>
- ----------------- ------------------- -------------------- ------------------- --------------------
FISCAL YEAR
1996 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
<S> <C> <C> <C> <C>
HIGH $11.50 $12.00 $13.25 $14.00
LOW $9.75 $10.00 $10.625 $11.50
- ----------------- ------------------- -------------------- ------------------- --------------------
<CAPTION>
FISCAL YEAR
1997 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
<S> <C> <C> <C> <C>
HIGH $12.125 $9.25 $9.375 $8.50
LOW $7.50 $7.75 $6.75 $6.875
- ----------------- ------------------- -------------------- ------------------- --------------------
<CAPTION>
FISCAL YEAR
1998 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
<S> <C> <C> <C> <C>
HIGH $10.5625 $12.00 $13.4375 $18.125
LOW $8.125 $9.00 $10.50 $13.00
- ----------------- ------------------- -------------------- ------------------- --------------------
</TABLE>
During fiscal year 1998, the Company declared two semi-annual dividends of
four cents per share each. The first semi-annual dividend (four cents per share)
was paid on November 1, 1997, to stockholders of record on October 10, 1997. The
second semi-annual dividend (four cents per share) was paid on May 1, 1998, to
stockholders of record on April 10, 1998.
ITEM 6. SELECTED FINANCIAL INFORMATION
The information for fiscal years 1993 through 1998, contained in the
Five-Year Financial Summary on page 23 of the 1998 Financial Statements booklet
in the Company's 1998 Annual Report to Stockholders, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth in the section entitled "Management's Discussion
of Results of Operations and Financial Condition" on pages 4 through 6 of the
1998 Financial Statements booklet in the Company's 1998 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report, Consolidated Statements of Earnings
(Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and
Notes to Consolidated Financial Statements on pages 8 through
12
<PAGE>
22 of the 1998 Financial Statements booklet in the Company's 1998 Annual Report
to Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the sections entitled "Information Concerning
Nominees" on pages 3 through 4, "Committees of the Board" on pages 6 through 7,
and "Section 16(a) Beneficial Ownership Reporting Compliance" on page 21 of the
Company's definitive proxy materials dated August 10, 1998, is incorporated
herein by reference. Certain information regarding executive officers is
contained in Part I above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the sections entitled "Board Compensation and
Benefits" on pages 5 through 6, "Summary Compensation Table" on pages 12 through
13, and "Option Grants in Last Fiscal Year" on page 14 of the Company's
definitive proxy materials dated August 10, 1998, is incorporated by reference.
The information appearing in such proxy materials under the heading "Report of
Compensation Committee on Executive Compensation" is not incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the sections entitled "Certain Owners of
Common Stock" on page 2 and "Share Ownership of Directors and Officers" on pages
7 through 8 of the Company's definitive proxy materials dated August 10, 1998,
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONS AND RELATED TRANSACTIONS
The information contained in the section entitled "Certain Relationships
and Related Transactions" on page 8 of the Company's definitive proxy materials
dated August 10, 1998, is incorporated herein by reference.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
Consolidated Statements of Earnings (Loss) for the fiscal years ended May
31, 1998, May 25, 1997 and May 26, 1996 (incorporated by reference to page 8 of
the 1998 Financial Statements booklet in the Company's 1998 Annual Report to
Stockholders)
Consolidated Balance Sheets at May 31, 1998 and May 25, 1997 (incorporated
by reference to page 9 of the 1998 Financial Statements booklet in the Company's
1998 Annual Report to Stockholders)
Consolidated Statements of Cash Flows for the fiscal years ended May 31,
1998, May 25, 1997 and May 26, 1996 (incorporated by reference to page 10 of the
1998 Financial Statements booklet in the Company's 1998 Annual Report to
Stockholders)
Notes to Consolidated Financial Statements (incorporated by reference to
pages 11 through 22 of the 1998 Financial Statements booklet in the Company's
1998 Annual Report to Stockholders)
2. FINANCIAL STATEMENTS SCHEDULES:
Not applicable.
3. EXHIBITS:
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain
instruments defining the rights of holders of certain long-term debt of the
Company are not filed, and in lieu thereof, the Company agrees to furnish copies
thereof to the Securities and Exchange Commission upon request.
EXHIBIT
NUMBER TITLE
------- -----
3(a) Articles of Incorporation (incorporated herein by reference to
Exhibit 3(a) to the Company's Registration Statement on Form 10
effective May 5, 1995)
3(b) Bylaws (incorporated herein by reference to Exhibit 3(b) to the
Company's Registration Statement on Form 10 effective May 5,
1995)
4(a) Rights Agreement dated as of May 28, 1995 between the Company and
Norwest Bank Minnesota, N.A., as amended May 23, 1996, assigned
to First Union National Bank, as Rights Agent, as of September
29, 1997
4(b) Indenture dated as of January 1, 1996, between the Company and
Norwest Bank Minnesota, National Association, as Trustee
(incorporated herein by reference to the Company's Current Report
on Form 8-K filed February 9, 1996)
*10(a) Darden Restaurants, Inc. Stock Option and Long-Term Incentive
Plan of 1995, as amended May 23, 1996, June 17, 1997, and June
26, 1998
*10(b) Darden Restaurants, Inc. FlexComp Plan (incorporated herein by
reference to Exhibit 10(b) to the Company's Registration
Statement on Form 10 effective May 5, 1995)
- --------------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
14
<PAGE>
*10(c) Darden Restaurants, Inc. Stock Option and Long-Term Incentive
Conversion Plan, as amended (incorporated herein by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 26, 1996)
*10(d) Supplemental Pension Plan of Darden Restaurants, Inc.
(incorporated herein by reference to Exhibit 10(d) to the
Company's Registration Statement on Form 10 effective May 5,
1995)
*10(e) Executive Health Plan of Darden Restaurants, Inc. (incorporated
herein by reference to Exhibit 10(e) to the Company's
Registration Statement on Form 10 effective May 5, 1995)
*10(f) Stock Plan for Directors of Darden Restaurants, Inc., as
amended December 10, 1996, and June 26, 1998
*10(g) Compensation Plan for Non-Employee Directors of Darden
Restaurants, Inc., as amended June 17, 1997
*10(h) Darden Restaurants, Inc. Management Incentive Plan, as amended
(incorporated herein by reference to Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 26, 1996)
*10(i) Benefits Trust Agreement dated as of October 3, 1995, between
the Company and Norwest Bank Minnesota, N.A., as Trustee
(incorporated herein by reference to Exhibit 10(i) to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 25, 1997)
*10(j) Form of Management Continuity Agreement, as amended, between
the Company and certain of its executive officers (incorporated
herein by reference to Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 25, 1997)
12 Computation of Ratio of Consolidated Earnings to Fixed Charges
13 Portions of 1998 Annual Report to Stockholders (incorporated by
reference herein)
21 Subsidiaries of Darden Restaurants, Inc.
23 Independent Accountant's Consent
24 Powers of Attorney
27 Financial Data Schedule
- --------------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K. During the last quarter covered by this Report, there
were no Form 8-K filings.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: August 20, 1998 DARDEN RESTAURANTS, INC.
By: /s/ C.L. Whitehill
------------------
C.L. Whitehill
Senior Vice President, General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person's on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ H.B. Atwater, Jr. Director
- -------------------------
H.B. Atwater, Jr.*
/s/ Daniel B. Burke Director
- -------------------------
Daniel B. Burke*
/s/ Odie C. Donald Director
- -------------------------
Odie C. Donald*
/s/ Betty Southard Murphy Director
- -------------------------
Betty Southard Murphy*
/s/ Michael D. Rose Director
- -------------------------
Michael D. Rose*
/s/ Jack A. Smith Director
- -------------------------
Jack A. Smith*
/s/ Bradley D. Blum Director and President,
- ------------------------- The Olive Garden
Bradley D. Blum*
/s/ Joe R. Lee Director, Chairman of the August 20, 1998
- ------------------------- Board and Chief Executive Officer
Joe R. Lee (principal executive officer)
/s/ Richard E. Rivera Director and President, Red Lobster
- -------------------------
Richard E. Rivera*
/s/ Blaine Sweatt, III Director and President,
- ------------------------- New Business Development
Blaine Sweatt, III*
/s/ Linda J. Dimopoulos Senior Vice President - Corporate August 20, 1998
- ------------------------- Controller and Business Information
Linda J. Dimopoulos Systems (controller and principal
accounting officer)
/s/ Clarence Otis, Jr. Senior Vice President-Finance August 20, 1998
- ------------------------- and Treasurer (principal financial
Clarence Otis, Jr. officer)
*BY: C.L. Whitehill,
Attorney-In-Fact
August 20, 1998
16
<PAGE>
EXHIBIT INDEX
<PAGE>
EXHIBITS
EXHIBIT
NUMBER TITLE
------- -----
3(a) Articles of Incorporation (incorporated herein by reference to Exhibit
3(a) to the Company's Registration Statement on Form 10 effective May
5, 1995)
3(b) Bylaws (incorporated herein by reference to Exhibit 3(b) to the
Company's Registration Statement on Form 10 effective May 5, 1995)
4(a) Rights Agreement dated as of May 28, 1995 between the Company and
Norwest Bank Minnesota, N.A., as amended May 23, 1996, assigned to
First Union National Bank, as Rights Agent, as of September 29, 1997
4(b) Indenture dated as of January 1, 1996, between the Company and Norwest
Bank Minnesota, National Association, as Trustee (incorporated herein
by reference to the Company's Current Report on Form 8-K filed
February 9, 1996)
*10(a) Darden Restaurants, Inc. Stock Option and Long-Term Incentive Plan
of 1995, as amended May 23, 1996, June 17, 1997, and June 26, 1998
*10(b) Darden Restaurants, Inc. FlexComp Plan (incorporated herein by
reference to Exhibit 10(b) to the Company's Registration Statement on
Form 10 effective May 5, 1995)
*10(c) Darden Restaurants, Inc. Stock Option and Long-Term Incentive
Conversion Plan, as amended (incorporated herein by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 26, 1996)
*10(d) Supplemental Pension Plan of Darden Restaurants, Inc. (incorporated
herein by reference to Exhibit 10(d) to the Company's Registration
Statement on Form 10 effective May 5, 1995)
*10(e) Executive Health Plan of Darden Restaurants, Inc. (incorporated
herein by reference to Exhibit 10(e) to the Company's Registration
Statement on Form 10 effective May 5, 1995)
*10(f) Stock Plan for Directors of Darden Restaurants, Inc., as amended
December 10, 1996, and June 26, 1998
- ---------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
i
<PAGE>
EXHIBITS
EXHIBIT
NUMBER TITLE
------- -----
*10(g) Compensation Plan for Non-Employee Directors of Darden Restaurants,
Inc., as amended June 17, 1997
*10(h) Darden Restaurants, Inc. Management Incentive Plan, as amended
(incorporated herein by reference to Exhibit 10(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 26, 1996)
*10(i) Benefits Trust Agreement dated as of October 3, 1995, between the
Company and Norwest Bank Minnesota, N.A., as Trustee (incorporated
herein by reference to Exhibit 10(i) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 25, 1997)
*10(j) Form of Management Continuity Agreement, as amended, between the
Company and certain of its executive officers (incorporated herein by
reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 25, 1997)
12 Computation of Ratio of Consolidated Earnings to Fixed Charges
13 Portions of 1998 Annual Report to Stockholders (incorporated by
reference herein)
21 Subsidiaries of Darden Restaurants, Inc.
23 Independent Accountant's Consent
24 Powers of Attorney
27 Financial Data Schedule
- ---------------------
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
ii
EXHIBIT 4(a)
RIGHTS AGREEMENT
<PAGE>
EXHIBIT 4(a)
RIGHTS AGREEMENT
DATED AS OF
MAY 28, 1995
BETWEEN
DARDEN RESTAURANTS, INC.
AND
NORWEST BANK MINNESOTA, N.A.,
AS RIGHTS AGENT
(AS AMENDED MAY 23, 1996)
<PAGE>
TABLE OF CONTENTS (1)
Section 1. Definitions..................................................
Section 2. Appointment of Rights Agent..................................
Section 3. Issue of Right Certificates..................................
Section 4. Form of Right Certificates...................................
Section 5. Countersignature and Registration............................
Section 6. Transfer and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.................
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.......................................................
Section 8. Cancellation and Destruction of Right Certificates...........
Section 9. Reservation and Availability of Capital Stock................
Section 10. Preferred Stock Record Date..................................
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights..........................................
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................
Section 14. Fractional Rights and Fractional Shares......................
Section 15. Rights of Action.............................................
Section 16. Agreement of Right Holders...................................
- ---------------------
(1) The Table of Contents is not part of this agreement.
<PAGE>
TABLE OF CONTENTS - (continued)
Section 17. Right Certificate Holder Not Deemed a Shareholder............
Section 18. Concerning the Rights Agent..................................
Section 19. Merger or Consolidation or Change of Name of Rights Agent....
Section 20. Duties of Rights Agent.......................................
Section 21. Change of Rights Agent.......................................
Section 22. Issuance of New Right Certificates...........................
Section 23. Redemption...................................................
Section 24. Exchange.....................................................
Section 25. Notice of Proposed Actions...................................
Section 26. Notices......................................................
Section 27. Supplements and Amendments...................................
Section 28. Successors...................................................
Section 29. Determinations and Actions by the Board of Directors, etc....
Section 30. Benefits of this Agreement...................................
Section 31. Severability.................................................
Section 32. Governing Law................................................
Section 33. Counterparts.................................................
Section 34. Descriptive Headings.........................................
<PAGE>
RIGHTS AGREEMENT
(as amended May 23, 1996)
AGREEMENT dated as of May 28, 1995, between Darden Restaurants, Inc., a
Florida corporation (the "Company"), and Norwest Bank Minnesota, N.A., as Rights
Agent (the "Rights Agent"),
W I T N E S S E T H
WHEREAS, on May 15, 1995 (the "Record Date") the Board of Directors of the
Company, in accordance with the provisions of the Florida Business Corporation
Act (and, in particular but without limitation, Section 607.0624 of such act),
authorized and declared a dividend, payable on the Record Date to the holders of
record of the Company's Common Stock (as hereinafter defined) on that date, of
preferred stock purchase rights (the "Rights") in an amount such that one Right
is payable with respect to each share of Common Stock outstanding at the close
of business on May 28, 1995, and has authorized the issuance, upon the terms and
subject to the conditions hereinafter set forth, of one Right in respect of each
share of Common Stock issued after May 28, 1995, each Right representing the
right to purchase, upon the terms and subject to the conditions hereinafter set
forth, one one-hundredth of a share of Preferred Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein, have the
following meanings:
"Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, shall at any time after May 28,
1995, be the Beneficial Owner of 20% or more of the shares of Common Stock
then outstanding, but shall not include the Company, any of its
Subsidiaries, any employee benefit plan of the Company or of any or its
Subsidiaries or any Person organized, appointed or established by the
Company or any of its Subsidiaries for or pursuant to the terms of any such
plan.
"Affiliate" and "Associate" have the respective meanings ascribed to
such terms in Rule 12b-2 under the Exchange Act as in effect on the date
hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own", any securities:
(a) which such Person or any of its Affiliates or Associates,
directly or indirectly, beneficially owns (as determined pursuant to
Rule 13d-3 under the Exchange Act as in effect on the date hereof),
<PAGE>
(b) which such Person or any of its Affiliates or Associates,
directly or indirectly, has
(i) the right to acquire (whether such right is exercisable
immediately or only upon the occurrence of certain events or the
passage of time or both) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or exercise of
conversion rights, exchange rights, rights, warrants or options,
or otherwise (other than pursuant to the Rights); provided that a
Person shall not be deemed the "Beneficial Owner" of or to
"beneficially own" securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of its
Affiliates or Associates until such tendered securities are
accepted for payment or exchange; or
(ii) the right to vote (whether such right is exercisable
immediately or only upon the occurrence of certain events or the
passage of time or both) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or otherwise;
provided that a Person shall not be deemed the "Beneficial Owner"
of or to "beneficially own" any security under this clause (ii)
as a result of an agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A)
arises solely from a revocable proxy or consent given in response
to a public proxy or consent solicitation made pursuant to, and
in accordance with, the applicable rules and regulations under
the Exchange Act and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in
subparagraph (b)(ii) immediately above) or disposing of any such
securities; provided that a Person engaged in business as an underwriter of
securities shall not to be deemed the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Business Day" means any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York or the State in
which the
<PAGE>
principal office of the Rights Agent is located are authorized or obligated
by law or executive order to close.
"Close of business" on any given date means 5:00 P.M., New York City
time, on such date; provided that if such date is not a Business Day "close
of business" means 5:00 P.M., New York City time, on the next succeeding
Business Day.
"Common Stock" means the Common Stock, without par value, of the
Company, except that, when used with reference to any Person other than the
Company, "Common Stock" means the capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
"Continuing Director" means any member of the Board of Directors of
the Company, while such Person is a member of the Board, who is not an
Acquiring Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any such Affiliate
or Associate and either (a) is a member of the Board immediately prior to
the time any Person becomes an Acquiring Person or (b) subsequently becomes
a member of the Board, if such Person's nomination for election or election
to the Board is recommended or approved by a majority of the Continuing
Directors.
"Distribution Date" means the earlier of (a) the close of business on
the tenth day (or such later day as may be designated by action of a
majority of the Continuing Directors) after the Stock Acquisition Date and
(b) the close of business on the tenth Business Day (or such later day as
may be designated by action of a majority of the Continuing Directors)
after the date of the commencement of a tender or exchange offer by any
Person if, upon consummation thereof, such Person would be an Acquiring
Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the earlier of (a) the Final Expiration Date
and (b) the time at which all Rights are redeemed as provided in Section 23
or exchanged as provided in Section 24.
"Final Expiration Date" means the close of business on May 24, 2005.
"Person" means an individual, corporation, partnership, association,
trust or any other entity or organization.
"Preferred Stock" means the Series A Participating Cumulative
Preferred Stock, without par value, of the Company, having the terms set
forth in the form of articles of amendment to articles of incorporation
attached hereto as Exhibit A.
<PAGE>
"Purchase Price" means the price (subject to adjustment as provided
herein) at which a holder of a Right may purchase one one-hundredth of a
share of Preferred Stock (subject to adjustment as provided herein) upon
exercise of a Right, which price shall initially be $62.50.
"Section 11(a)(ii) Event" means any event described in Section
11(a)(ii).
"Section 13 Event" means any event described in clauses (x), (y) or
(z) of Section 13(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Acquisition Date" means the date (after the date of this
Agreement) of the first public announcement (including without limitation
the filing of a report on Schedule 13D under the Exchange Act (or any
comparable or successor report)) by the Company or an Acquiring Person
indicating that an Acquiring Person has become such.
"Subsidiary" of any Person means any other Person of which securities
or other ownership interests having ordinary voting power, in the absence
of contingencies, to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by such first Person.
"Trading Day" means a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any Section 13
Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. If the Company appoints
one or more Co-Rights Agents, the respective duties of the Rights Agent and any
Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates.
