Red Lobster 2007 Annual Report Download - page 56

54 Darden Restaurants, Inc. Annual Report 2007
Notes to Consolidated Financial Statements
N
Note17
Stock-Based Compensation
We maintain one active stock option and stock grant plan under
which new awards may still be issued, the 2002 Stock Incentive Plan
(2002 Plan). We also have three other stock option and stock grant
plans under which we no longer can grant new awards, although
awards outstanding under the plans may still vest and be exercised
in accordance with their terms: the Stock Plan for Directors (Director
Stock Plan), the Stock Option and Long-Term Incentive Plan of 1995
(1995 Plan) and the Restaurant Management and Employee Stock
Plan of 2000 (2000 Plan). All of the plans are administered by the
Compensation Committee of the Board of Directors. The 2002 Plan
provides for the issuance of up to 9.55 million common shares in
connection with the granting of non-qualified stock options, incen-
tive stock options, stock appreciation rights, restricted stock,
restricted stock units (RSUs), stock awards and other stock-based
awards to key employees and non-employee directors. The Director
Stock Plan provided for the issuance of up to 0.375 million common
shares out of our treasury in connection with the granting of non-
qualified stock options, restricted stock and RSUs to non-employee
directors. No new awards could be granted under the Director Stock
Plan after September 30, 2005. The 1995 Plan provided for the issu-
ance of up to 33.3 million common shares in connection with the
granting of non-qualified stock options, restricted stock or RSUs to
key employees. The 2000 Plan provided for the issuance of up to 5.4
million shares of common stock out of our treasury as non-qualified
stock options, restricted stock or RSUs. Under all of the plans, stock
options are granted at a price equal to the fair value of the shares at
the date of grant for terms not exceeding ten years and have various
vesting periods at the discretion of the Compensation Committee.
Outstanding options generally vest over one to four years. Restricted
stock and RSUs granted under the 1995 Plan, 2000 Plan and 2002
Plan generally vest over periods ranging from three to five years and
no sooner than one year from the date of grant. The restricted period
for certain grants may be accelerated based on performance goals
established by the Compensation Committee.
On June 16, 2006, the Board of Directors adopted amendments
to the 2002 Plan, which were approved by our shareholders at the
September 2006 annual meeting of shareholders. The amendments,
among other things: (a) increased the maximum number of shares
that are authorized for issuance under the 2002 Plan from 8.55 million
to 9.55 million; (b) implemented a “fungible share pool” approach to
manage authorized shares in order to improve the flexibility of awards
going forward, and eliminated the limits on the number of restricted
stock and RSU awards and the number of awards to non-employee
directors; and (c) provided that, in determining the number of shares
available for grant, a formula will be applied such that all future awards
other than stock options and stock appreciation rights will be counted
as double the number of shares covered by such award.
We also maintain the Compensation Plan for Non-Employee
Directors. This plan provided that non-employee directors could elect
to receive their annual retainer and meeting fees in any combination
of cash, deferred cash or our common shares and authorized the issu-
ance of up to 106.0 thousand common shares out of our treasury for
this purpose. The common shares were issued under the plan in
consideration of foregone retainer and meeting fees, and were issued
at a value equal to the market price of our common stock on the date
of grant. No new awards could be made under the Compensation
Plan for Non-Employee Directors after September 30, 2005.
On December 15, 2005, the Board of Directors approved the
Director Compensation Program, effective as of October 1, 2005,
which replaced the Director Stock Plan and the Compensation Plan
for Non-Employee Directors. The Director Compensation Program
provides for payments to non-employee directors of: (a) an annual
retainer and meeting fees for regular or special Board meetings and
committee meetings; (b) an initial award of non-qualified stock
options to purchase 12.5 thousand shares of common stock upon
becoming a director of the Company for the first time; (c) an addi-
tional award of non-qualified stock options to purchase 3.0 thou-
sand shares of common stock annually upon election or re-election
to the Board; and (d) an annual award of common stock with a fair
market value of $0.1 million on the date of grant. Directors may elect
to have their cash compensation paid in any combination of current
or deferred cash, common stock or salary replacement options.
Deferred cash compensation may be invested on a tax-deferred
basis in the same manner as deferrals under our non-qualified
deferred compensation plan. Directors may elect to have their
annual stock award paid in the form of common stock or cash, or a
combination thereof, or deferred. All stock options and other stock
or stock-based awards that are part of the compensation paid or
deferred pursuant to the Director Compensation Program are
awarded under the 2002 Plan.