Red Lobster 2009 Annual Report Download - page 66

64 Darden Restaurants, Inc. 2009 Annual Report
Notes to Consolidated Financial Statements
At the end of fiscal 2005, the ESOP borrowed $1.6 million from
us at a variable interest rate and acquired an additional 0.05 million
shares of our common stock, which were held in suspense within
the ESOP at May 29, 2005. The loan, which had a variable interest
rate of 0.69 percent at May 31, 2009, is due to be repaid no later than
December 2018. The shares acquired under this loan are accounted
for in accordance with Statement of Position (SOP) 93-6, “Employers’
Accounting for Employee Stock Ownership Plans.” Fluctuations in
our stock price are recognized as adjustments to common stock and
surplus when the shares are committed to be released. These ESOP
shares are not considered outstanding until they are committed to be
released and, therefore, have been excluded for purposes of calculating
basic and diluted net earnings per share at May 31, 2009. The fair value
of these shares at May 31, 2009 was $1.6 million.
As part of the RARE acquisition, we assumed RARE’s employee
benefit plans. We merged these plans into our existing employee
benefit plans during fiscal 2009. As of the date of acquisition, RARE
provided its employees who met minimum service requirements
with retirement benefits under a 401(k) plan (RARE Plan). Under the
RARE Plan, eligible employees were eligible to make contributions
of between 1 percent and 20 percent of their annual compensation
to one or more investment funds. Officers and highly compensated
employees did not participate in the RARE Plan. Quarterly matching
contributions were made in an amount equal to 50 percent of the
first 5 percent of employee compensation contributed, resulting in a
maximum annual company contribution of 2.5 percent of employee
compensation. For fiscal 2009 and the period from the date of acqui-
sition through the end of fiscal 2008, we incurred expense under the
RARE Plan of $0.0 million and $0.6 million, respectively.
Effective January 1, 2000, RARE implemented the Supplemental
Deferred Compensation Plan (Supplemental Plan), a non-qualified
plan which allowed officers and highly compensated employees to
defer receipt of a portion of their compensation and contribute such
amounts to one or more investment funds. The maximum aggregate
amount deferred under the Supplemental Plan and the RARE Plan
could not exceed the lesser of 20 percent of annual compensation or
$50,000. Quarterly matching contributions were made in an amount
equal to 50 percent of the first 5 percent of employee compensation
contributed, with a maximum annual company contribution of the
lesser of 2.5 percent of employee compensation or $5,750. For fiscal
2009 and the period from the date of acquisition through the end of
fiscal 2008, we incurred expense under the Supplemental Plan of
$0.0 million and $0.4 million, respectively. Upon the acquisition of
RARE, all unvested Company contributions to both the RARE Plan and
the Supplemental Plan were immediately vested, however, contributions
subsequent to the date of acquisition vest according to the plans’
provisions. Company contributions vest at a rate of 20 percent each
year beginning after the employee’s first year of service and are made
in the form of cash. The Company entered into a rabbi trust agree-
ment to protect the assets of the Supplemental Plan. Participants’
accounts are comprised of their contribution; the company’s matching
contribution and each participant’s share of earnings or losses in the
Supplemental Plan. In accordance with EITF No. 97-14, “Accounting
for Deferred Compensation Arrangements Where Amounts Are
Held in a Rabbi Trust and Invested,” the accounts of the rabbi trust are
reported in our consolidated financial statements. Our consolidated
balance sheet includes the investments in other assets and the offset-
ting obligation is included in other liabilities. As of May 31, 2009 and
May 25, 2008, the balance of the Supplemental Plan was $9.1 million
and $13.2 million, respectively. The Supplemental Plan investments
are considered trading securities and are reported at fair value with
the realized and unrealized holding gains and losses related to these
investments, as well as the offsetting compensation expense, recorded
in selling, general and administrative expenses.
NOTE 18
StocK-BaSeD comPenSation
We maintain two active stock option and stock grant plans under
which new awards may still be issued, known as the Darden
Restaurants, Inc. 2002 Stock Incentive Plan (2002 Plan) and the
RARE Hospitality International, Inc. Amended and Restated 2002
Long-Term Incentive Plan (RARE 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, incentive 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 RARE Plan provides for the issuance of
up to 3.9 million common shares in connection with the granting of
non-qualified stock options, incentive stock options and restricted
stock to employees. Awards under the RARE Plan are only permitted
to be granted to employees who were employed by RARE as of
the date of acquisition and continued their employment with the
Company. 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, 2000. The Director
Compensation Plan provided for the issuance of 0.1 million shares
common shares out of our treasury to non-employee directors of the
Board. No new awards may be granted under the Director Compen-
sation Plan after September 30, 2005. The 1995 Plan provided for the
issuance 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 these plans, stock