(a) Prior to the Distribution Date, (i) the Rights will be evidenced by the
certificates for the Common Stock and not by separate Right Certificates (as
<PAGE>
hereinafter defined) and the registered holders of the Common Stock shall be
deemed to be the registered holders of the associated Rights, and (ii) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock. As soon as practicable after the Record Date,
the Company will send a summary of the Rights substantially in the form of
Exhibit C hereto, by first-class, postage prepaid mail, to each record holder of
the Common Stock as of the close of business on the Record Date at the address
of such holder shown on the records of the Company.
(b) As soon as practicable after the Company has notified the Rights Agents
of the occurrence of the Distribution Date, the Rights Agent will send, by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more Rights Certificates
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held. If an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p), the Company shall, at the
time of distribution of the Right Certificates, make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a)) so that
Right Certificates representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. From and after the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
(c) Rights shall be issued on the Record Date in respect of all shares of
Common Stock outstanding as of that date in an amount such that one Right is
issuable with respect to each share of Common Stock outstanding as of May 28,
1995, or issued (on original issuance or out of treasury) after May 28, 1995,
but prior to the earlier of the Distribution Date and the Expiration Date. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(i) shall, with respect to shares of Common Stock so issued or sold (x) pursuant
to the exercise of stock options or under any employee plan or arrangement or
(y) upon the exercise, conversion or exchange of other securities issued by the
Company prior to the Distribution Date and (ii) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Right Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided that no such Right Certificate shall be
issued if, and to the extent that, (i) the Company shall be advised by counsel
that such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued or (ii) appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
(d) Certificates for the Common Stock issued after the Record Date, but
prior to the earlier of the Distribution Date and the Expiration Date, shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder thereof to certain
Rights as set forth in the Rights Agreement (the "Rights Agreement")
between Darden Restaurants, Inc. (the "Corporation") and Norwest Bank
Minnesota, N.A. (the "Rights Agent"), the terms of which are hereby
incorporated by reference and a copy of which is on file at the principal
executive offices of the Corporation. Under certain circumstances set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by the certificate. The
Corporation will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may be null and void.
Section 4. Form of Right Certificates.
(a) The certificates evidencing the Rights (and the forms of assignment,
election to purchase and certificates to be printed on the reverse thereof) (the
"Right Certificates") shall be substantially in the form of Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to usage. The Right Certificates, whenever distributed,
shall be dated as of the Record Date.
(b) Any Right Certificate representing Rights beneficially owned by any
Person referred to in clauses (i), (ii) or (iii) of the first sentence of
Section 7(d) shall (to the extent feasible) contain the following legend:
The Rights represented by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). This Right Certificate and the Rights represented hereby may be
or may become null and void in the circumstances specified in Section 7(d)
of such Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company whose manual or facsimile signature is affixed to the Right Certificates
shall cease to be such officer of the Company
<PAGE>
before countersignature by the Rights Agent and issuance and delivery by the
Company, such Right Certificates may, nevertheless, be countersigned by the
Rights Agent and issued and delivered with the same force and effect as though
the Person who signed such Right Certificates had not ceased to be such officer
of the Company. Any Right Certificate may be signed on behalf of the Company by
any Person who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Rights Agreement any such Person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the place for
surrender of Right Certificates upon exercise, transfer or exchange, books for
registration and transfer of the Right Certificates. Such books shall show with
respect to each Right Certificate the name and address of the registered holder
thereof, the number of Rights indicated on the certificate and the certificate
number.
Section 6. Transfer and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.
(a) At any time after the Distribution Date and prior to the Expiration
Date, any Right Certificate or Certificates may, upon the terms and subject to
the conditions set forth below in this Section 6(a), be transferred or exchanged
for another Right Certificate or Certificates evidencing a like number of Rights
as the Right Certificate or Certificates surrendered. Any registered holder
desiring to transfer or exchange any Right Certificate or Certificates shall
surrender such Right Certificate or Certificates (with, in the case of a
transfer, the form of assignment and certificate on the reverse side thereof
duly executed) to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate or Certificates until the
registered holder of the Rights has complied with the requirements of Section
7(e). Upon satisfaction of the foregoing requirements, the Rights Agent shall,
subject to Sections 4(b), 7(d), 14 and 24, countersign and deliver to the Person
entitled thereto a Right Certificate or Certificates as so requested. The
Company may require payment of a sum sufficient to cover any transfer tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of any Right Certificate or Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will issue and deliver a new
Right Certificate of like tenor to the Rights Agent for
<PAGE>
countersignature and delivery to the registered owned in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including Sections 7(d)
and (e), 9(c), 11(a) and 24) in whole or in part at any time after the
Distribution Date and prior to the Expiration Date upon surrender of the Right
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment (in lawful money of the United States of America by certified check or
bank draft payable to the order of the Company) of the aggregate Purchase Price
with respect to the Rights then to be exercised and an amount equal to any
applicable transfer tax or other governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and subject to
Section 20(k), the Rights Agent shall thereupon promptly (i)(A) requisition from
any transfer agent of the Preferred Stock (or make available, if the Rights
Agent is the transfer agent therefor) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be purchased (and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests) or (B) if the Company shall have elected to deposit the shares of
Preferred Stock issuable upon exercise of the Rights with a depositary agent,
requisition from the depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
issuance of fractional shares in accordance with Section 14 and (iii) after
receipt of such certificates or depositary receipts and cash, if any, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate (with such certificates or receipts registered in such name or names
as may be designated by such holder). If the Company is obligated to deliver
Common Stock, other securities or assets pursuant to this Agreement, the Company
will make all arrangements necessary so that such other securities and assets
are available for delivery by the Rights Agent, if and when appropriate. The
Company reserves the right to require prior to the occurrence of a Triggering
Event that, upon exercise of Rights, a number of Rights be exercised so that
only whole shares of Preferred Stock would be issued.
(c) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
the number of Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14.
<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person (or any such
Associate or Affiliate) to holders of equity interests in such Acquiring Person
(or in any such Associate or Affiliate) or to any Person with whom the Acquiring
Person (or any such Associate or Affiliate) has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Continuing Directors have determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(d) shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(d) and Section 4(b) are complied with, but shall have no liability to any
holder of Right Certificates or other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates and
Associates or any transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any purported
transfer pursuant to Section 6 or exercise pursuant to this Section 7 unless
such registered holder (i) shall have completed and signed the certificate
contained in the form of assignment or election to purchase, as the case may be,
set forth on the reverse side of the Right Certificate surrendered for such
transfer or exercise, as the case may be, (ii) shall not have indicated an
affirmative response to clause 1 or 2 thereof and (iii) shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for exercise, transfer or exchange shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement. The Company shall
deliver to the Rights Agent for cancellation, and the Rights Agent shall cancel,
any other Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company.
<PAGE>
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available a number of shares of Preferred Stock which are authorized, but
not outstanding or otherwise reserved for issuance sufficient to permit the
exercise in full, of all outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock issuable upon the exercise of Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
securities reserved for such issuance to be listed on any such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event as of which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with Section
11(a)(iii), or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Securities Act with respect
to the securities issuable upon exercise of the Rights, (ii) to cause such
registration statement to become effective as soon as practicable after such
filing and (iii) to cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Securities Act) until
the earlier of (A) the date as of which the Rights are no longer exercisable for
such securities and (B) the Expiration Date. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or blue sky laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed 90 days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any such provision of this Agreement to the contrary, the Rights
shall not be exercisable for securities in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, such exercise
therefor shall not be permitted under applicable law or a registration statement
in respect of such securities shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to insure that all one one-hundredths of a share of Preferred
Stock issuable upon exercise of Rights shall, at the time of delivery of the
certificates for such securities (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and other governmental
<PAGE>
charges which may be payable in respect of the issuance or delivery of the Right
Certificates and of any certificates for Preferred Stock upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax or
other governmental charge which may be payable in respect of any transfer
involved in the issuance or delivery of any Right Certificates or of any
certificates for Preferred Stock to a person other than the registered holder of
the applicable Right Certificate, and prior to any such transfer, issuance or
delivery any such tax or other governmental charge shall have been paid by the
holder of such Right Certificate or it shall have been established to the
Company's satisfaction that no such tax or other governmental charge is due.
Section 10. Preferred Stock Record Date. Each Person (other than the
Company) in whose name any certificate for Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Stock represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any transfer taxes
or other governmental charges) was made; provided that if the date of such
surrender and payment is a date upon which the transfer books of the Company
relating to the Preferred Stock are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the applicable transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including without limitation the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.
(a) (i) If the Company shall at any time after the date of this Agreement
(A) pay a dividend on the Preferred Stock payable in shares of Preferred Stock,
(B) subdivide the outstanding Preferred Stock into a greater number of shares,
(C) combine the outstanding Preferred Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger involving the Company), the Purchase Price in effect immediately prior to
the record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of Preferred
Stock or other capital stock issuable on such date shall be proportionately
adjusted so that each holder of a Right shall (except as otherwise provided
herein, including pursuant to Section 7(d)) thereafter be entitled to receive,
upon exercise thereof at the Purchase Price in effect immediately prior to such
date, the aggregate number and kind of shares of Preferred Stock or other
capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the applicable transfer books
of the Company were open, such holder
<PAGE>
would have been entitled to receive upon such exercise and by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs which
requires an adjustment under both this Section 11(a)(i) and Section 11(a)(ii),
the adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii).
(ii) If any Person, alone or together with its Affiliates and Associates,
shall, at any time after the date of this Agreement, become an Acquiring Person,
then proper provision shall promptly be made so that each holder of a Right
shall (except as otherwise provided herein, including pursuant to Section 7(d))
thereafter be entitled to receive, upon exercise thereof at the Purchase Price
in effect immediately prior to the first occurrence of a Section 11(a)(ii)
Event, in lieu of Preferred Stock, such number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock of the Company (such
shares being referred to herein as the "Adjustment Shares") as shall be equal to
the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in effect
immediately prior to the first occurrence of a Section 11(a)(ii) Event by
the number of one one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such first occurrence (such
product being thereafter referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by
(B) 50% of the current market price (determined pursuant to Section
11(d)(i)) per share of Common Stock on the date of such first occurrence;
provided that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13, then only the
provisions of Section 13 shall apply and no adjustment shall be made pursuant to
this Section 11(a)(ii).
(iii) If the number of shares of Common Stock which are authorized by the
Company's Articles of Incorporation, but not outstanding or reserved for
issuance other than upon exercise of the Rights, is not sufficient to permit the
exercise in full of the Rights in accordance with Section 11(a)(ii), the Company
shall, with respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon payment of the Purchase Price then in effect, (A) (to
the extent available) Common Stock and then, (B) (to the extent available) other
equity securities of the Company which a majority of the Continuing Directors
has determined to be essentially equivalent to shares of Common Stock in respect
to dividend, liquidation and voting rights (such securities being referred to
herein as "common stock equivalents") and then, if necessary, (C) other equity
or debt securities of the Company, cash or other assets, a reduction in the
Purchase Price or any combination of the foregoing, having an aggregate value
(as determined by the Continuing Directors based upon the advice of a nationally
recognized investment banking firm selected by the Continuing Directors) equal
to the value of the Adjustment Shares; provided that (x) the Company may, and
(y) if the Company shall not have made
<PAGE>
adequate provision as required above, to deliver value within 30 days following
the later of the first occurrence of a Section 11(a)(ii) Event and the first
date that the right to redeem the Rights pursuant to Section 23 shall expire,
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, (1) (to the
extent available) Common Stock and then (2) (to the extent available) common
stock equivalents and then, if necessary, (3) other equity or debt securities of
the Company, cash or other assets or any combination of the foregoing, having an
aggregate value (as determined by the Continuing Directors based upon the advice
of a nationally recognized investment banking firm selected by the Continuing
Directors) equal to the excess of the value of the Adjustment Shares over the
Purchase Price. If the Continuing Directors of the Company shall determine in
good faith that it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the Rights, the 30 day
period set forth above (such period, as it may be extended, being referred to
herein as the "Substitution Period") may be extended to the extent necessary,
but not more than 90 days following the first occurrence of a Section 11(a)(ii)
Event, in order that the Company may seek shareholder approval for the
authorization of such additional shares. To the extent that the Company
determines that some action is to be taken pursuant to the first and/or second
sentence of this Section 11(a)(iii), the Company (X) shall provide, subject to
Section 7(d), that such action shall apply uniformly to all outstanding Rights
and (Y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form and value of any consideration to be
delivered as referred to in such first and/or second sentence. If any such
suspension occurs, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of the Common Stock shall be the
current market price per share of Common Stock (as determined pursuant to
Section 11(d)) on the later of the date of the first occurrence of a Section
11(a)(ii) Event and the first date that the right to redeem the Rights pursuant
to Section 23 shall expire; any common stock equivalent shall be deemed to have
the same value as the Common Stock on such date; and the value of other
securities or assets shall be determined pursuant to Section 11(d)(iii).
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or securities having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into or exercisable for Preferred
Stock (or equivalent preferred stock) at a price per share of Preferred Stock
(or equivalent preferred stock) (in each case, taking account of any conversion
or exercise price) less than the current market price (as determined pursuant to
Section 11(d)) per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of
<PAGE>
shares of Preferred Stock which the aggregate price (taking account of any
conversion or exercise price) of the total number of shares of Preferred Stock
(and/or equivalent preferred stock) so to be offered would purchase at such
current market price and the denominator of which shall be the number of shares
of Preferred Stock outstanding on such record date plus the number of additional
shares of Preferred Stock (and/or equivalent preferred stock) so to be offered.
In case such subscription price may be paid by delivery of consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. Shares of Preferred Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and if such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger involving the Company) of
evidences of indebtedness, equity securities other than Preferred Stock, assets
(other than a regular periodic cash dividend out of the earnings or retained
earnings of the Company) or rights, options or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price (as determined pursuant to Section 11(d)) per
share of Preferred Stock on such record date, less the value (as determined
pursuant to Section 11(d)(iii)) of such evidences of indebtedness, equity
securities, assets, rights, options or warrants so to be distributed with
respect to one share of Preferred Stock and the denominator of which shall be
such current market price per share of Preferred Stock. Such adjustment shall be
made successively whenever such a record date is fixed, and if such distribution
is not so made, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) or 14, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days immediately prior to such date; for purposes of
computations made pursuant to Section 11(a)(iii), the "current market price" per
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 10 consecutive Trading
Days immediately following such date; and for purposes of computations made
pursuant to Section 14, the "current market price" per share of Common Stock for
any Trading Day shall be deemed to be the closing price per share of Common
Stock for such Trading Day; provided that if the current market price per share
of the Common Stock is determined during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities exercisable for or
convertible into shares of such Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Stock, and prior to
the expiration of the requisite 30 Trading Day or 10 Trading Day period, as set
forth above, after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each case, the "current market price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the Company,
or, if at the time of such selection there is an Acquiring Person, by a majority
of the Continuing Directors. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company (or, if at the
time of such determination there is an Acquiring Person, by a majority of the
Continuing Directors) shall be used. If the Common Stock is not publicly held or
not so listed or traded, the "current market price" per share means the fair
value per share as determined in good faith by the Board of Directors of the
Company, or, if at the time of such determination there is an Acquiring Person,
by a majority of the Continuing Directors, or if there are no Continuing
Directors, by a nationally recognized investment banking firm selected by the
Board of Directors, which determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner as
set forth above for the Common Stock in Section 11(d)(i) (other then the last
sentence thereof). If the current market price per share of Preferred Stock
cannot be determined in such manner, the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock occurring after
the date of this Agreement) multiplied by the current market price per share of
Common Stock (as determined pursuant to Section 11(d)(i) (other than the last
sentence thereof)). If neither the Common Stock nor the Preferred
<PAGE>
Stock is publicly held or so listed or traded, the "current market price" per
share of the Preferred Stock shall be determined in the same manner as set forth
in the last sentence of Section 11(d)(i). For all purposes of this Agreement,
the "current market price" of one one-hundredth of a share of Preferred Stock
shall be equal to the "current market price" of one share of Preferred Stock
divided by 100.
(iii) For the purpose of any computation hereunder, the value of any
securities or assets other than Common Stock or Preferred Stock shall be the
fair value as determined in good faith by the Board of Directors of the Company,
or, if at the time of such determination there is an Acquiring Person, by a
majority of the Continuing Directors then in office, or, if there are no
Continuing Directors, by a nationally recognized investment banking firm
selected by the Board of Directors, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest ten-thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be.
(f) If at any time, as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a), the holder of any Right shall be entitled to receive
upon exercise or such Right any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment to the
provisions with respect to the Preferred Stock contained in Section 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made hereunder shall evidence the right to purchase, at the Purchase
Price then in effect, the then applicable number of one one-hundredths of a
share of Preferred Stock and other capital stock of the Company issuable from
time to time hereunder upon exercise of the Rights, all subject to further as
provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share for which a
Right was exercisable immediately prior to this adjustment by (y)
<PAGE>
the Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-hundredths of a
share of Preferred Stock for which such Right was exercisable prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If the Right Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price per one one-hundredth of a share and
the number of shares which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the par value, if any, of the number of one one-hundredths
of a share of Preferred Stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-hundredths of a share of Preferred Stock at
such adjusted Purchase Price.
<PAGE>
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-hundredths of a share of Preferred Stock or other capital stock of
the Company, if any, issuable upon such exercise over and above the number of
one one-hundredths of a share of Preferred Stock or other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exercisable for Preferred Stock, stock dividends or
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to the holders of its Preferred Stock, shall not
be taxable to such shareholders.
