Red Lobster 2000 Annual Report Download - page 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN RESTAURANTS
Note 15
Stock Plans
The Darden Restaurants, Inc. Amended and Restated
Stock Option and Long-Term Incentive Plan of 1995
provides for the granting of stock options to key employ-
ees 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. The plan has 22,200,000 shares of common
stock authorized for issuance; 3,000,000 of these
shares are authorized 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 1,500,000 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 exceeding 300,000 shares in each of the last four
fiscal years of the plan determined on a prospective and
retroactive cumulative basis.
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 com-
mon stock in lieu of retainer and meeting fees. The
terms of these grants do not exceed ten years. 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 the 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 authorized for issuance
under the plan.
The per share weighted average fair value of stock
options granted during 2000, 1999, and 1998 was
$6.47, $10.21, and $8.03, respectively. These amounts
were determined using the Black-Scholes 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 deter-
mined considering stock prices for the fiscal year the
grant occurred and prior fiscal years, as well as consid-
ering 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 weighted average assumptions used in the
Black-Scholes model were as follows:
Stock Options
Granted in Fiscal Year
2000 1999 1998
Risk-free interest rate 6.50% 5.60% 6.25%
Expected volatility of stock 30.0% 30.0% 25.0%
Dividend yield 0.1% 0.1% 0.1%
Expected option life 6.0 years 6.0 years 5.0 years
DARDEN RESTAURANTS 2000 ANNUAL REPORT 41