(n) The Company covenants and agrees that it will not at any time after the
Distribution Date (i) consolidate, merge or otherwise combine with or (ii) sell
or otherwise transfer (and/or permit any of its Subsidiaries to sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries, taken as a whole, to any other Person or
Persons if (x) at the time of or immediately after such consolidation, merger,
combination or sale there are any rights, warrants or other instruments or
securities outstanding or any agreements or arrangements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, combination or sale, the shareholders of a Person
who constitutes, or would constitute, the "Principal Party" for the purposes of
Section 13 shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the Distribution Date, it
will not, except as permitted by Sections 23, 24 and 27, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
<PAGE>
(p) Notwithstanding anything in this Agreement to the contrary, if at any
time after the date of this Agreement and prior to the Distribution Date the
Company shall (i) pay a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
into a larger number of shares or (iii) combine the outstanding Common Stock
into a smaller number of shares, the number of Rights associated with each share
of Common Stock then outstanding, or issued or delivered thereafter as
contemplated by Section 3(c), shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock following
any such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to such
event by a fraction the numerator of which shall be the total number of shares
of Common Stock outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Preferred Stock and
the Common Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate (or, if prior to the Distribution Date, to
each holder of a certificate representing shares of Common Stock) in the manner
set forth in Section 26. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) If, following the Stock Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, merge into, or otherwise
combine with, any other Person, and the Company shall not be the continuing
or surviving corporation of such consolidation, merger or combination,
(y) any Person shall merge into, or otherwise combine with, the
Company, and the Company shall be the continuing or surviving corporation
of such merger or combination and, in connection with such merger or
combination, all or part of the outstanding shares of Common Stock shall be
changed into or exchanged for other stock or securities of the Company or
any other Person, cash or any other property, or
(z) the Company and/or one or more of its Subsidiaries shall sell or
otherwise transfer, in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning
power
<PAGE>
of the Company and its Subsidiaries, taken as a whole, to any other Person
or Persons,
then, and in each such case, proper provision shall promptly be made so that
(1) each holder of a Right shall thereafter be entitled to receive,
upon exercise thereof at the Purchase Price in effect immediately prior to
the first occurrence of any Triggering Event, such number of duly
authorized, validly issued, fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as hereinafter defined), not
subject to any rights of call of first refusal, liens, encumbrances or
other claims, as shall be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of any Triggering
Event by the number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
first occurrence (such product being thereafter referred to as the
"Purchase Price" for each Right and for all purposes of this
Agreement) by
(B) 50% of the current market price (determined pursuant to
Section 11(d)(i)) per share of the Common Stock of such Principal
Party on the date of consummation of such consolidation, merger,
combination, sale or transfer;
(2) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, combination, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement;
(3) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and
(4) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its
Common Stock to permit exercise of all outstanding Rights in accordance
with this Section 13(a)) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to
the shares of its Common Stock thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Section 13(a)(x) or
(y), the Person that is the issuer of any securities into which shares of
Common
<PAGE>
Stock of the Company are converted in such merger, consolidation or
combination, and if no securities are so issued, the Person that survives
or results from such merger, consolidation or combination; and
(ii) in the case of any transaction described in Section 13(a)(z), the
Person that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or transactions;
provided that in any such case, (A) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which is and has been
so registered, "Principal Party" shall refer to such other Person; and (B) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
combination, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which are not outstanding or
otherwise reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in Section 13(a) and
(b) and providing that, as soon as practicable after the date of any
consolidation, merger, combination, sale or transfer mentioned in Section 13(a),
the Principal Party will
(i) prepare and file a registration statement under the Securities Act
with respect to the securities issuable upon exercise of the Rights, and
will use its best efforts to cause such registration statement (A) to
become effective as soon as practicable after such filing and (B) to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date and
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers,
consolidations, combinations, sales or other transfers. If any Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
<PAGE>
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p), or to distribute
Right Certificates which evidence fractional Rights. In lieu of any such
fractional Rights, the Company shall pay to the registered holders of the Right
Certificates, with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
price of a whole Right. For purposes of this Section 14(a), the current market
price of a whole Right shall be the closing price of a Right for the Trading Day
immediately prior to the date on which such fractional Rights would otherwise
have been issuable. The closing price of a Right for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company, or, if at the time of such selection there is an Acquiring Person,
by a majority of the Continuing Directors. If on any such date no such market
maker is making a market in the Rights, the current market price of the Right on
such date shall be as determined in good faith by the Board of Directors of the
Company, or, if at the time of such determination there is an Acquiring Person,
by a majority of the Continuing Directors.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are multiples of one one-hundredth
of a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are multiples of one one-hundredth of a share of Preferred
Stock). In lieu of any such fractional shares of Preferred Stock, the Company
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market price of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market price of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of any Triggering Event or upon any exchange
pursuant to Section 24, the Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to distribute certificates
which
<PAGE>
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised or exchanged as herein
provided an amount in cash equal to the same fraction of the current market
price of a share of Common Stock. For purposes of this Section 14(c), the
current market price of a share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to Section 11(d)(i)) for the
Trading Day immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of any certificate representing
Common Stock), without the consent of the Rights Agent or of the holder of any
Right Certificate (or, prior to the Distribution Date, of any certificate
representing Common Stock), may, in his own behalf and for his own benefit,
enforce, any may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Right Certificate in the manner provided in such
Right Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of, any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights Agent may deem
and treat the Person in whose name a Right Certificate (or, prior to the
Distribution Date, a certificate representing shares of Common Stock) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any
<PAGE>
notations of ownership or writing on the Right Certificate or the certificate
representing shares of Common Stock made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company not the
Rights Agent, subject to the last sentence of Section 7(d), shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority prohibiting or otherwise restraining performance of such
obligation; provided that the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of capital stock which may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the execution or administration of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the administration of this Agreement or
the exercise or performance of its duties hereunder, including the costs and
expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with the
administration of this Agreement or the exercise or performance of its duties
hereunder in
<PAGE>
reliance upon any Right Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall succeed to the agency created
by this Agreement, any of the Right Certificates shall have been countersigned,
but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Rights Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned, but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
<PAGE>
(b) Whenever in the performance of its duties under this Agreement, the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any "Acquiring Person" and the
determination of "current market price") be proved or established by the Company
prior to taking, suffering or omitting to take any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, any Vice Chairman, the
President or any Vice President and by the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken, suffered or omitted
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(d)) or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Right Certificate
or as to whether any shares of Common Stock or Preferred Stock will, when
issued, be duly authorized, validly issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
<PAGE>
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, a Vice Chairman, the President or any Vice President or
the Secretary or any Assistant Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken, suffered or omitted to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not the Rights Agent under
this Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company or to any holders of Rights resulting from
any such act, default, neglect or misconduct, provided that reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the cases may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock and Preferred Stock by registered or certified mail, and,
subsequent to the Distribution Date, to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock by registered or
<PAGE>
certified mail, and, subsequent to the Distribution Date, to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or of any state of the United States, in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an Affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and, subsequent to the Distribution
Date, mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares of stock issuable
upon exercise of the Rights made in accordance with the provisions of this
Agreement.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day after the
Stock Acquisition Date (or such later date as a majority of the Continuing
Directors may designate prior to such time as the Rights are no longer
redeemable) and (ii) the Final Expiration Date, redeem all but not less than all
the then outstanding Rights at a redemption price of $.01 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof
<PAGE>
(such redemption price being hereinafter referred to as the "Redemption Price");
provided that after any Person has become an Acquiring Person, any redemption of
the Rights shall be effective only if there are Continuing Directors then in
office, and such redemption shall have been approved by a majority of such
Continuing Directors. Notwithstanding anything in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the Company
electing to redeem the Rights and without any further action and without any
notice, the right to exercise the Rights will terminate and thereafter the only
right of the holders of Rights shall be to receive the Redemption Price for each
Right so held. The Company shall promptly thereafter give notice of such
redemption to the Rights Agent and the holders of the Rights in the manner set
forth in Section 26; provided that the failure to give, or any defect in, such
notice shall not affect the validity of such redemption. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in Section 23 or 24, and other than in connection with the purchase,
acquisition or redemption of shares of Common Stock prior to the Distribution
Date.
Section 24. Exchange.
(a) At any time after any Person becomes an Acquiring Person, a majority of
the Continuing Directors may, at their option, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to Section 7(d)) for shares of Common Stock at an exchange
ratio of one share of Common Stock per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange if at any time after the date of this
Agreement any Person (other than the Company, any of its Subsidiaries, any
employee benefit plan of the Company or any of its Subsidiaries or any Person
organized, appointed or established by the Company or any of its Subsidiaries
for or pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
shares of Common Stock then outstanding.
(b) Immediately upon the action of the Continuing Directors electing to
exchange any Rights pursuant to Section 24(a) and without any further action and
without any notice, the right to exercise such Rights will terminate and
thereafter the only right of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange
<PAGE>
Ratio. The Company shall promptly thereafter give notice of such exchange to the
Rights Agent and the holders of the Rights to be exchanged in the manner set
forth in Section 26; provided that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the shares of Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to Section 7(d))
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute common stock equivalents (as defined in Section
11(a)(iii)) for shares of Common Stock exchangeable for Rights, at the initial
rate of one common stock equivalent for each share of Common Stock, as
appropriately adjusted to reflect adjustments in dividend, liquidation and
voting rights of common stock equivalents pursuant to the terms thereof, so that
each common stock equivalent delivered in lieu of each share of Common Stock
shall have essentially the same dividend, liquidation and voting rights as one
share of Common Stock.
Section 25. Notice of Proposed Actions.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision or combination of
outstanding shares of Preferred Stock) or (iv) to effect any consolidation or
merger with any other Person, or to effect and/or to permit one or more of its
Subsidiaries to effect any sale or other transfer, in one transaction or a
series of related transactions, of assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries, taken as
a whole, to any other Person or Persons, or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Right, to the extent feasible and in accordance
with Section 26, a notice of such proposed action, which shall specify the
record date for the purposes of any such dividend, distribution or offering of
rights or warrants, or the date on which any such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
to take place and the date of participation therein by the holders of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 20 days prior to
the record date for determining holders of the Preferred Stock entitled to
participate in such dividend, distribution or offering, and in the case of any
<PAGE>
such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Preferred
Stock, whichever shall be the earlier. The failure to give notice required by
this Section or any defect therein shall not affect the legality or validity of
the action taken by the Company or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to the contrary, prior to
the Distribution Date a public filing by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Agreement
and no other notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case, (1) the
Company shall as soon as practicable thereafter give to each holder of a Right,
in accordance with Section 26, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to holders of Rights
under Section 11(a)(ii) or 13, as the case may be, and (2) all references in
Section 25(a) to Preferred Stock shall be deemed thereafter to refer to Common
Stock or other capital stock, as the case may be.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right to or on the
Company shall be sufficiently given or made if sent by first-class mail (postage
prepaid) to the address of the Company indicated on the signature page hereof or
such other address as the Company shall specify in writing to the Rights Agent.
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right to or
on the Rights Agent shall be sufficiently given or made if sent by first-class
mail (postage prepaid) to the address of the Rights Agent indicated on the
signature page hereof or such other address as the Rights Agent shall specify in
writing to the Company. Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the holder of any Right
Certificate (or, prior to the Distribution Date, to the holder of any
certificate representing shares of Common Stock) shall be sufficiently given or
made if sent by first-class mail (postage prepaid) to the address of such holder
shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Right Certificates in order (a) to cure any ambiguity, (b) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or (c) to change or supplement the provisions
hereof in any manner which the Company may deem necessary or desirable and which
shall not adversely affect the interests of the holders of
<PAGE>
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person). Notwithstanding the foregoing, after any Person has become an
Acquiring Person, any supplement or amendment shall be effective only if there
are Continuing Directors then in office, and such supplement or amendment shall
have been approved by a majority of such Continuing Directors. Upon the delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with terms of this
Section, the Rights Agent shall execute such supplement or amendment. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on
the date of this Agreement. The Board of Directors of the Company (or, after any
Person has become an Acquiring Person, a majority of the Continuing Directors)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or
exchange or not to redeem or exchange the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (or, after any Person has become an Acquiring
Person, by the Continuing Directors) in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board of Directors of the
Company or the Continuing Directors to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the certificates representing the shares of Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the certificates representing the shares of Common Stock).
<PAGE>
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided that, notwithstanding anything in this Agreement to the contrary, of
any such term, provision, covenant or restriction is held by such court or
authority to be invalid, void or unenforceable and the Board of Directors of the
Company (or, after any Person has become an Acquiring Person, a majority of the
Continuing Directors) determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors or
Continuing Directors, as the case may be.
Section 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Florida and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, except that the rights and
obligations of the Rights Agent shall be governed by the law of the State of New
York.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same instrument.
Section 34. Descriptive Headings. The captions herein are included for
convenience of reference only, do not constitute a part of this Agreement and
shall be ignored in the construction and interpretation hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DARDEN RESTAURANTS, INC.
By: /s/ Clifford L. Whitehill
Name: Clifford L. Whitehill
Title: Senior Vice President
5900 Lake Ellenor Drive
Orlando, FL 32809
Attention:
STATE OF MINNESOTA
COUNTY OF HENNEPIN
On this the 14th day of August, 1995, personally appeared before me,
Clifford L. Whitehill, known to be the person who signed the foregoing Agreement
for the purposes therein expressed.
/s/ Susan L. Tesarek
Notary Public
NORWEST BANK MINNESOTA, N.A.
By: /s/ Kenneth P. Swanson
Name: Kenneth P. Swanson
Title: Asst. Vice President
Attention: Norwest Stock Transfer Dept.
161 North Concord Exchange,
Post Office Box 738,
South St. Paul, MN 55075-0738
<PAGE>
Exhibit A
FORMS OF ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
This is to certify, pursuant to Section 607.1008, Florida Statutes, that:
(a) The name of the Corporation is Darden Restaurants, Inc.
(b) Article III of the Articles of Incorporation is amended by adding the
following new Section (4):
"(4) SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK"
The Board of Directors, pursuant to the authority conferred upon it by this
Article III, and pursuant to the provisions of the Business Corporation Act of
the State of Florida, has by resolution adopted May 15, 1995 (which resolution
was set forth in Articles of Amendment which were filed with the Secretary of
State of the State of Florida on _______________, 1995), fixed the designations,
preferences, limitations and special rights of a series of Cumulative Preferred
Stock, as follows:
Section 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares constituting such series
shall be 2,000,000. Such number of shares of the Series A Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
issuable upon exercise or conversion of outstanding rights, options or other
securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable on February 1, May 1,
August 1 and November 1 of each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of any share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 and (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
<PAGE>
share amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other distributions
(other than (i) a dividend payable in shares of Common Stock, without par value
of the Corporation (the "Common Stock") or (ii) a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise)), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. If the
Corporation shall at any time after May 28, 1995, pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than as described
in clauses (i) and (ii) of the first sentence of paragraph (A)); provided that
if no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date (or, with respect to the first
Quarterly Dividend Payment Date, the period between the first issuance of any
share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is on or before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and on or before such Quarterly Dividend Payment Date, in which case
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued, but unpaid, dividends shall not bear interest. Dividends
paid on shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution
<PAGE>
declared thereon, which record date shall not be more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of shareholders of the Corporation. If the
Corporation shall at any time after May 28, 1995, pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as a single class on all matters submitted to a vote of shareholders of
the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred
Stock and any other series of Preferred Stock then entitled as a class to
elect directors, voting together as a single class, irrespective of series,
shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of shareholders, and thereafter at annual meetings of shareholders,
provided that neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the holders of 10%
in number of shares of Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of holders of Common Stock
shall not affect the exercise by holders
<PAGE>
of Preferred Stock of such voting right. At any meeting at which holders of
Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors
as may then exist up to two Directors or, if such right is exercised at an
annual meeting, to elect two Directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such increase
in the number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock shall
have exercised their right to elect Directors in any default period and
during the continuance of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors,
the Board of Directors may order, or any shareholder or shareholders owning
in the aggregate not less than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of holders of Preferred Stock, which meeting
shall thereupon be called by the Chairman of the Board, a Vice Chairman,
the President, a Vice President or the Secretary of the Corporation. Notice
of such meeting and of any annual meeting at which holders of Preferred
Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be
given to each holder of record of Preferred Stock by mailing a copy of such
notice to such holder at his or her last address as the same appears on the
books of the Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later than 60 days after such order or request
or in default of the calling of such meeting within 60 days after such
order or request, such meeting may be called on similar notice by any
shareholder or shareholders owning in the aggregate not less than 10% of
the total number of shares of Preferred Stock outstanding, irrespective of
series. Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of
shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining Directors theretofore
<PAGE>
elected by the holders of the class of stock which elected the Director
whose office shall have become vacant. References in this paragraph (C) to
Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the articles of incorporation or
bylaws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the articles of
incorporation or bylaws). Any vacancies in the Board of Directors effected
by the provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) The Articles of Incorporation of the Corporation shall not be amended
in any manner (whether by merger or otherwise) so as to adversely affect the
powers, preferences or special rights of the Series A Preferred Stock without
the affirmative vote of the holders of a majority of the outstanding shares of
Series A Preferred Stock, voting separately as a class.
(E) Except as otherwise provided herein, holders of Series A Preferred
Stock shall have no special voting rights, and their consent shall not be
required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on outstanding shares of Series A Preferred Stock shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
other parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;
<PAGE>
(iii) redeem, purchase or otherwise acquire for value any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of stock of the
Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of Series A Preferred Stock and all such other
parity stock upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series of classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for value any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized, but unissued
shares of Preferred Stock without designation as to series and may be reissued
as part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors as permitted by the Articles of
Incorporation or as otherwise permitted under Florida Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (2) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made
<PAGE>
ratably on the Series A Preferred Stock and all such other parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. If the Corporation
shall at any time after May 28, 1995, pay any dividend on Common Stock payable
in shares of Common Stock or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the shares of Series A
Preferred Stock shall at the same time be similarly exchanged for or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash or
any other property, as the case may be, into which or for which each share of
Common Stock is changed or exchanged. If the Corporation shall at any time after
May 28, 1995, pay any dividend on Common Stock payable in shares of Common Stock
or effect a subdivision or combination of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding up) to all other series
of the Corporation's preferred stock except any series that specifically
provides that such series shall rank pari passu with or junior to the Series A
Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
<PAGE>
(c) At a special meeting of the Board of Directors of Darden Restaurants,
Inc., held on May 15, 1995, where all the directors of the Corporation
participated by conference telephone by means of which all persons participating
in the meeting could hear each other at the same time, the resolution providing
for the adoption of new Section (4) of Article III of the Articles of
Incorporation of Darden Restaurants, Inc. was unanimously approved and adopted
without shareholder action, and no shareholder action was required therefor
under Section 607.0602, Florida Statutes and Section (2) of Article III of the
Articles of Incorporation.
IN WITNESS WHEREOF, the undersigned Chairman of the Board/Vice
Chairman/President/Vice President and Secretary/Assistant Secretary of the
Corporation have executed these Articles of Amendment to its Articles of
Incorporation this ____ day of May, 1995.
DARDEN RESTAURANTS, INC.
By:
[Title]
Attest:
[Title]
(Corporate Seal)
<PAGE>
Exhibit B
[Form of Right Certificate]
No. R-_________ _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF ____________, 2005 AND THE DATE ON WHICH
THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET
FORTH IN THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BE NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHT
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(d) OF SUCH AGREEMENT.](2)
RIGHT CERTIFICATE
DARDEN RESTAURANTS, INC.
This Right Certificate certifies that ___________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the holder (upon the terms and subject to the conditions set
forth in the Rights Agreement dated as of May 28, 1995 (the "Rights Agreement")
between Darden Restaurants, Inc., a Florida corporation (the "Company"), and
Norwest Bank Minnesota, N.A. (the "Rights Agent")) to purchase from the Company,
at any time after the Distribution Date and prior to the Expiration Date, ______
one-hundredth[s] of a fully paid, nonassessable share of Series A Participating
Cumulative Preferred Stock (the "Preferred Stock") of the Company at a purchase
price of $_____ per one one-hundredth of a share (the "Purchase Price"), payable
in lawful money of the United States of America, upon surrender of this Right
Certificate, with the form of election to purchase and related certificate duly
executed, and payment of the Purchase Price at an office of the Rights Agent
designated for such purpose.
- ---------------------
(2) If applicable, insert this portion of the legend and delete the preceding
sentence.
<PAGE>
Terms used herein and not otherwise defined herein have the meanings
assigned to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and the number
and kind of shares issuable upon exercise of each Right) and the Purchase Price
set forth above are as of _____________, 1995, and may have been or in the
future be adjusted as a result of the occurrence of certain events, as more
fully provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced
by this Right Certificate are beneficially owned by (a) an Acquiring Person or
an Associate or Affiliate of an Acquiring Person, (b) a transferee of an
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such, or (c) under certain circumstances
specified in the Rights Agreement, a transferee of an Acquiring Person (or any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such, such Rights shall become null and void,
and no holder hereof shall have any right with respect to such Rights from and
after the occurrence of such Section 11(a)(ii) Event.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Upon surrender at the principal office or offices of the Rights Agent
designated for such purpose and subject to the terms and conditions set forth in
the Rights Agreement, any Rights Certificate or Certificates may be transferred
or exchanged for another Rights Certificate or Certificates evidencing a like
number of Rights as the Rights Certificate or Certificates surrendered.
Subject to the provisions of the Rights Agreement, the Board of Directors
of the Company may, at its option,
(a) at any time prior to the earlier of (i) the close of business on
the tenth day after the Stock Acquisition Date (or such later date as a
majority of the Continuing Directors may designate prior to such time as
the Rights are no longer redeemable) and (ii) the Final Expiration Date,
redeem all, but not less than all, the then outstanding Rights at a
redemption price of $.01 per Right; or
<PAGE>
(b) at any time after any Person becomes an Acquiring Person (but
before such Person becomes the Beneficial Owner of 50% or more of the
shares of Common Stock then outstanding), exchange all or part of the then
outstanding Rights (other than Rights held by the Acquiring Person and
certain related Persons) for shares of Common Stock at an exchange ratio of
one share of Common Stock per Right. If the Rights shall be exchanged in
part, the holder of this Right Certificate shall be entitled to receive
upon surrender hereof another Right Certificate or Certificates for the
number of whole Rights not exchanged.
No fractional shares of Preferred Stock are required to be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Certificates for
the number of whole Rights not exercised.
No holder of this Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of capital stock
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal by its authorized officers.
Dated:___________________.
DARDEN RESTAURANTS, INC.
By
Title:
[SEAL]
Attest:
- -----------------------------
Secretary
Countersigned:
NORWEST BANK MINNESOTA, N.A.,
as Rights Agent
By:
-----------------------
Authorized Signature
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED,
-----------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated: , 1995
----------------
------------------------------------
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate are are not
being assigned by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
did did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: , 1995
-------------- ----------------------------------
Signature
----------------
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
----------------
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise
Rights represented by the Right Certificate.)
To:
--------------------------
The undersigned hereby irrevocably elects to exercise
Rights represented by this Right Certificate to purchase shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such securities be issued in the name
of and delivered to:
Please insert social security
or other identifying number
-----------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number
-----------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated: , 1995
--------------
------------------------------------
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate are are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
did did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: , 1995
-------------- ---------------------------------------
Signature
----------------
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
----------------
<PAGE>
Exhibit C
DARDEN RESTAURANTS, INC.
SHAREHOLDER RIGHTS PLAN
Summary of Terms
Form of Security: The Board of Directors has declared a dividend,
payable on May 15, 1995, to the holders of record of the
Company's Common Stock on that date, of preferred stock
purchase rights (each a "Right" and collectively, the
"Rights") in an amount such that one Right is payable with
respect to each outstanding share of the Company's Common
Stock outstanding as of the close of business on May 28,
1995.
Transfer: Prior to the Distribution Date (3), the Rights will be
evidenced by the certificates for and will be transferred
with the Common Stock, and the registered holders of the
Common Stock will be deemed to be the registered holders of
the Rights.
After the Distribution Date, the Rights Agent will mail
separate certificates evidencing the Rights to each record
holder of the Common Stock as of the close of business on
the Distribution Date, and thereafter the Rights will be
transferable separately from the Common Stock.
Exercise: Prior to the Distribution Date, the Rights will not be
exercisable.
After the Distribution Date, each Right will be exercisable
to purchase, for $62.50 (the "Purchase Price"), one
one-hundredth of a share of Series A
- ---------------------
(3) Distribution Date means the earlier of:
(1) the 10th day after public announcement that at any time after May 28,
1995, any person or group has become the beneficial owner of 20% or
more of the Company's Common Stock and
(2) the 10th business day after the date of the commencement of a tender
or exchange offer by any person which would, if consummated, result in
such person becoming the beneficial owner of 20% or more of the
Company's Common Stock,
in each case, subject to extension by a majority of the Directors not affiliated
with the Acquiring Person.
<PAGE>
Participating Cumulative Preferred Stock, without par value,
of the Company.
Flip-In: If after May 28, 1995, any person or group (an
"Acquiring Person") becomes the beneficial owner of 20% or
more of the Company's Common Stock, then each Right (other
than Rights beneficially owned by the Acquiring Person and
certain affiliated persons) will entitle the holder to
purchase, for the Purchase Price, a number of shares of the
Company's Common Stock having a market value of twice the
Purchase Price.
Flip-Over: If, after any person has become an Acquiring Person,
(1) the Company is involved in a merger or other business
combination in which the Company is not the surviving
corporation or its Common Stock is exchanged for other
securities or assets or (2) the Company and/or one or more
of its subsidiaries sell or otherwise transfer assets or
earning power aggregating more than 50% of the assets or
earning power of the Company and its subsidiaries, taken as
a whole, then each Right will entitle the holder to
purchase, for the Purchase Price, a number of shares of
common stock of the other party to such business combination
or sale (or in certain circumstances, an affiliate) having a
market value of twice the Purchase Price.
Exchange: At any time after any person has become an Acquiring
Person (but before any person becomes the beneficial owner
of 50% or more of the Company's Common Stock), a majority of
the Directors not affiliated with the Acquiring Person may
exchange all or part of the Rights (other than the Rights
beneficially owned by the Acquiring Person and certain
affiliated persons) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right.
Redemption: The Board of Directors may redeem all of the Rights
at a price of $.01 per Right at any time prior to the close
of business on the 10th day after public announcement that
any person has become an Acquiring Person (subject to
extension by a
<PAGE>
majority of the Directors not affiliated with the Acquiring
Person).
After any person has become an Acquiring Person, the Rights
may be redeemed only with the approval of a majority of the
Directors not affiliated with the Acquiring Person.
Expiration: The Rights will expire on May 24, 2005, unless
earlier exchanged or redeemed.
Amendments: Prior to the Distribution Date, the Rights Agreement
may be amended in any respect.
After the Distribution Date, the Rights Agreement may be
amended in any respect that does not adversely affect the
Rights holders (other than any Acquiring Person and certain
affiliated persons).
After any person has become an Acquiring Person, the Rights
Agreement may be amended only with the approval of a
majority of the Directors not affiliated with the Acquiring
Person.
Voting Rights: Rights holders have no rights as a shareholder of
the Company, including the right to vote and to receive
dividends.
Antidilution
Provisions: The Rights Agreement includes antidilution provisions
designed to prevent efforts to diminish the efficacy of the
Rights.
Taxes: While the dividend of the Rights will not be taxable to
shareholders or to the Company, shareholders of the Company
may, depending upon the circumstances, recognize taxable
income if the Rights become exercisable as set forth above.
-------------------
A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated effective as of the 29th
day of September, 1997 (the "Assignment"), by and between NORWEST BANK
MINNESOTA, N.A., a national banking association (the "Assignor"), FIRST UNION
NATIONAL BANK, a national banking association (the "Assignee"), and DARDEN
RESTAURANTS, INC., a Florida corporation (the "Company"), recites and provides:
RECITALS
A. By Rights Agreement dated as of May 28, 1995 (the "Rights Agreement"),
between the Assignor and the Company, the Company appointed the Assignor to
serve as agent (the "Rights Agent") in connection with certain preferred stock
purchase rights payable to holders of record of the Company's common stock on
May 15, 1995, subject to terms and conditions more particularly described in the
Rights Agreement.
B. Pursuant to Section 21 of the Rights Agreement, the Company now desires
to remove the Assignor as Rights Agent and to appoint the Assignee as successor
Rights Agent and, accordingly, the Assignor desires to assign its rights and
interest in the Rights Agreement to the Assignee, and the Assignee desires to
assume the Assignor's obligations under the Rights Agreement, all upon the terms
and conditions set forth below.
ASSIGNMENT AND ASSUMPTION AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual agreements contained
herein, the Assignor, the Assignee and the Company agree as follows:
1. Removal; Appointment. The Company hereby removes the Assignor and
appoints the Assignee as Rights Agent under the Rights Agreement.
2. Assignment. The Assignor hereby transfers and assigns to the Assignee
all of the Assignor's rights and interest in the Rights Agreement and delegates
and assigns to the Assignee all of the Assignor's duties and obligations under
the Rights Agreement.
3. Assumption. The Assignee hereby accepts the foregoing assignment and
delegation and agrees to assume and fulfill, perform and observe all of the
terms, conditions and obligations set forth in the Rights Agreement as fully and
as completely as though the Assignee were an originally named party to the
Rights Agreement.
4. Consent; Release. The Company hereby consents to the foregoing
assignment and delegation by the Assignor to the Assignee and to the foregoing
assumption by the Assignee. The Company hereby remises, releases and forever
discharges (i) the Assignor from any and all liability and obligation under the
Rights Agreement arising out of events occurring from and after the effective
date of this
<PAGE>
Assignment and (ii) the Assignee from any and all liability and obligation under
the Rights Agreement arising out of events occurring before the effective date
of this Agreement.
5. Waiver of Notices. The Assignor, the Assignee and the Company waive all
notices required by Section 21 of the Rights Agreement in connection with the
removal of the Assignor and appointment of the Assignee as Rights Agent,
including but not limited to notices to the Assignor in its capacities as Rights
Agent and as the former transfer agent of the Company's common stock, and
notices to the Assignee in its capacities as successor Rights Agent and
successor transfer agent of the Company's common stock.
6. Successors and Assigns. The terms and conditions of this Assignment and
Assumption Agreement shall be binding upon and shall inure to the benefit of the
Assignor, the Assignee, the Company and their respective successors and assigns.
7. Further Assurances. The Assignor, the Assignee and the Company covenant
and agree to execute and deliver or cause to be executed and delivered, and to
do or make, or cause to be done or made, upon the request of any of them, any
and all instruments, papers, deeds, acts or things, supplemental, confirmatory
or otherwise, as may be required for the purpose of effecting the purposes and
intent of this instrument.
8. Governing Law. This Assignment and Assumption Agreement shall be
governed by and shall be construed according to the laws of the State of
Florida.
9. Counterparts. To facilitate execution, this Assignment may be executed
utilizing counterpart signature pages, in which case, the signatures of all
parties on multiple counterparts will constitute a single agreement.
IN WITNESS WHEREOF, the Assignor, the Assignee and the Company have caused
this Assignment to be executed on their behalf by their duly authorized
representatives effective as of the date first above written.
<PAGE>
SIGNATURES
ASSIGNOR:
Norwest Bank Minnesota, N.A., a national
banking association
By: /s/ Kenneth P. Swanson
Name: Kenneth P. Swanson
Title: Assistant Vice President
ASSIGNEE:
First Union National Bank, a national
banking association
By: /s/ Patrick J. Edwards
Name: Patrick J. Edwards
Title: Vice President
COMPANY:
Darden Restaurants, Inc., a Florida
corporation
By: /s/ Clifford L. Whitehill
Name: Clifford L. Whitehill
Title: Senior Vice President
<PAGE>
STATE OF MINNESOTA,
COUNTY OF HENNEPIN, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of
September, 1997, by Kenneth P. Swanson, as Assistant Vice President of Norwest
Bank Minnesota, N.A., a national banking association, on behalf of the banking
association.
My Commission Expires: January 31, 2000
/s/ Darren Larson
Notary Public
STATE OF NORTH CAROLINA,
COUNTY OF MECKLENBURG, to-wit:
The foregoing instrument was acknowledged before me this 22nd day of
September, 1997, by Patrick J. Edwards, as Vice President of First Union
National Bank, a national banking association, on behalf of the banking
association.
My Commission Expires: 1/2/99
/s/ Delores M. Harris
Notary Public
STATE OF FLORIDA,
COUNTY OF ORANGE, to-wit:
The foregoing instrument was acknowledged before me this 1st day of
October, 1997, by Clifford L. Whitehill, as Senior Vice President of Darden
Restaurants, Inc., a Florida corporation, on behalf of the corporation.
My Commission Expires: July 13, 2001
/s/ James O. McIntosh
Notary Public
EXHIBIT 10(a)
STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995
<PAGE>
EXHIBIT 10(a)
DARDEN RESTAURANTS, INC.
STOCK OPTION AND LONG-TERM INCENTIVE PLAN OF 1995
(as amended May 23, 1996, June 17, 1997, and June 26, 1998)
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 before you can exercise
such option 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 as an
employee for the remaining years of the option before making the
decision whether or not to buy shares of the Company. Thereafter, the
rights under the option will lapse and cannot be used by the employee.
Generally 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
<PAGE>
Committee shall have authority to adopt rules and regulations for 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.
<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, subject that SRO's granted to
directors pursuant to the Stock Plan for Directors (as amended) shall
also be included within such 3,000,000 shares of Common Stock. 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 from the date of grant no sooner than in increments of
one-third after two years, one-third after three years and one-third
after four years, subject to the Participant's continued employment
with the Company and in accordance with other terms and conditions
prescribed by the Committee which may specify a longer period before
an option may be exercised.
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.
<PAGE>
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;
(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
<PAGE>
testament or (ii) by the applicable laws of descent and distribution, or
(iii) by gift by a Participant who is subject to Section 16 of the 1934 Act
and is eligible for retirement (age 55 with 10 years of service) to a
"family member" defined by the Committee. Such Stock Options shall be
exercised during the Participant's lifetime only by the Participant or his
or her guardian or legal representative or the donee family member. After
death, such Stock Option may be exercised in accordance with Section 13B.
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.
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.
<PAGE>
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 (i) by the
person designated in such Participant's last will and testament or,
(ii) in the absence of such designation, by the Participant's estate,
or (iii) by the donee of a Stock Option made pursuant to Section 10
(iii), to the full extent that such Stock Option could have been
exercised by such Participant immediately prior to death. Further,
with 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).
<PAGE>
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.
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:
<PAGE>
Darden Restaurants, Inc.
5900 Lake Ellenor Dr.
Orlando, FL 32809
Attn: General Counsel
Effective May 28, 1995
EXHIBIT 10(f)
STOCK PLAN FOR DIRECTORS
<PAGE>
EXHIBIT 10(f)
DARDEN RESTAURANTS, INC.
STOCK PLAN FOR DIRECTORS
(AS AMENDED DECEMBER 10, 1996
AND JUNE 26, 1998)
THIS DOCUMENT, DATED SEPTEMBER 14, 1995 AND AMENDED DECEMBER 10, 1996,
CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
Additional information about this Plan and its administrators may be obtained
without charge by writing to the Supervisor, Stock Compensation Plans, Darden
Restaurants, Inc., Compensation Department, P.O. Box 593330, Orlando, FL
32859-3330, or by calling (407)245-4293.
<PAGE>
DARDEN RESTAURANTS, INC.
STOCK PLAN FOR DIRECTORS
1. Purpose. The purpose of the Darden Restaurants, Inc. Stock Plan (the
"Plan") for Directors is to increase the proprietary interest of Directors in
Darden Restaurants, Inc. (the "Company") by granting them non-qualified options
to purchase Common Stock of the Company ("Common Stock") and shares of Common
Stock subject to the restrictions described herein ("Restricted Stock") that
will promote long-term shareholder value through ownership of Common Stock.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company. Grants of options to
purchase Common Stock under the Plan and the amount and nature of the awards of
Restricted Stock shall be made automatically or by the Board of Directors as
provided in Section 4. However, the Compensation Committee shall have full
authority to interpret the Plan, to promulgate such rules and regulations with
respect to the Plan as it deems desirable and to make all other determinations
necessary or appropriate for the administration of the Plan, and such
determinations shall be final and binding upon all persons having an interest in
the Plan.
3. Participation. Each person who is a Director of the Company or any of
its subsidiaries at the date of each grant or award shall be eligible to
participate in the Plan. A "Director" for purposes of this Plan is defined as a
person who has been elected to the Board of Directors of the Company and does
not have an employee status with the Company.
4. Awards under the Plan. The number of shares of Common Stock authorized
for grants under the Plan is 250,000 shares plus additional shares of Common
Stock held as Treasury Shares pursuant to Section 4(c).
(a) Non-qualified Stock Options
(i) Grant of Options. Each Director on the effective date of the Plan
shall be awarded an option (an "Option") to purchase 12,500 shares of
Common Stock. Each person who becomes a Director for the first time after
the effective date of the Plan also shall be awarded an Option to purchase
12,500 shares of Common Stock, effective as of the date such person becomes
a Director. In addition, at the close of business on each annual
shareholders' meeting, each Director elected or re-elected to the Board
shall be granted an Option to purchase 3000 shares of Common Stock. The
written agreement evidencing such Options granted under the Plan shall be
dated as of the applicable date of each grant. Each Director receiving an
Option grant shall execute and return a copy of the agreement to the
Company. Except for the annual Option grant of 3000 shares of Common Stock
and "SRO's", as provided in Section 4(c), any shares issued pursuant to
Options may consist, in whole or in part, of authorized but unissued shares
of 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. All
Options granted under the Plan shall be non-qualified stock options
governed by Section 83 of the Internal Revenue Code of 1986, as amended.
(ii) Option Exercise Price. The per share price to be paid by the
Director at the time an Option is exercised shall be 100% of the Fair
Market Value of the Common Stock on the date of grant. "Fair Market Value"
shall equal the mean of the high and low price for the Common Stock on the
New York Stock Exchange on the relevant date or, if the New York Stock
Exchange is closed on that date, on the last preceding date on which the
Exchange was open for trading.
(iii) Term of Option. Each Option shall expire ten (10) years from the
date of grant.
(iv) Exercise of Option. Options shall be exercisable only after three
years from the date the Option is granted except that "SRO's" may be
exercised after a period of six months or longer if so determined by the
Board of Directors at the date of the grant of the SRO.
<PAGE>
(v) Method of Exercise and Tax Obligations. Each notice of exercise
shall be accompanied by the full purchase price of the shares being
purchased. Such payment may be made in cash, check, shares of Common Stock
valued using the Fair Market Value as of the exercise date or a combination
thereof. The Company may also require payment of the amount of any federal,
state or local withholding tax attributable to the exercise of an Option or
the delivery of shares of Common Stock upon lapse of the Restricted Period
described below.
(vi) Non-transferability. An Option shall be non-assignable and
non-transferable by a Director other than by (i) the Director's last will
and testament, or (ii) the applicable laws of descent and distribution, or
(iii) by gift by a Director to a "family member" defined by the
Compensation Committee. Such Option may be exercised only by such Director
or his or her guardian or legal representative or the donee family member.
A Director shall forfeit any Option assigned or transferred, voluntarily or
involuntarily, other than as permitted under this subsection.
(b) Restricted Stock.
(i) Awards. Each Director on the effective date of the Plan shall be
granted an award of 3,000 shares of Common Stock, restricted as described
below ("Restricted Stock"). At the close of business on each successive
annual stockholders' meeting date thereafter, each Director then elected or
re-elected to the Board shall be granted an award of 3,000 shares of
Restricted Stock.
(ii) Restricted Period. The restrictions set forth shall apply from
the date of each grant until the earlier of the following: (1) the last day
on which the New York Stock Exchange is open for trading immediately prior
to the annual stockholders meeting next succeeding the grant of such
Restricted Stock, or (2) completion of the Director's term of service on
the Board of Directors by retirement, death or disability (the "Restricted
Period"); provided, however, that for the first grant of Restricted Stock
made hereunder, the annual stockholders meeting next succeeding the grant
shall be deemed to be the annual stockholders meeting held in September,
1996. Until the expiration of the Restricted Period, none of the Restricted
Stock may be sold, transferred, assigned, pledged or otherwise encumbered
or disposed of, and all of the Restricted Stock shall be forfeited and all
further rights of the Director to or with respect to such Restricted Stock
shall terminate without any obligation on the part of the Company unless
the Director has remained a Director throughout the Restricted Period
applicable to such Restricted Stock.
(iii) Other Terms and Conditions. Any shares of Restricted Stock
granted hereunder may be evidenced in such manner as the Committee deems
appropriate, including, without limitation, book-entry registration or
issuance of stock certificates, and may be held in escrow. If certificated,
each such certificate shall bear a legend giving notice of the
restrictions. Each Director must also endorse in blank and return to the
Company a stock power for each grant of Restricted Stock. During the
Restricted Period, each Director shall have all the rights and privileges
of a shareholder with respect to the Restricted Stock, including the right
to vote the shares and to receive dividends thereon. At the expiration of
the Restricted Period, a stock certificate free of all restrictions for the
number of shares of Restricted Stock so registered shall be delivered to
the Director or his or her estate.
(c) "SRO's".
In addition to the Options for 12,500 shares and the annual grant of 3000
shares of Common Stock described in Section 4(a)(i) above, the Board of
Directors also shall grant SRO Options to one or more of the Directors pursuant
to the annual decision of each Director in lieu of all or part of an annual
retainer or for directors fees for attendance at Board or Committee meetings or
other compensation for services as a Director. Such grants shall be made on the
last day of each fiscal quarter of the Company for compensation accrued during
such quarter and be valued by the same formula as used by the Compensation
Committee for awards of SRO's to employees of the Company. All SRO's and the
annual Option of 3000 shares of Common Stock granted under this Plan are
<PAGE>
subject to the requirement that the exercise of any "SRO" or of the annual
Option of 3000 shares shall be satisfied and effected solely from Common Stock
held in the Company's treasury.
(d) Change of Control.
The Options granted hereunder shall become exercisable and the restrictions
on the Restricted Stock shall lapse upon the occurrence of a "Change of
Control." Each of the following shall constitute a "Change of Control":
(a) 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;
(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 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.
5. Adjustments. In the event of a stock dividend or stock split, or
combination or other reduction in the number of issued shares of Common Stock, a
merger, consolidation, reorganization, recapitalization, sale or exchange of
substantially all assets or dissolution of the Company, or whenever the
Committee determines such adjustments are appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under this Plan, then appropriate adjustments shall be made in the shares and
number of shares of Common Stock subject to and authorized by this Plan and the
number of Options and Restricted Stock previously granted hereunder and the
exercise price of Options previously granted hereunder, in order to prevent
dilution or enlargement of the rights of the Directors under the Plan.
6. Amendment of the Plan. The Board of Directors may suspend or terminate
the Plan or any portion thereof at any time, and the Board of Directors may
amend the Plan from time to time as may be deemed to be in the best interests of
the Company; provided, however, that no such amendment, alteration or
discontinuation shall be made (a) that would impair the rights of a Director
with respect to Options and Restricted Stock theretofore awarded, without such
person's consent, or (b) without the approval of the stockholders, (i) if such
approval is necessary to comply with any legal, tax or statutory requirement,
including any approval requirement which is a prerequisite for exemptive relief
from Section 16 of the Securities Exchange Act of 1934 (the "1934 Act") or (ii)
would materially change the definition of persons eligible to receive awards
under this Plan, or (c) unless such amendment is necessary to comply with
changes in the Internal Revenue Code of 1986, as amended, or the Employment
Retirement Income Security Act of 1974, as amended, or rules promulgated
thereunder.
7. Miscellaneous Provisions. Neither the Plan nor any action taken
hereunder shall be construed as giving any Director any right to be nominated
for re-election to the Board. The Plan shall be governed by the laws of the
state of Florida.
8. Effective Date and Duration of Plan. The Plan shall be deemed effective
as of the effective date of the distribution of Common Stock to the holders of
General Mills, Inc. Common Stock. No awards shall be made hereunder after
September 30, 2000.
9. Section 16. With respect to persons subject to Section 16 of the 1934
Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
<PAGE>
Effective May 28, 1995
EXHIBIT 10(g)
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
<PAGE>
EXHIBIT 10(g)
DARDEN RESTAURANTS, INC.
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(as amended June 17, 1997)
<PAGE>
DARDEN RESTAURANTS, INC.
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
PART I
GENERAL PROVISIONS
A. OBJECTIVE AND SUMMARY OF THE PLAN
It is the intent of the Company to provide a compensation program for its
non-employee directors which will attract and retain highly qualified
individuals to serve in this capacity. This program shall be called the
"Darden Restaurants, Inc. Compensation Plan for Non-Employee Directors
(hereinafter the "Plan"). "Compensation" shall mean the annual retainer and
meeting fees for each regular or special Board of Directors meeting and any
committee meeting attended. Such Compensation may be received in any
combination of the following:
1. Cash
2. Deferred Cash
3. Darden Restaurants, Inc. Common Stock ("Common Stock")
The combination of alternatives for each non-employee director shall equal
the aggregate Compensation earned by each non-employee director. Such
Compensation shall be distributed as outlined in Parts II, III, and IV
hereof.
B. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (hereinafter
the "Committee") of the Board of Directors. The Committee shall have full
authority and complete discretion to interpret the Plan, to promulgate such
rules and regulations with respect to the Plan as it deems desirable and to
make all other determinations necessary or appropriate for the
administration of the Plan, and such determinations shall be final and
binding upon all persons having an interest in the Plan.
C. AWARDS UNDER THE PLAN
The number of shares of Company Common Stock authorized to be issued under
Part IV hereof is 50,000.
D. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be deemed to be effective as of the effective date of the
distribution of Common Stock to the holders of General Mills, Inc. common
stock. No awards shall be made hereunder after September 30, 2000.
E. AMENDMENT OF THE PLAN
The Board of Directors may suspend or terminate the Plan or any portion
thereof at any time, and the Board of Directors may amend the Plan from
time to time as may be deemed to be in the best interests of the Company;
provided, however, that no such amendment, suspension or termination shall
be made (a) which would impair the rights of a non-employee director with
respect to Compensation theretofore earned, without such person's consent,
or (b) without the approval of the stockholders, which would materially
increase the maximum number of shares subject to this Plan, materially
increase the maximum number of shares issuable to any non-employee director
under this Plan, or materially change the definition of persons eligible to
receive awards under this Plan, or (c) if the Plan has been amended within
the preceding six months, unless such amendment is necessary to comply with
changes in the Internal Revenue Code of 1986, as amended, or the Employee
Retirement Income Security Act of 1974, as amended, or rules promulgated
thereunder.
<PAGE>
F. CHANGE OF CONTROL
After a "Change in Control," no amendments, suspension to or action to
terminate the Plan may be made which would affect Compensation earned prior
to such amendments, suspensions or termination without the written consent
of a majority of participants determined as of the day before a "Change in
Control." Any decision or interpretation adopted by the Committee shall be
final and conclusive. A "Change in Control" shall mean the occurrence of
any of the following events:
1. if any person (including a group as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934) becomes, directly or indirectly, the
beneficial owner of twenty percent (20%) or more of the shares of the
Company entitled to vote for the election of directors;
2. as a result of or in connection with any cash tender offer, exchange
offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who
were directors of the Company just prior to such event shall cease to
constitute a majority of the Company's Board of Directors; or
3. the stockholders of the Company approve an agreement providing for a
transaction in which the Company will cease to be an independent
publicly-owned corporation or a sale or other disposition of all or
substantially all of the assets of the Company occurs.
G. PARTICIPATION
1. Each non-employee director of Darden Restaurants, Inc., may elect by
written notice to the Company on or before each annual stockholder
meeting, to participate in the Compensation alternative provisions of
the Plan. Any combination of the alternatives--Cash, Deferred Cash
and/or Company Common Stock--may be elected, provided the aggregate of
the alternatives elected equals one hundred percent of the
non-employee director's Compensation.
2. The election shall remain in effect for a one-year period which shall
begin the day of the annual stockholders meeting in September and
terminate the day before the succeeding annual stockholders meeting
(hereinafter "Plan Year"); provided, however, that the first election
hereunder shall remain effective until the annual stockholders meeting
to be held in September 1996. If a non-employee director fails to
submit an election prior to the commencement of a new Plan Year, the
election from the prior year shall remain in effect.
3. The Plan Year shall include four Plan Quarters. Plan Quarters shall
correspond to the Company's fiscal quarters.
4. A director elected to the Board after the September Board meeting may
elect, by written notice to the Company before such director's term
begins, to participate in the Compensation alternatives for the
remainder of that Plan Year, and elections for succeeding years shall
be on the same basis as other directors.
5. As soon as possible after the end of each Plan Year, the Company shall
supply to each participant an account statement of participation under
the Plan.
6. Unless otherwise notified, all notices under this Plan shall be sent
in writing to the Company, attention the Supervisor, Management Stock
Plans, 5900 Lake Ellenor Dr., Orlando, FL 32809. All correspondence to
the participants shall be sent to the address which is their recorded
address as listed on the election forms.
<PAGE>
PART II
CASH COMPENSATION PROVISIONS
A. Each non-employee director who elects to participate under the Cash
Compensation Provision of the Plan shall be paid all or the specified
percentage of his or her Compensation for the Plan Year in cash, and such
cash payment shall be made as of the end of each Plan Quarter.
B. If a participant dies prior to payment in full of all amounts due under the
Plan, the balance of the amount due shall be payable in full to such
participant's designated beneficiary, or, if none, the estate as soon as
possible following death.
PART III
DEFERRED CASH COMPENSATION PROVISION
A. Each non-employee director may elect to have all or a specified percentage
of his or her Compensation for the Plan Year deferred until the participant
ceases to be a director.
B. For each director who has made this Deferred Cash election, the Company
shall establish a deferred compensation account and shall credit such
account monthly for the Compensation due. Interest shall be credited to
each such account monthly at the rate or rates of return of funds or
portfolios established under a qualified benefit plan maintained by the
Company which the Committee or the Minor Amendment Committee of the
Committee (the "Minor Amendment Committee"), or its delegate, in its
discretion, may from time to time establish.
C. Distribution of the participant's deferred compensation account shall be as
follows:
1. at the time, and in the form of payment, elected by the participant at
the time of deferral, provided that payments will not commence until
the participant ceases to be a director; or
2. in the absence of an election at the time of deferral, in ten
substantially equal annual installments beginning on January 1 of each
year following the year in which the participant ceases to be a
director; or
3. if a participant makes a written request before payments have
commenced, and such request is approved by the Minor Amendment
Committee, payments may be made in some other lesser number of
substantially equal annual installments or in a single sum paid on a
date prior to the otherwise scheduled payment commencement date.
Each installment or lump sum payment shall also include interest on the
outstanding account balance to the first of the month in which the
distribution occurs. The method of distribution approved by the Committee
shall be irrevocable.
D. In the event of a severe financial hardship, a participant may apply to
receive a distribution of his or her account earlier than initially
elected. The Senior Vice President, Personnel will review the request and
make a recommendation to the Minor Amendment Committee which, by majority
action, shall either approve or deny the request. The determination made by
the Committee will be final and binding on all parties. If the request is
granted, the Committee will accelerate payments only to the extent
reasonably necessary to alleviate the financial hardship.
E. If a participant dies prior to payment in full of all amounts due under the
Plan, the balance of the amount due shall be payable in full to the
participant's designated beneficiary, or, if none, the estate as soon as
possible following death.
<PAGE>
F. Notwithstanding any other provision of this Plan to the contrary, the
Committee, by majority approval, may, in its sole discretion, direct that
payments be made before such payments are otherwise due if, for any reason
(including, but not limited to, a change in the tax or revenue laws of the
United States of America, a published ruling or similar announcement issued
by the Internal Revenue Service, a regulation issued by the Secretary of
the Treasury or his or her delegate, or a decision by a court of competent
jurisdiction involving a participant or beneficiary), it believes that a
participant or beneficiary has recognized or will recognize income for
federal income tax purposes with respect to amounts that are or will be
payable to him under the Plan before they are paid to him. In making this
determination, the Committee shall take into account the hardship that
would be imposed on the participant or beneficiary by the payment of
federal income taxes under such circumstances.
PART IV
GMI COMMON STOCK PROVISIONS
A. Each participant may elect to receive all or a specified percentage of his
or her Compensation in shares of Darden Restaurants, Inc. Common Stock,
which will be issued at the end of each Plan Quarter.
B. The Company shall ensure that an adequate number of Darden Restaurants,
Inc. shares of Common Stock are available for distribution to those
participants making this election.
C. Only whole number of shares will be issued, with any fractional share
amounts paid in cash.
D. For purposes of computing the number of shares earned each Plan Quarter,
the value of each share shall be equal to the mean of the high and low
price of shares of Darden Restaurants, Inc. Common Stock on the New York
Stock Exchange on the third Business Day preceding the last day of each
Plan Quarter. For the purposes of this Plan, "Business Day" shall mean a
day on which the New York Stock Exchange is open for trading.
E. If a participant dies prior to payment in full of all amounts due under the
Plan, the balance of the amount due shall be payable in full to the
participant's designated beneficiary, or, if none, to the participant's
estate, in cash, as soon as possible following death.
Effective May 28, 1995
EXHIBIT 12
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES
<PAGE>
EXHIBIT 12
DARDEN RESTAURANTS, INC.
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES
(HISTORICAL AND PRO FORMA)
COMPUTATION OF RATIO OF HISTORICAL CONSOLIDATED EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
- --------------------------------------------------------------------------------------------------------------------
MAY 31, MAY 25, MAY 26, MAY 28, MAY 29,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
($ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consolidated Earnings from Operations before
Restructuring and Asset Impairment Charges,
Cumulative Effect of Accounting Changes and Income
Taxes.............................................. $ 153,672 $ 75,401 $ 188,718 $ 164,446 $ 193,695
Plus Fixed Charges................................... 38,569 39,582 40,822 42,685 38,304
Less Capitalized Interest............................ (1,018) (739) (2,007) (4,327) (4,087)
--------- --------- --------- --------- ---------
Consolidated Earnings from Operations before
Restructuring and Asset Impairment Charges,
Cumulative Effect of Accounting Changes and Income
Taxes Available to Cover Fixed Charges............. $ 191,223 $ 114,244 $ 227,533 $ 202,804 $ 227,912
========= ========= ========= ========= =========
Ratio of Consolidated Earnings to Fixed Charges...... 4.96 2.89 5.57 4.75 5.95
========= ========= ========= ========= =========
COMPUTATION OF RATIO OF PRO FORMA CONSOLIDATED EARNINGS TO FIXED CHARGES
<CAPTION>
FISCAL YEAR ENDED
- --------------------------------------------------------------------------------------------------------------------
MAY 31, MAY 25, MAY 26, MAY 28, MAY 29,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
($ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Pro Forma Consolidated Earnings from Operations
before Restructuring and Asset Impairment Charges,
Cumulative Effect of Accounting Changes and Income
Taxes.............................................. $ 153,672 $ 75,401 $ 188,718 $ 159,076 $ 188,325
Plus Fixed Charges................................... 38,569 39,582 40,822 42,685 38,304
Less Capitalized Interest............................ (1,018) (739) (2,007) (4,327) (4,087)
--------- --------- --------- --------- ---------
Pro Forma Consolidated Earnings from Operations
before Restructuring and Asset Impairment Charges,
Cumulative Effect of Accounting Changes and Income
Taxes Available to Cover Fixed Charges............. $ 191,223 $ 114,244 $ 227,533 $ 197,434 $ 222,542
========= ========= ========= ========= =========
Ratio of Pro Forma Consolidated Earnings to Fixed
Charges............................................ 4.96 2.89 5.57 4.63 5.81
========= ========= ========= ========= =========
</TABLE>
For purposes of computing the ratio of consolidated earnings to fixed charges,
earnings represent consolidated pretax earnings from continuing operations plus
fixed charges (net of capitalized interest). Fixed charges represent interest
(whether expensed or capitalized) and 40 percent (the percent deemed
representative of the interest factor) of minimum restaurant lease payments for
continuing operations.
The pro forma adjustments to the historical consolidated statements of earnings
for each of the two fiscal years ended May 28, 1995 consist of (a) additional
annual general and administrative expenses of $5,370 which would have been
incurred by Darden as a separate publicly-held company, based on estimates by
the management of Darden and General Mills, and (b) the estimated income tax
benefit associated with the pro forma adjustment described in clause (a) above
at an assumed combined state and federal income tax rate of 39.8 percent.
EXHIBIT 13
PORTIONS OF 1998 ANNUAL REPORT TO STOCKHOLDERS
(INCORPORATED BY REFERENCE HEREIN)
<PAGE>
EXHIBIT 13
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 4
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Darden Restaurants, Inc. (Darden) was created as an independent publicly
held company in May 1995 through the spin-off of all of General Mills'
restaurant operations to its shareholders. Darden operates 1,151 Red Lobster,
Olive Garden and Bahama Breeze restaurants in the U.S. and Canada, and licenses
37 restaurants in Japan. All of the restaurants in the U.S. and Canada are
operated by the Company with no franchising.
This discussion should be read in conjunction with the business information
and the consolidated financial statements and related notes found elsewhere in
this report. Darden's fiscal year ends on the last Sunday in May.
REVENUES
Total revenues in 1998 (53 weeks) were $3.29 billion, a four percent
increase from 1997 (52 weeks). Total revenues in 1997 were $3.17 billion, a one
percent decrease from 1996 which included $16 million of sales from the
discontinued China Coast.(R)
COSTS AND EXPENSES
Food and beverage costs for 1998 were 33.0 percent of sales, a decrease of
1.0 percentage point from 1997 and 0.3 percentage point from 1996. The higher
level of food and beverage costs for 1997, as a percentage of sales, primarily
resulted from the repositioning strategy at Red Lobster, initiated in 1997's
second quarter, that lowered check averages and improved food. Check averages
and profit margins increased during 1998 primarily as a result of increased
sales of alcoholic beverages and high-margin food items.
Restaurant labor was higher for 1998 at 32.3 percent of sales against 32.1
percent for 1997, and 29.9 percent in 1996. The higher restaurant labor levels
in 1998 and 1997 were primarily due to wage rate inflation, additional training
initiatives to improve service at both Red Lobster and Olive Garden and higher
training costs to implement cost-saving systems at Olive Garden.
Restaurant expenses (primarily lease expenses, property taxes, utilities
and workers' compensation costs) decreased in 1998 to 14.7 percent of sales
compared to 15.2 percent in 1997 and 14.3 percent in 1996. The 1998 decrease
primarily resulted from increased sales levels generated by 1998's 53rd week.
Selling, general and administrative expenses declined in 1998 to 10.9
percent of sales compared to 11.4 percent in 1997 and 11.7 percent in 1996. The
1998 decline resulted from an overall decrease in marketing costs for the year.
Depreciation and amortization expense of 3.8 percent of sales in 1998
decreased from 4.3 percent in 1997 and 4.2 percent in 1996. The 1998 decrease
resulted from increased sales levels, restaurant closings and asset impairment
write-downs that occurred during 1997's fourth quarter. Interest expense of 0.6
percent of sales in 1998 decreased from 0.7 percent in 1997 and 1996.
INCOME FROM OPERATIONS
Pre-tax earnings increased by 104 percent in 1998 to $153.7 million,
compared to $75.4 million before restructuring and asset impairment charges in
1997, and $188.7 million before restructuring and asset impairment charges in
1996. The increase in 1998 was mainly attributable to substantially higher
earnings at Red Lobster resulting from actions during the second quarter of 1997
intended to enhance long-term performance through new menu items, bolder
flavors, lower prices and service improvements. Olive Garden also posted a solid
increase in earnings.
PROVISION FOR INCOME TAXES
The effective tax rate for 1998 was 33.8 percent compared to 27.9 percent
before restructuring and asset impairment charges in 1997, and 36.8 percent
before restructuring and asset impairment charges in 1996. The higher effective
tax rate in 1998 resulted from higher pre-tax earnings. The 33.8 percent rate in
1998 compared to 1997's 41.1 percent benefit after restructuring and asset
impairment charges, and 1996's 34.6 percent after restructuring and asset
impairment charges. The unusual effective rate in 1997 resulted from operating
losses combined with federal income tax credits, both of which created an income
tax benefit.
NET EARNINGS AND NET EARNINGS PER SHARE BEFORE RESTRUCTURING AND ASSET
IMPAIRMENT CHARGES
Net earnings for 1998 of $101.7 million or 67 cents per diluted share
increased 87 percent, compared to net earnings before restructuring and asset
impairment charges for 1997 of $54.3 million or 35 cents per diluted share. Net
earnings before restructuring and asset impairment charges for 1996 amounted to
$119.2 million or 74 cents per diluted share.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 5
NET EARNINGS (LOSS) AND NET EARNINGS (LOSS) PER SHARE
Net earnings for 1998 of $101.7 million (67 cents per diluted share)
compared with 1997's net loss after restructuring and asset impairment charges
of $(91.0) million (59 cents per diluted share) and 1996's net earnings after
restructuring and asset impairment charges of $74.4 million (46 cents per
diluted share).
During 1997, an after-tax restructuring and asset impairment charge of
$145.4 million (93 cents per diluted share) was taken in the fourth quarter
related to low-performing restaurant properties in the U.S. and Canada and other
long-lived assets including those restaurants that have been closed. The pre-tax
charge included approximately $160.7 million of non-cash charges primarily
related to the write-down of buildings and equipment to net realizable value,
and approximately $69.2 million of charges to be settled in cash related to
carrying costs of buildings and equipment prior to their disposal, lease buy-out
provisions, employee severance and other costs. Cash required to carry out these
activities is being provided by operations and the sale of closed properties
(see Note 3 of Notes to Consolidated Financial Statements).
During 1996, an after-tax restructuring and asset impairment charge of
$44.8 million (28 cents per diluted share) was taken in the first quarter to
close all China Coast operations. The pre-tax restructuring charge included
approximately $60.4 million of non-cash charges primarily related to the
write-down of buildings and equipment to net realizable value, and approximately
$14.6 million of charges to be settled in cash related to carrying costs of
buildings and equipment prior to their disposal, lease buy-out provisions,
employee severance and other costs. Cash required to carry out these
restructuring activities is being provided by operations and the sale of closed
properties (see Note 3 of Notes to Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to manage its business and its financial ratios to
maintain an investment grade bond rating, which allows access to financing at
reasonable costs. Currently, the Company's publicly issued long-term debt
carries "Baa1" (Moody's Investor Services, Inc.), "BBB" (Standard & Poor's
Corporation) and "BBB+" (Duff & Phelps Corporation) ratings. Our commercial
paper has ratings of "P-2" (Moody's), "A-2" (Standard & Poor's) and "D-2" (Duff
& Phelps).
Darden's long-term debt includes $150 million of 6.375 percent notes due in
2006, and $100 million of 7.125 percent debentures due in 2016. The effective
annual interest rate is 7.57 percent for the notes and 7.82 percent for the
debentures, after consideration of loan costs, issuance discounts and costs to
terminate interest-rate swaps established prior to the distribution from General
Mills.
Darden's long-term debt also includes a $66.9 million commercial bank loan
to the Company, with an outstanding principal balance of $62.0 million as of May
31, 1998, that is used to support two loans from the Company to the Employee
Stock Ownership Plan portion of the Darden Savings Plan (formerly the Profit
Sharing and Savings Plan for Darden Restaurants, Inc.) (the "ESOP"). During the
fiscal year ended May 25, 1997, the ESOP refinanced $50 million in existing
debt, which was previously guaranteed by the Company. The refinancing was
accomplished by the commercial bank's loan to the Company and a corresponding
loan from the Company to the ESOP.
Commercial paper is the primary source of short-term financing. Bank credit
lines are maintained to ensure availability of short-term funds on an as-needed
basis. Available fee-paid credit lines, all of which are unused at May 31, 1998,
total $250 million.
The Company's adjusted debt-to-total-capital ratio (which includes 6.25
times the total annual restaurant minimum rent as a component of debt and total
capital) was 38 percent and 36 percent at May 31, 1998, and May 25, 1997,
respectively. The Company's fixed-charge coverage ratio, which measures the
number of times each year that the Company earns enough to cover its fixed
charges, amounted to 5.0 times at May 31, 1998, and 2.9 times at May 25, 1997.
Based on these ratios, the Company's financial condition remains strong.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 6
The composition of the Company's capital structure is shown in the following
table.
CAPITAL STRUCTURE
May 31, 1998 May 25, 1997
$ In millions $ In millions
------------- -------------
Short-term debt $ 75.1 $ 43.4
Long-term debt 310.6 313.2
---------- ----------
Total debt 385.7 356.6
Stockholders' equity 1,019.8 1,081.2
---------- ----------
Total capital $ 1,405.5 $ 1,437.8
========== ==========
ADJUSTMENTS TO CAPITAL
Leases-debt equivalent 250.0 244.5
Adjusted total debt 635.7 601.1
Adjusted total capital $ 1,655.5 $ 1,682.3
Debt-to-total-capital ratio 27% 25%
Adjusted debt-to-total-
capital ratio 38% 36%
In 1998, the Company declared eight cents per share in annual dividends,
paid in two installments. In December 1997, the Company's Board approved a stock
buy-back plan whereby the Company may purchase on the open market up to 15.0
million shares of Darden common stock. This buy-back plan is in addition to two
previously approved plans by the Board in September 1996 and December 1995
covering open market purchases of up to 9.3 million and 6.5 million shares,
respectively, of Darden common stock. As of May 31, 1998, 20.4 million shares
were purchased under these programs.
The Company typically carries current liabilities in excess of current
assets, because the restaurant business receives substantially immediate payment
for sales (nominal receivables), while inventories and other current liabilities
normally carry longer payment terms (usually 15 to 30 days). The seasonal
variation in net working capital is typically in the $30 million to $50 million
range.
The Company requires capital principally for building new restaurants,
replacing equipment and remodeling existing units. Capital expenditures were
$112 million in 1998, down from $160 million in 1997 and $214 million in 1996
because of decisions to slow the growth in new Olive Garden and Red Lobster
units and, in 1996, to discontinue China Coast operations. The 1998 capital
expenditure and dividend requirements were financed primarily through internally
generated funds. The Company generated $236 million, $189 million and $294
million in funds from operating activities during 1998, 1997 and 1996,
respectively.
IMPACT OF YEAR 2000
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process date fields containing a
two-digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
The Company has identified all significant applications that will require
modification to ensure Year 2000 Compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 Compliance. The
modification process of all significant applications is well under way. The
Company plans on completing the testing process of all significant applications
by the end of fiscal 1999.
In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third-party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be converted in a timely manner, or that a
failure to convert by another company, or a conversion that is incompatible with
the Company's systems, would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the date on which the
Company plans to complete the Year 2000 modification and testing processes are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved, and actual results could
differ from those plans.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 7
[ INTENTIONALLY OMITTED ]
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Darden Restaurants, Inc.
We have audited the accompanying consolidated balance sheets of Darden
Restaurants, Inc. and subsidiaries as of May 31, 1998, and May 25, 1997, and the
related consolidated statements of earnings (loss) and cash flows for each of
the years in the three-year period ended May 31, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Darden
Restaurants, Inc. and subsidiaries as of May 31, 1998, and May 25, 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended May 31, 1998, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
June 19, 1998
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands, except per share data) May 31, 1998 May 25, 1997 May 26, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 3,287,017 $ 3,171,810 $ 3,191,779
Costs and Expenses:
Cost of sales:
Food and beverages 1,083,629 1,077,316 1,062,624
Restaurant labor 1,062,490 1,017,315 954,886
Restaurant expenses 482,311 481,348 455,626
----------- ----------- -----------
Total Cost of Sales $ 2,628,430 $ 2,575,979 $ 2,473,136
Selling, General and Administrative 358,542 361,263 373,920
Depreciation and Amortization 126,289 136,876 134,599
Interest, Net 20,084 22,291 21,406
Restructuring and Asset Impairment 229,887 75,000
----------- ----------- -----------
Total Costs and Expenses $ 3,133,345 $ 3,326,296 $ 3,078,061
----------- ----------- -----------
Earnings (Loss) before Income Taxes 153,672 (154,486) 113,718
Income Taxes 51,958 (63,457) 39,363
----------- ----------- -----------
Net Earnings (Loss) $ 101,714 $ (91,029) $ 74,355
=========== =========== ===========
Net Earnings (Loss) per Share:
Basic $ 0.69 $ (0.59) $ 0.47
Diluted $ 0.67 $ (0.59) $ 0.46
Average Number of Common Shares Outstanding:
Basic 148,300 155,600 158,700
Diluted 151,400 155,600 161,300
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 9
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) May 31, 1998 May 25, 1997
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 33,505 $ 25,490
Receivables 27,312 16,333
Refundable income taxes, net 16,968
Inventories 182,399 132,241
Net assets held for disposal 49,230 47,471
Prepaid expenses and other current assets 20,498 14,709
Deferred income taxes 84,597 84,157
----------- -----------
Total Current Assets $ 397,541 $ 337,369
Land, Buildings and Equipment 1,490,348 1,533,272
Other Assets 96,853 93,081
----------- -----------
Total Assets $ 1,984,742 $ 1,963,722
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 132,938 $ 113,087
Short-term debt 75,100 43,400
Current portion of long-term debt 5 5
Accrued payroll 73,240 58,312
Accrued income taxes 1,067
Other accrued taxes 24,172 22,180
Other current liabilities 252,142 243,596
----------- -----------
Total Current Liabilities $ 558,664 $ 480,580
Long-term Debt 310,603 313,187
Deferred Income Taxes 77,054 70,118
Other Liabilities 18,576 18,624
----------- -----------
Total Liabilities $ 964,897 $ 882,509
----------- -----------
Stockholders' Equity:
Common stock and surplus, no par value. Authorized
500,000 shares; issued and outstanding
161,580 and 159,944 shares, respectively $ 1,286,191 $ 1,268,656
Preferred stock, no par value. Authorized 25,000 shares;
None issued and outstanding
Retained earnings (accumulated deficit) 48,327 (41,706)
Treasury stock, 20,434 and 6,951 shares, at cost (239,876) (69,184)
Cumulative foreign currency adjustment (11,749) (10,037)
Unearned compensation (63,048) (66,516)
----------- -----------
Total Stockholders' Equity $ 1,019,845 $ 1,081,213
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,984,742 $ 1,963,722
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands) May 31, 1998 May 25, 1997 May 26, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows - Operating Activities
Net Earnings (loss) $ 101,714 $ (91,029) $ 74,355
Adjustments to reconcile net earnings (loss) to cash flow:
Depreciation and amortization 126,289 136,876 134,599
Amortization of unearned compensation and loan costs 4,682 3,824 1,929
Change in current assets and liabilities (6,791) (41,401) 9,722
Change in other liabilities (48) 323 1,861
Loss on disposal of land, buildings and equipment 3,132 6,358 6,076
Deferred income taxes 6,496 (52,068) (3,513)
Non-cash restructuring and asset impairment expenses 226,342 69,073
Other, net 651 (22) (70)
---------- ---------- ----------
Net Cash Provided by Operating Activities $ 236,125 $ 189,203 $ 294,032
---------- ---------- ----------
Cash Flows - Investment Activities
Purchases of land, buildings and equipment (112,168) (159,688) (213,905)
Purchases of intangibles (1,798) (651) (1,200)
(Increase) decrease in other assets (4,112) 1,844 (733)
Proceeds from disposal of land, buildings and equipment
(including net assets held for disposal) 24,494 34,017 16,338
---------- ---------- ----------
Net Cash Used by Investment Activities $ (93,584) $ (124,478) $ (199,500)
---------- ---------- ----------
Cash Flows - Financing Activities
Proceeds from issuance of common stock 10,606 1,450 7,318
Income tax benefit credited to equity 3,808 871 2,570
Dividends paid (11,681) (12,385) (12,647)
Purchases of treasury stock (170,692) (44,147) (25,037)
Loan to ESOP (66,900)
ESOP note receivable repayments 2,700 19,100 1,100
Increase (decrease) in short-term debt 31,700 (29,200) (25,400)
Proceeds from issuance of long-term debt 66,900 248,303
Repayment of long-term debt (2,704) (5,054) (251,010)
Payment of interest-rate swap settlement and loan costs (213) (29,520)
Proceeds from issuance of equity put options 1,737
---------- ---------- ----------
Net Cash Used by Financing Activities $ (134,526) $ (69,578) $ (84,323)
---------- ---------- ----------
Increase (Decrease) in Cash and Cash Equivalents 8,015 (4,853) 10,209
Cash and Cash Equivalents - Beginning of Year 25,490 30,343 20,134
---------- ---------- ----------
Cash and Cash Equivalents - End of Year $ 33,505 $ 25,490 $ 30,343
========== ========== ==========
Cash Flow from Changes in Current Assets and Liabilities
Receivables (10,979) 8,439 558
Refundable income taxes, net 16,968 (16,968)
Inventories (50,158) (11,516) 42,243
Net assets held for disposal (3,088)
Prepaid expenses and other current assets 1,236 2,589 10,024
Accounts payable 19,851 (15,109) (38,503)
Accrued payroll 14,928 4,635 (1,721)
Accrued income taxes 1,067 (12,522) 572
Other accrued taxes 1,992 3,259 (675)
Other current liabilities (1,696) (4,208) 312
---------- ---------- ----------
Change in Current Assets and Liabilities $ (6,791) $ (41,401) $ 9,722
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except
per share data.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The accompanying 1998, 1997 and 1996 consolidated financial statements
include the operations of Darden Restaurants, Inc. and its wholly owned
subsidiaries (Darden or the Company). Prior to 1996, the Company was a
wholly-owned subsidiary of General Mills, Inc. (General Mills). The common
shares of Darden were distributed by General Mills to its stockholders as of May
28, 1995.
Darden's fiscal year ends on the last Sunday in May. 1998 consisted of 53
weeks. 1997 and 1996 each consisted of 52 weeks.
B. LAND, BUILDINGS AND EQUIPMENT
All land, buildings and equipment are recorded at cost. Building components
are depreciated over estimated useful lives ranging from seven to 40 years using
the straight-line method. Equipment is depreciated over estimated useful lives
ranging from three to ten years, also using the straight-line method.
Accelerated depreciation methods are generally used for income tax purposes.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," the Company periodically reviews restaurant sites and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Measurement of an impairment loss for such assets is based on the
fair value of the asset. Restaurant sites and certain identifiable intangibles
to be disposed of are reported at the lower of the carrying amount or fair
value, less estimated cost to sell.
C. INVENTORIES
Inventories are valued at the lower of cost or market value, using the
"first-in, first-out" method.
D. INTANGIBLE ASSETS
The cost of intangible assets is amortized evenly over their estimated
useful lives. Most of these costs were incurred through the purchase of leases
with favorable rent terms. The Audit Committee of the Board of Directors
annually reviews intangible assets. At its meeting on June 23, 1998, the Board
of Directors affirmed that the remaining amounts of these assets have continuing
value.
E. LIQUOR LICENSES
The costs of obtaining non-transferable liquor licenses that are directly
issued by local government agencies for nominal fees are expensed in the year
incurred. The costs of purchasing transferable liquor licenses through open
markets in jurisdictions with a limited number of authorized liquor licenses for
fees in excess of nominal amounts are capitalized. If there is permanent
impairment in the value of a liquor license due to market changes, the asset is
written down to its net realizable value. Annual liquor license renewal fees are
expensed.
F. FOREIGN CURRENCY TRANSLATION
The Canadian dollar is the functional currency for the Canadian restaurant
operations. Assets and liabilities are translated using the exchange rates in
effect at the balance sheet date. Results of operations are translated using the
average exchange rates prevailing throughout the period. Translation gains and
losses are accumulated in a cumulative foreign currency adjustment account
included as a separate component of stockholders' equity. Gains and losses from
foreign currency transactions are generally included in the consolidated
statements of earnings (loss) for each period.
G. PRE-OPENING COSTS
Prior to 1998, the Company capitalized the direct and incremental costs
associated with the opening of new restaurants. These costs were amortized over
a one-year period from the restaurant opening date. During 1998 the Company
adopted the accounting practice of expensing these costs as incurred. This
change in accounting method did not have a significant impact on the Company's
financial position or results of operations.
H. ADVERTISING
Production costs of commercials and programming are charged to operations
in the year first aired. The costs of other advertising, promotion and marketing
programs are charged to operations in the year incurred. Advertising expense was
$186,261, $204,321, and $239,526 in 1998, 1997 and 1996, respectively.
I. INCOME TAXES
The Company provides for federal and state income taxes currently payable
as well as for those deferred because of temporary differences between reporting
income and expenses for financial statement purposes and income and expenses for
tax purposes. Federal income tax credits are recorded as a reduction of income
taxes. Deferred tax assets and liabilities are recognized for the future tax
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 12
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates is recognized as income or expense in the period that includes the
enactment date.
J. STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, amounts
receivable from credit card companies and investments purchased with a maturity
of three months or less are considered cash equivalents.
K. NET EARNINGS (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share,"
which requires presentation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. As required, the Company adopted the
provisions of SFAS 128 during 1998. All prior year weighted average and per
share information has been restated in accordance with SFAS 128. Outstanding
stock options issued by the Company represent the only dilutive effect reflected
in diluted weighted average shares.
Options to purchase 868,300 and 1,755,000 shares of common stock were
excluded from the calculation of diluted earnings per share for the years ended
May 31, 1998, and May 26, 1996, respectively, because their exercise prices
exceeded the average market price of common shares for the period. All options
were excluded from the calculation of diluted earnings (loss) per share for the
year ended May 25, 1997, because their inclusion would have been antidilutive.
L. DERIVATIVE FINANCIAL AND COMMODITY INSTRUMENTS
On January 31, 1997, the Securities and Exchange Commission (SEC) issued
amended disclosure rules for derivatives and exposures to market risk from
derivative and other financial and certain commodity instruments. Enhanced
accounting policy disclosures in accordance with this SEC release follow.
The Company may, from time to time, use financial and commodities
derivatives in the management of interest rate and commodities pricing risks
that are inherent in its business operations. The Company may also use financial
derivatives as part of its stock repurchase program as described in Note 10.
Such instruments are not held or issued for trading or speculative purposes. The
Company may, from time to time, use interest rate swap and cap agreements in the
management of interest rate exposure. The interest rate differential to be paid
or received is normally accrued as interest rates change, and is recognized as a
component of interest expense over the life of the agreements. If an agreement
is terminated prior to the maturity date and is characterized as a hedge, any
accrued rate differential would be deferred and recognized as interest expense
over the life of the hedged item. The Company uses commodities hedging
instruments, including forwards, futures and options, to reduce the risk of
price fluctuations related to future raw materials requirements for commodities
such as coffee, soybean oil, and shrimp. The terms of such instruments generally
do not exceed 12 months, and depend on the commodity and other market factors.
Deferred gains and losses are subsequently recorded as cost of products sold in
the statement of earnings (loss) when the inventory is sold. If the inventory is
not acquired and the hedge is disposed of, the deferred gain or loss is
recognized immediately in cost of products sold. The Company does not have any
material risk from any of the above financial instruments, and the Company does
not anticipate any material losses from the use of such instruments.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 13
M. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
N. ACCOUNTING FOR STOCK OPTIONS
During 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," which was
effective for fiscal years beginning after December 15, 1995. The statement
encourages the use of a fair-value-based method of accounting for stock-based
awards under which the fair value of stock options is determined on the date of
grant and expensed over the vesting period. Companies may, however, continue to
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees." Companies that continue to apply APB 25 are required to
include pro forma disclosures of net earnings (loss) and net earnings (loss) per
share as if the fair-value-based method of accounting had been applied. The
Company has elected to continue to account for such plans under the provisions
of APB 25.
O. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income." Comprehensive income includes not only net earnings, but also revenues,
expenses, gains and losses that are excluded from net earnings under generally
accepted accounting principles. Examples include foreign currency translation
adjustments and unrealized gains and losses on investments. SFAS 130 requires
that all items required to be recognized as components of comprehensive income
be reported in a financial statement with equal prominence to the other
financial statements. SFAS 130 is effective for annual periods beginning after
December 15, 1997. Adoption of SFAS 130 is not expected to materially impact the
Company's reported results, since each component of comprehensive income is
currently reported separately in the stockholders' equity disclosure table at
Note 10.
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains or losses resulting
from changes in the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
SFAS 133 is effective for interim and annual periods beginning after June 15,
1999. Adoption of SFAS 133 is not expected to materially impact the Company's
financial position or results of operations, since the Company utilizes
derivatives to hedge business risks and not for trading or speculative purposes.
NOTE 2 - ACCOUNTS RECEIVABLE
Darden contracts with a national storage and distribution company to
provide services that are billed to Darden on a per-case basis. In connection
with these services, certain Darden inventory items are sold to the distribution
company at a predetermined price when they are shipped to the distribution
company's storage facilities. These items are repurchased at the same price by
Darden when the inventory is delivered to Company restaurants by the
distribution company. The receivable from the distribution company was $24,476
and $12,106 at May 31, 1998, and May 25, 1997, respectively.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 14
NOTE 3 - RESTRUCTURING AND ASSET IMPAIRMENT EXPENSE
Darden recorded asset impairment charges of $158,987 and $56,600 in 1997
and 1996, respectively, representing the difference between fair value and
carrying value of impaired assets. The asset impairment charges relate to
low-performing restaurant properties and other long-lived assets including those
restaurants that have been closed. Fair value is generally determined based on
appraisals or sales prices of comparable properties. In connection with the
closing of certain restaurant properties, the Company recorded other
restructuring expenses of $70,900 and $18,400 in 1997 and 1996, respectively.
The components of the restructuring expense and the after-tax and earnings
per share effects of the restructuring and asset impairment expense are as
follows:
Fiscal Year
1997 1996
--------- ---------
Carrying costs of buildings
and equipment prior to disposal
and employee severance costs $ 27,500 $ 8,600
Lease buy-out provisions 30,000 1,600
Other 13,400 8,200
--------- ---------
Subtotal 70,900 18,400
Impairment of restaurant properties
and other long-lived assets 158,987 56,600
--------- ---------
Total restructuring and asset
impairment expense 229,887 75,000
Less related income tax effect (84,528) (30,151)
--------- ---------
Restructuring and asset impairment
expense, net of income taxes $ 145,359 $ 44,849
========= =========
Earnings per share effect -
basic and diluted $ 0.93 $ 0.28
========= =========
As of May 31, 1998, approximately $21,085 and $14,440 of costs associated
with the 1997 and 1996 restructurings, respectively, had been paid and charged
against the restructuring liability. The total restructuring liability included
in other current liabilities was $58,265 and $91,770 as of May 31, 1998, and May
25, 1997, respectively. The restructuring actions related to the 1996
restructuring were substantially completed as of May 31, 1998. The 1997
restructuring actions are expected to be substantially completed during 2001.
NOTE 4 - INCOME TAXES
The components of earnings (loss) before income taxes and the provision for
income taxes thereon are as follows:
<TABLE>
<CAPTION>
Fiscal Year
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Earnings (loss) before income taxes:
U.S. $ 149,096 $ (108,687) $ 118,506
Canada 4,576 (45,799) (4,788)
---------- ---------- ----------
Earnings (loss) before income taxes $ 153,672 $ (154,486) $ 113,718
========== ========== ==========
Income taxes:
Current:
Federal $ 38,730 $ (13,285) $ 33,935
State and local 6,349 1,529 8,608
Canada 383 367 333
---------- ---------- ----------
Total current 45,462 (11,389) 42,876
Deferred (principally U.S.) 6,496 (52,068) (3,513)
---------- ---------- ----------
Total income taxes $ 51,958 $ (63,457) $ 39,363
========== ========== ==========
</TABLE>
During 1998, 1997 and 1996, Darden paid income taxes of $24,630, $15,900,
and $25,777, respectively.
The following table is a reconciliation of the U.S. statutory income tax
rate to the effective income tax rate included in the accompanying consolidated
statements of earnings (loss):
Fiscal Year
1998 1997 1996
---- ---- ----
U.S. statutory rate 35.0% (35.0)% 35.0%
State and local income taxes, net
of federal tax benefits (expense) 3.3 (3.3) 4.6
Benefit of U.S. federal income tax credits (5.8) (5.7) (6.8)
Other, net 1.3 2.9 1.8
----- ----- -----
Effective income tax rate 33.8% (41.1)% 34.6%
===== ===== =====
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 15
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
May 31, 1998 May 25, 1997
------------ ------------
Accrued liabilities $ 14,004 $ 12,135
Compensation and employee benefits (including
Deferred compensation) 39,575 32,334
Asset disposition liabilities 32,104 41,147
Operating loss and tax credit carry forwards 8,461 4,016
Net assets held for disposal 2,074 2,372
Other 2,090 1,584
--------- ---------
Gross deferred tax assets 98,308 93,588
--------- ---------
Buildings and equipment (68,405) (59,356)
Prepaid pension asset (14,979) (14,482)
Prepaid interest (4,696) (5,015)
Other (2,685) (696)
--------- ---------
Gross deferred tax liabilities (90,765) (79,549)
--------- ---------
Net deferred tax asset $ 7,543 $ 14,039
========= =========
Management believes the Company will obtain the full benefit of deferred
tax assets on the basis of its evaluation of anticipated profitability over the
period of years that the temporary differences are expected to become tax
deductions. It believes that sufficient book and taxable income will be
generated to realize the benefit of these tax assets.
NOTE 5 - LAND, BUILDINGS AND EQUIPMENT
The components of land, buildings and equipment are as follows:
May 31, 1998 May 25, 1997
------------ ------------
Land $ 382,999 $ 379,411
Buildings 1,320,388 1,315,209
Equipment 634,626 649,689
Construction in progress 30,418 46,214
----------- -----------
Total land, buildings and equipment 2,368,431 2,390,523
Less accumulated depreciation (878,083) (857,251)
----------- -----------
Net land, buildings and equipment $ 1,490,348 $ 1,533,272
=========== ===========
NOTE 6 - OTHER ASSETS
The components of other assets are as follows:
May 31, 1998 May 25, 1997
------------ ------------
Prepaid pension $ 39,160 $ 37,863
Prepaid interest and loan costs 24,781 27,170
Liquor licenses 18,140 17,677
Intangible assets 9,459 9,174
Miscellaneous 5,313 1,197
--------- ---------
Total other assets $ 96,853 $ 93,081
========= =========
NOTE 7 - SHORT-TERM DEBT
Short-term debt at May 31, 1998, and May 25, 1997, consisted of $75,100 and
$43,400 of unsecured commercial paper borrowings with original maturities of one
month or less, and interest rates ranging from 5.65 percent to 5.81 percent, and
5.55 percent to 5.80 percent, respectively.
NOTE 8 - LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
May 31, 1998 May 25, 1997
------------ ------------
<S> <C> <C>
10-year notes and 20-year debentures as described below $ 250,000 $ 250,000
ESOP loan with variable rate of interest (6.04 percent at
May 31, 1998), due December 31, 2018 62,000 64,700
Other 24 28
---------- ----------
Total long-term debt 312,024 314,728
Less issuance discount (1,416) (1,536)
---------- ----------
Total long-term debt less issuance discount 310,608 313,192
Less current portion (5) (5)
---------- ----------
Long-term debt, excluding current portion $ 310,603 $ 313,187
========== ==========
</TABLE>
In January 1996, the Company issued $150,000 of 6.375 percent notes due in
2006, and $100,000 of 7.125 percent debentures due in 2016. The proceeds from
the issuance were used to refinance commercial paper borrowings. Concurrent with
the issuance of the notes and debentures, the Company terminated, and settled
for cash, interest-rate swap agreements with notional amounts totaling $200,000,
which hedged the movement of interest rates prior to the issuance of the notes
and debentures. The cash paid in terminating the interest-rate swap agreements
is being amortized
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 16
to interest expense over the life of the notes and debentures. The effective
annual interest rate is 7.57 percent for the notes and 7.82 percent for the
debentures, after consideration of loan costs, issuance discounts, and interest
rate swap termination costs.
The Company also maintains a revolving loan agreement expiring May 19,
2000, with a consortium of banks under which the Company can borrow up to
$250,000. The loan agreement allows the Company to borrow at interest rates that
vary based on the prime rate, LIBOR or a competitively bid rate among the
members of the lender consortium, at the option of the Company. The Company is
required to pay a facility fee of 12.5 basis points per annum on the average
daily amount of loan commitments by the consortium. The amount of interest and
the annual facility fee are subject to change based on the Company's achievement
of certain financial ratios and debt ratings. Advances under the loan agreement
are unsecured. At May 31, 1998, and May 25, 1997, no borrowings were outstanding
under this agreement.
The aggregate maturities of long-term debt for each of the five years
subsequent to May 31, 1998, and thereafter are $5 in 1999, $6 in 2000 and 2001,
$7 in 2002, $0 in 2003 and $312,000 thereafter.
NOTE 9 - FINANCIAL INSTRUMENTS
The Company has participated in the financial derivatives markets to manage
its exposure to interest rate fluctuations. The Company had interest rate swaps
with a notional amount of $200,000 which it used to convert variable rates on
its long-term debt to fixed rates effective May 30, 1995. The Company received
the one-month commercial paper interest rate and paid fixed-rate interest
ranging from 7.51 percent to 7.89 percent. The interest rate swaps were settled
during January 1996 at a cost to the Company of $27,670. This cost will be
recognized as an adjustment to interest expense over the term of the Company's
10-year notes and 20-year debentures (see Note 8). The following methods were
used in estimating fair value disclosures for significant financial instruments:
Cash equivalents and short-term debt approximate their carrying amount due to
the short duration of those items. Long-term debt is based on quoted market
prices or, if market prices are not available, the present value of the
underlying cash flows discounted at the Company's incremental borrowing rates.
The carrying amounts and fair values of the Company's significant financial
instruments are as follows:
May 31, 1998 May 25, 1997
------------ ------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
Cash and cash equivalents $ 33,505 $ 33,505 $ 25,490 $ 25,490
Short-term debt $ 75,100 $ 75,100 $ 43,400 $ 43,400
Total long-term debt $310,608 $314,502 $313,192 $301,399
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 17
NOTE 10 - STOCKHOLDERS' EQUITY
The following table summarizes the changes in the components of
stockholder's equity:
<TABLE>
<CAPTION>
Common Retained Cumulative
Stock Earnings Foreign Total
and (Accumulated Treasury Currency Unearned Stockholders'
(In thousands) Surplus Deficit) Stock Adjustment Compensation Equity
---------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 28, 1995 $1,253,415 $ $ $ (10,281) $ (69,172) $1,173,962
Net earnings 74,355 74,355
Cash dividends declared
($0.08 per share) (12,647) (12,647)
Stock option exercises
(1,137 shares) 7,318 7,318
Issuance of restricted stock
(304 shares) 2,909 (2,909)
Earned compensation 1,086 1,086
ESOP note receivable
repayments 1,100 1,100
Income tax benefit
credited to equity 2,570 2,570
Purchases of common stock
for treasury (1,908 shares) (25,037) (25,037)
Foreign currency adjustment (70) (70)
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 26, 1996 1,266,212 61,708 (25,037) (10,351) (69,895) 1,222,637
Net loss (91,029) (91,029)
Cash dividends declared
($0.08 per share) (12,385) (12,385)
Stock option exercises
(261 shares) 1,450 1,450
Issuance of restricted stock
(25 shares) 123 (123)
Earned compensation 1,302 1,302
ESOP note receivable
repayments, net 2,200 2,200
Income tax benefit
Credited to equity 871 871
Purchases of common stock
for treasury (5,043 shares) (44,147) (44,147)
Foreign currency adjustment 314 314
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 25, 1997 1,268,656 (41,706) (69,184) (10,037) (66,516) 1,081,213
Net earnings 101,714 101,714
Cash dividends declared
($0.08 per share) (11,681) (11,681)
Stock option exercises
(1,464 shares) 10,606 10,606
Issuance of restricted stock
(238 shares), net of
forfeiture adjustments 1,384 (1,404) (20)
Earned compensation 2,172 2,172
ESOP note receivable
repayments 2,700 2,700
Income tax benefit
credited to equity 3,808 3,808
Proceeds from issuance
of equity put options 1,737 1,737
Purchases of common stock
for treasury (13,483 shares) (170,692) (170,692)
Foreign currency adjustment (1,712) (1,712)
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 31, 1998 $1,286,191 $ 48,327 $ (239,876) $ (11,749) $ (63,048) $1,019,845
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 18
As a part of its stock repurchase program, the Company issued equity put
options that entitle the holder to sell shares of Company common stock to the
Company, at a specified price, if the holder exercises the option. In 1998 the
Company issued put options for 2,465,000 shares for $1,737 in premiums. At May
31, 1998, put options for 965,000 shares remain outstanding at exercise prices
ranging from $15.25 to $15.52 per share with exercise dates in July 1998.
NOTE 11 - STOCKHOLDERS' RIGHTS PLAN
The Company has a stockholders' rights plan that entitles each holder of
Company common stock to purchase one-hundredth of one share of Darden preferred
stock for each common share owned at a purchase price of $62.50 per share,
subject to adjustment to prevent dilution. The rights are exercisable when, and
are not transferable apart from the Company's common stock until, a person or
group has acquired 20 percent or more, or makes a tender offer for 20 percent or
more, of the Company's common stock. If the specified percentage of the
Company's common stock is then acquired, each right will entitle the holder
(other than the acquiring company) to receive, upon exercise, common stock of
either the Company or the acquiring company having a value equal to two times
the exercise price of the right. The rights are redeemable by the Company's
Board in certain circumstances and expire on May 24, 2005.
NOTE 12 - INTEREST, NET
Interest expense on average ESOP debt of $62,688, $65,850, and $67,075 in
1998, 1997 and 1996, respectively, was included in compensation expense. The
Company paid $17,235 and $19,830 for interest (net of amount capitalized) in
1998 and 1997, respectively.
The components of interest, net are as follows:
Fiscal Year
1998 1997 1996
------- ------- -------
Interest expense $21,527 $23,336 $24,875
Capitalized interest (1,018) (739) (2,007)
Interest income (425) (306) (1,462)
------- ------- -------
Interest, net $20,084 $22,291 $21,406
======= ======= =======
NOTE 13 - LEASES
An analysis of rent by property leased (all of which are accounted for as
operating leases) is as follows:
Fiscal Year
1998 1997 1996
------- ------- -------
Restaurant minimum rent $39,140 $40,616 $39,867
Restaurant percentage rent 1,707 1,649 1,713
Restaurant rent averaging expense (121) 595 (275)
Transportation equipment 2,169 1,951 2,103
Office equipment 990 915 956
Office space 436 406 331
Warehouse space 217 235 207
------- ------- -------
Total rent expense $44,538 $46,367 $44,902
======= ======= =======
Minimum rental obligations are accounted for on a straight-line basis over
the term of the lease. Some leases require payment of property taxes, insurance
and maintenance costs in addition to the rent payments. The annual
non-cancelable future lease commitments for each of the five years subsequent to
May 31, 1998, and thereafter are: $44,443 in 1999; $41,972 in 2000; $38,382 in
2001; $34,557 in 2002; $29,793 in 2003; and $111,780 thereafter, for a
cumulative total of $300,927.
NOTE 14 - RETIREMENT PLANS
The Company has a defined benefit plan covering most salaried employees and
a group of hourly employees with a frozen level of benefits. Benefits for
salaried employees are based on length of service and final average
compensation. The hourly plan provides a monthly amount for each year of
credited service. The Company's funding policy is consistent with the funding
requirements of federal law and regulations. Plan assets consist principally of
listed equity securities, corporate obligations and U.S. government securities.
Components of net pension expense (income) are as follows:
Fiscal Year
1998 1997 1996
-------- -------- --------
Service cost-benefits earned $ 2,576 $ 3,250 $ 2,427
Interest cost on projected benefit 4,699 4,686 3,806
obligation
Actual return on plan assets (19,714) (10,955) (16,965)
Net amortization and deferral 10,915 3,859 9,316
-------- -------- --------
Net pension expense (income) $ (1,524) $ 840 $ (1,416)
======== ======== ========
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 19
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
benefit obligations were 7.25 percent and 4.5 percent in 1998, 8.0 percent and
6.0 percent in 1997, and 7.75 percent and 6.0 percent in 1996, respectively. The
expected long-term rate of return on plan assets was 10.4 percent.
The funded status of the plan and the amount recognized on the consolidated
balance sheets are as follows:
<TABLE>
<CAPTION>
May 31, 1998 May 25, 1997
------------ ------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits $ 60,550 $ 2,286 $ 49,978 $ 1,974
Non-vested benefits 3,977 1,741
---------- ---------- ---------- ----------
Accumulated benefit obligations $ 64,527 $ 2,286 $ 51,719 $ 1,974
========== ========== ========== ==========
Projected benefit obligation $ 73,112 $ 2,286 $ 59,323 $ 1,974
Plan assets at fair value 105,010 10 89,064 11
---------- ---------- ---------- ----------
Plan assets in excess of (less than) the
projected benefit obligation 31,898 (2,276) 29,741 (1,963)
Unrecognized prior service costs (3,218) (3,674)
Unrecognized net loss 13,047 15,005
Unrecognized transition asset (2,567) (3,209)
---------- ---------- ---------- ----------
Prepaid (accrued) pension cost $ 39,160 $ (2,276) $ 37,863 $ (1,963)
========== ========== ========== ==========
</TABLE>
The Company has a defined contribution plan covering most employees age 21
and older with at least one year of service. Employees classified as "highly
compensated" under the Internal Revenue Code are ineligible to participate. The
Company matches participant contributions up to six percent of compensation on
the basis of up to $1.00 for each dollar contributed by the participant. The
plan had net assets of $231,220 at May 31, 1998, and $122,585 at May 25, 1997.
Expense recognized in 1998, 1997 and 1996 was $3,038, $2,551, and $2,505,
respectively.
The defined contribution plan includes an Employee Stock Ownership Plan
(ESOP). This ESOP originally borrowed $50,000 from third parties guaranteed by
the Company, and borrowed $25,000 from the Company at a variable interest rate.
The $50,000 third-party loan was refinanced in 1997 by a commercial bank's loan
to the Company and a corresponding loan from the Company to the ESOP.
Compensation expense is recognized as contributions are accrued. Contributions
to the plan, plus the dividends accumulated on the common stock held by the
ESOP, are used to pay principal, interest and expenses of the plan. As loan
payments are made, common stock is allocated to ESOP participants. In 1998,
1997, and 1996, the ESOP incurred interest expense of $3,882, $3,815, and $3,431
respectively, and used dividends received of $1,339, $5,127, and $1,735, and
contributions received from the Company of $4,538, $2,548, and $2,397,
respectively, to pay principal and interest on its debt. Company shares owned by
the ESOP are included in average common shares outstanding for purposes of
calculating net earnings (loss) per share. At May 31, 1998, the ESOP's debt to
the Company had a balance of $62,000 with a variable rate of interest of 6.04
percent. $45,100 of the principal balance is due to be repaid no later than
December 2007, with the remaining $16,900 due to be repaid no later than
December 2014. The number of Company common shares within the ESOP at May 31,
1998, approximates 12,494,000 representing 9,605,000 unreleased shares, 29,000
shares committed to be released and 2,860,000 shares allocated to participants.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 20
NOTE 15 - OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS
The Company sponsors a plan that provides health-care benefits to its
salaried retirees. The plan is contributory, with retiree contributions based on
years of service.
Components of the post-retirement health-care expense are as follows:
Fiscal Year
1998 1997 1996
----- ----- -----
Service cost-benefits earned $ 225 $ 292 $ 227
Interest cost on accumulated
benefit obligation 375 366 364
Net amortization and deferral 18 67 76
----- ----- -----
Net post-retirement expense $ 618 $ 725 $ 667
===== ===== =====
The plan is not funded. The amounts included in the consolidated balance
sheets are as follows:
May 31, 1998 May 25, 1997
------------ ------------
Accumulated benefit obligations:
Retirees $ 962 $ 785
Fully eligible active employees 512 370
Other active employees 4,349 3,580
------- -------
Accumulated benefit obligations 5,823 4,735
Plan assets at fair value 0 0
------- -------
Accumulated benefit obligations
in excess of plan assets 5,823 4,735
Unrecognized prior service cost (118) (136)
Unrecognized net loss (376) (1)
------- -------
Accrued post-retirement benefits $ 5,329 $ 4,598
======= =======
The discount rates used in determining the actuarial present value of the
benefit obligations were 7.25 percent in 1998 and 8.0 percent in 1997.
The health-care cost trend rate increase in the per-capita charges for
benefits ranged from 5.9 percent to 7.1 percent for 1999, depending on the
medical service category. The rates gradually decrease to 4.6 percent to 5.5
percent for 2009 and remain at that level thereafter. If the health-care cost
trend rate increased by one percentage point in each future year, the aggregate
of the service and interest cost components of post-retirement expense for 1998
would increase by $115, and the accumulated benefit obligation at May 31, 1998,
would increase by $1,064.
NOTE 16 - STOCK PLANS
The Darden Restaurants Stock Option and Long-Term Incentive Plan of 1995
provides for the granting of stock options to key employees at a price equal to
the fair market value of the shares at the date of the grant and are for terms
not exceeding ten years. Fifteen million shares of common stock are authorized
for issuance under the plan; 3,000,000 of these shares are available solely for
issuance in connection with the granting of stock options in lieu of merit
salary increases or other compensation or employee benefits. Such options vest
at the discretion of the Compensation Committee. The plan also allows for grants
of restricted stock and restricted stock units (RSUs) for up to 10 percent of
the shares under the plan.
No individual may receive in excess of two percent of the total number of
shares authorized under the plan in restricted stock or RSUs. Restricted stock
and RSUs granted under the plan vest no sooner than one year from the date of
grant. No individual may receive awards covering in excess of 10 percent of the
total number of shares authorized for issuance under the plan.
The Darden Restaurants Stock Plan for Non-Employee Directors provides for a
one-time grant to each non-employee director of an option to purchase 12,500
shares of common stock and an additional option to purchase 3,000 shares of
common stock upon election or re-election at a price equal to the fair market
value of the shares at the date of grant. The plan also provides for an annual
grant of 3,000 shares of restricted stock to each non-employee director, as well
as additional options to purchase shares of common stock in lieu of retainer and
meeting fees. Up to 250,000 shares of common stock may be issued under this plan
and all options have an exercise price equal to the fair market value of the
shares at date of grant. The Darden Restaurants Compensation Plan for
Non-Employee Directors provides that non-employee directors may elect to receive
their annual retainer and meeting fees in cash, deferred cash or shares of
common stock. The common stock issuable under the plan shall have a fair market
value equivalent to the value of the foregone retainer and meeting fees.
Fifty-thousand shares of common stock are available for issuance under the plan.
The per share weighted average fair value of stock options granted during
1998, 1997, and 1996 was $8.03, $2.88, and $4.24, respectively. These amounts
were determined using the Black Scholes
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 21
option-pricing model, which values options based on the stock price at the grant
date, the expected life of the option, the estimated volatility of the stock,
expected dividend payments, and the risk-free interest rate over the expected
life of the option. The dividend yield was calculated by dividing the current
annualized dividend by the option price for each grant. The expected volatility
was determined considering stock prices for the fiscal year the grant occurred
and prior fiscal years, as well as considering industry volatility data. The
risk-free interest rate was the rate available on zero coupon U.S. government
issues with a term equal to the remaining term for each grant. The expected life
of the option was estimated based on the exercise history from previous grants.
The Company applies APB 25 in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized in the Company's financial
statements for stock options granted under any of the stock plans. If, under
SFAS 123, the Company determined compensation cost based on the fair value at
the grant date for its stock options, net earnings (loss) and net earnings
(loss) per share would have been the pro forma amounts indicated below:
Fiscal Year
1998 1997 1996
-------- -------- --------
Net earnings (loss)
As reported $101,714 $(91,029) $ 74,355
Pro forma $ 98,047 $(93,154) $ 72,261
Basic net earnings (loss) per share
As reported $ 0.69 $ (0.59) $ 0.47
Pro forma $ 0.66 $ (0.60) $ 0.46
Diluted net earnings (loss) per share
As reported $ 0.67 $ (0.59) $ 0.46
Pro forma $ 0.65 $ (0.60) $ 0.45
Under SFAS 123, stock options granted prior to 1996 are not required to be
included as compensation in determining pro forma net earnings (loss). To
determine pro forma net earnings (loss), reported net earnings (loss) have been
adjusted for compensation costs associated with stock options granted during
1998, 1997 and 1996 that are expected to eventually vest.
Option transactions, commencing as of the distribution date, are as
follows:
Weighted Weighted
Average Average
Options Price Per Number Price Per
Exercisable Share of Options Share
----------- --------- ------------ ---------
Balance at May 28, 1995 6,962,356 $ 7.81 15,199,136 $ 9.42
Options granted 5,599,308 $ 11.13
Options exercised (1,136,998) $ 6.31
Options cancelled (1,855,253) $ 10.83
----------
Balance at May 26, 1996 6,177,151 $ 8.23 17,806,193 $ 10.01
Options granted 120,123 $ 8.15
Options exercised (261,227) $ 5.69
Options cancelled (1,603,796) $ 10.67
----------
Balance at May 25, 1997 6,832,479 $ 8.81 16,061,293 $ 10.00
Options granted 3,335,711 $ 9.83
Options exercised (1,463,788) $ 7.26
Options cancelled (1,570,316) $ 10.48
----------
Balance at May 31, 1998 6,286,678 $ 9.55 16,362,900 $ 10.16
==========
The following table provides information regarding exercisable and
outstanding options as of May 31, 1998:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Average Average Average
Exercise Exercise Exercise Remaining
Price Per Options Price Options Price Contractual
Share Exercisable Per Share Outstanding Per Share Life (Years)
- ------------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
$04.00-$05.00 243,223 $ 4.19 243,223 $ 4.19 .25
$05.01-$10.00 3,489,603 $ 8.50 7,261,439 $ 8.89 6.00
$10.01-$15.00 2,553,852 $ 11.48 8,662,375 $ 11.27 6.25
Over $15.00 195,863 $ 15.65 10.00
--------- ------- ---------- ------- -----
6,286,678 $ 9.55 16,362,900 $ 10.16 6.10
========= ==========
</TABLE>
NOTE 17 - COMMITMENTS AND CONTINGENCIES
Darden makes normal trade commitments in the course of regular operations
and is subject to litigation incident to the conduct of its ongoing business. As
of May 31, 1998, the Company was contingently liable for approximately $62,761,
primarily relating to outstanding letters of credit. In the opinion of
management, there are no unusual commitments or contingencies at May 31, 1998,
that would materially affect the financial position or operating results of
Darden.
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 22
NOTE 18 - QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal 1998
Quarters Ended
Aug. 24 Nov. 23 Feb. 22 May 31 Total
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Sales $809,331 $745,263 $811,261 $921,162 $3,287,017
Gross Profit 161,620 132,534 165,650 198,783 658,587
Earnings before Interest and Taxes 40,943 16,509 50,307 65,997 173,756
Earnings before Taxes 36,250 11,786 45,228 60,408 153,672
Net Earnings 24,408 7,530 29,758 40,018 101,714
Net Earnings per Share:
Basic $ 0.16 $ 0.05 $ 0.20 $ 0.28 $ 0.69
Diluted $ 0.16 $ 0.05 $ 0.20 $ 0.27 $ 0.67
<CAPTION>
Fiscal 1997
Quarters Ended
Aug. 25 Nov. 24 Feb. 23 May 25 Total
-------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Sales $805,555 $748,757 $800,846 $ 816,652 $3,171,810
Gross Profit 167,935 118,189 147,559 162,148 595,831
Earnings (Loss) before Interest and Taxes 33,826 (10,196) 27,247 (183,072) (132,195)
Earnings (Loss) before Taxes 28,893 (15,819) 21,613 (189,173) (154,486)
Net Earnings (Loss) 20,473 (11,169) 15,723 (116,056) (91,029)
Net Earnings (Loss) per Share:
Basic $ 0.13 $ (0.07) $ 0.10 $ (0.76) $ (0.59)
Diluted $ 0.13 $ (0.07) $ 0.10 $ (0.76) $ (0.59)
</TABLE>
<PAGE>
DARDEN RESTAURANTS, INC.
1998 FINANCIAL STATEMENTS BOOKLET IN THE
COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS
PAGE 23
FIVE YEAR FINANCIAL SUMMARY
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
Pro Forma
May 31, May 25, May 26, May 28, May 29,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATION RESULTS
Sales $ 3,287,017 $ 3,171,810 $ 3,191,779 $ 3,163,289 $ 2,962,980
Costs and Expenses:
Cost of Sales:
Food and beverages 1,083,629 1,077,316 1,062,624 1,093,896 1,014,066
Restaurant labor 1,062,490 1,017,315 954,886 931,553 868,178
Restaurant expenses 482,311 481,348 455,626 470,194 442,769
----------- ----------- ----------- ----------- -----------
Total Cost of Sales $ 2,628,430 $ 2,575,979 $ 2,473,136 $ 2,495,643 $ 2,325,013
----------- ----------- ----------- ----------- -----------
Restaurant Operating Profit 658,587 595,831 718,643 667,646 637,967
----------- ----------- ----------- ----------- -----------
Selling, General and Administrative 358,542 361,263 373,920 351,197 306,516
Depreciation and Amortization 126,289 136,876 134,599 135,472 124,732
Interest, Net 20,084 22,291 21,406 21,901 18,394
----------- ----------- ----------- ----------- -----------
Total Costs and Expenses $ 3,133,345 $ 3,096,409 $ 3,003,061 $ 3,004,213 $ 2,774,655
----------- ----------- ----------- ----------- -----------
Earnings before Restructuring and Asset
Impairment Expenses and Income Taxes 153,672 75,401 188,718 159,076 188,325
Income Taxes before Restructuring and
Asset Impairment Expenses 51,958 21,071 69,514 50,817 68,451
----------- ----------- ----------- ----------- -----------
Earnings from Operations before
Restructuring and Asset Impairment
Expenses and Accounting Changes 101,714 54,330 119,204 108,259 119,874
Cumulative Effect of Accounting Changes 3,661
Restructuring and Asset Impairment
Expenses, Net of Income Taxes 145,359 44,849 59,085
----------- ----------- ----------- ----------- -----------
Net Earnings (Loss) $ 101,714 $ (91,029) $ 74,355 $ 49,174 $ 123,535
=========== =========== =========== =========== ===========
Earnings per Share from Operations before
Restructuring and Asset Impairment
Expenses and Accounting Changes:
Basic $ 0.69 $ 0.35 $ 0.75 $ 0.68 $ 0.75
Diluted $ 0.67 $ 0.35 $ 0.74
Net Earnings (Loss) per Share from
Operations after Restructuring and Asset
Impairment Expenses:
Basic $ 0.69 $ (0.59) $ 0.47 $ 0.31 $ 0.78
Diluted $ 0.67 $ (0.59) $ 0.46
Average Number of Common Shares
Outstanding, Net of Shares Held in
Treasury (in 000's):
Basic 148,300 155,600 158,700 158,000 159,100
Diluted 151,400 155,600 161,300
----------- ----------- ----------- ----------- -----------
FINANCIAL POSITION
Total Assets $ 1,984,742 $ 1,963,722 $ 2,088,504 $ 2,113,381 $ 1,859,124
Land, Buildings and Equipment 1,490,348 1,533,272 1,702,861 1,737,982 1,564,245
Working Capital (deficit) (161,123) (143,211) (157,326) (209,609) (152,926)
Long-term Debt 310,608 313,192 301,205 303,860 303,971
Stockholders' Equity 1,019,845 1,081,213 1,222,637 1,173,962 1,057,319
Stockholders' Equity per Share 7.23 7.07 7.70 7.43 6.65
----------- ----------- ----------- ----------- -----------
OTHER STATISTICS
Cash Flow from Operations $ 236,125 $ 189,203 $ 294,032 $ 273,978 $ 262,018
Capital Expenditures 112,168 159,688 213,905 357,904 335,031
Dividends Paid 11,681 12,385 12,647
Dividends Paid per Share 0.08 0.08 0.08
Advertising Expense $ 186,261 $ 204,321 $ 239,526 $ 211,904 $ 173,053
Number of Employees 114,800 114,600 119,100 124,700 115,200
Number of Restaurants 1,151 1,182 1,217 1,243 1,158
Stock Price:
High $ 18.125 $ 12.125 $ 14.000 $ 10.875
Low 8.125 6.750 9.750 9.375
Close 15.438 8.250 11.750 10.875
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF DARDEN RESTAURANTS, INC.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF DARDEN RESTAURANTS, INC.
As of May 31, 1998, the Registrant had one "significant subsidiary", as defined
in Regulation S-X, Rule 1-02(w), identified as follows:
GMRI, Inc., a Florida corporation, doing business as Red Lobster,
The Olive Garden and Bahama Breeze.
In order to comply with certain state laws, the Registrant, either directly, or
indirectly through GMRI, Inc., had 66 other subsidiaries as of May 31, 1998. If
considered in the aggregate as a single subsidiary as of May 31, 1998, the 66
other subsidiaries would not constitute a "significant subsidiary" as defined in
Regulation S-X, Rule 1-02(w).
EXHIBIT 23
INDEPENDENT ACCOUNTANTS' CONSENT
<PAGE>
EXHIBIT 23
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Darden Restaurants, Inc.:
We consent to incorporation by reference in the Registration Statement (No.
33-93854) on Form S-3 and Registration Statements (Nos. 33-92702 and 33-92704)
on Form S-8 of Darden Restaurants, Inc. of our report dated June 19, 1998,
relating to the consolidated balance sheets of Darden Restaurants, Inc. and
subsidiaries as of May 31, 1998 and May 25, 1997 and the related consolidated
statements of earnings (loss) and cash flows for each of the fiscal years in the
three-year period ended May 31, 1998, which report is incorporated by reference
to page 8 of the 1998 Financial Statements booklet in the Registrant's 1998
Annual Report to Stockholders in the May 31, 1998 Annual Report on Form 10-K of
Darden Restaurants, Inc.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
August 14, 1998
EXHIBIT 24
POWERS OF ATTORNEY
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ H. Brewster Atwater, Jr.
-----------------------------------------
H. Brewster Atwater, Jr.
Date: August 18, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Daniel B. Burke
-----------------------------------------
Daniel B. Burke
Date: August 11, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Betty Southard Murphy
-----------------------------------------
Betty Southard Murphy
Date: August 10, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Jack A. Smith
-----------------------------------------
Jack A. Smith
Date: August 10, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Michael D. Rose
-----------------------------------------
Michael D. Rose
Date: August 10, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Odie C. Donald
-----------------------------------------
Odie C. Donald
Date: August 10, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Bradley D. Blum
-----------------------------------------
Bradley D. Blum
Date: August 14, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Richard E. Rivera
-----------------------------------------
Richard E. Rivera
Date: August 10, 1998
<PAGE>
EXHIBIT 24 (CON'T)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
C.L. Whitehill, Joe R. Lee and Clarence Otis, Jr., and each of them, his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the fiscal year ended May
31, 1998, and any and all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/ Blaine Sweatt
-----------------------------------------
Blaine Sweatt
Date: August 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Darden Restaurants, Inc. and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-26-1997
<PERIOD-END> MAY-31-1998
<CASH> 33,505
<SECURITIES> 0
<RECEIVABLES> 27,312
<ALLOWANCES> (235)
<INVENTORY> 182,399
<CURRENT-ASSETS> 397,541
<PP&E> 2,368,431
<DEPRECIATION> (878,083)
<TOTAL-ASSETS> 1,984,742
<CURRENT-LIABILITIES> 558,664
<BONDS> 310,608
0
0
<COMMON> 1,286,191
<OTHER-SE> (266,346)
<TOTAL-LIABILITY-AND-EQUITY> 1,984,742
<SALES> 3,287,017
<TOTAL-REVENUES> 3,287,017
<CGS> 1,083,629
<TOTAL-COSTS> 2,628,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,084
<INCOME-PRETAX> 153,672
<INCOME-TAX> 51,958
<INCOME-CONTINUING> 101,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,714
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.67
</TABLE>
