<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ADVANTICA RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(ADVANTICA RESTAURANT GROUP LOGO)
203 East Main Street
Spartanburg, South Carolina 29319
April 5, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at 10:00 a.m. on Wednesday, May 19, 1999, at The Waldorf Astoria Hotel,
301 Park Avenue, New York, New York 10022. We look forward to greeting
personally those stockholders who are able to attend. If you plan to attend, we
ask that you please (1) detach, sign and return the self-addressed, postage
prepaid attendance card, and (2) detach and bring with you to the meeting the
Admittance Card. Both cards are attached to the enclosed proxy.
The accompanying formal Notice of Meeting and Proxy Statement describe the
matters on which action will be taken at the meeting.
Whether or not you attend in person, IT IS IMPORTANT your shares be
represented and voted at the meeting. I urge you to sign, date and return the
enclosed proxy, or vote via telephone or the Internet as set forth in the proxy,
at your earliest convenience.
On Behalf of the Board of Directors,
Sincerely,
/S/ JAMES B. ADAMSON
JAMES B. ADAMSON
Chairman, Chief Executive Officer and President
<PAGE> 3
(ADVANTICA RESTAURANT GROUP LOGO)
-----------------------------
NOTICE OF MEETING
----------------------------
Spartanburg, SC
April 5, 1999
The Annual Meeting of Stockholders of Advantica Restaurant Group, Inc.
("Advantica") will be held at The Waldorf Astoria Hotel, 301 Park Avenue, New
York, New York 10022, on Wednesday, May 19, 1999, at 10:00 a.m. for the
following purposes as further described in the accompanying Proxy Statement:
1. To elect nine (9) directors.
2. To consider and vote upon a proposal to ratify the selection by the
Board of Directors of Deloitte & Touche LLP as the principal independent
auditors of Advantica and its subsidiaries (collectively, the "Company") for the
year 1999.
3. To consider and vote upon a proposal to approve Advantica's 1999
Incentive Program for the Company's employees.
4. To consider and vote upon a proposal to amend the Advantica Stock Option
Plan, as previously amended, to increase the authorized shares issuable
thereunder.
5. To transact such other business as may properly come before the meeting.
Only holders of record of Advantica's common stock at the close of business
on March 23, 1999 will be entitled to notice of, and to vote at, such meeting.
Whether or not you plan to attend the meeting, you are urged to promptly
complete, sign, date and return the enclosed proxy in the envelope provided (or
follow the instructions set forth in the enclosed proxy to vote by telephone or
the Internet). Returning your proxy as described above does not deprive you of
your right to attend the meeting and to vote your shares in person.
/s/RHONDA J. PARISH
RHONDA J. PARISH
Executive Vice President, General Counsel
and
Secretary
<PAGE> 4
(ADVANTICA RESTAURANT GROUP LOGO)
---------------------------
PROXY STATEMENT
---------------------------
April 5, 1999
GENERAL
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Advantica Restaurant Group, Inc., a
Delaware corporation, ("Advantica"), for use at the Annual Meeting of
Stockholders to be held on Wednesday, May 19, 1999, at 10:00 a.m. at The Waldorf
Astoria Hotel, 301 Park Avenue, New York, New York 10022 (the "Annual Meeting").
Proxies in the form enclosed will be voted at the Annual Meeting (including
adjournments) if properly executed, returned to the Company prior to the
meeting, and not revoked, or if voted by telephone or the Internet in accordance
with the instructions set forth in the enclosed proxy and not revoked.
Stockholders who execute proxies may revoke them at any time before they are
exercised by delivering a written notice to Rhonda J. Parish, the Executive Vice
President, General Counsel and Secretary of Advantica, either at the Annual
Meeting or prior to the meeting date at the Company's executive offices at 203
East Main Street, Spartanburg, South Carolina 29319, by executing and delivering
a later-dated proxy, or by attending the meeting and voting in person.
STOCKHOLDER VOTING
Only holders of record of Common Stock of Advantica, par value $.01 per
share (the "Common Stock") as of the close of business on March 23, 1999 (the
"Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. This Proxy Statement will be mailed to each such stockholder on or
about April 8, 1999.
As of the close of business on the Record Date, there were issued and
outstanding and entitled to be voted at the Annual Meeting, 40,025,207 shares of
Common Stock. At the meeting, holders of Common Stock will have one vote per
share and a quorum, a majority of the outstanding shares of Common Stock as of
the Record Date represented in person or by proxy, will be required for the
transaction of business by stockholders. A quorum being present, directors will
be elected and the other actions proposed in the accompanying notice will become
effective by majority vote. Votes withheld from nominees for director,
abstentions and broker non-votes will be counted for purposes of determining
whether a quorum has been reached but will not be counted in determining the
number of shares voted "for" any director-nominee or "for" any proposal.
Proxies in the accompanying form, properly executed and duly returned and
not revoked, or if voted by telephone or the Internet in accordance with the
instructions set forth in the enclosed proxy and not revoked, will be voted at
the meeting (including adjournments). Where stockholders have appropriately
specified how their proxies are to be voted, they will be voted accordingly. If
no specifications are made, proxies will be voted (i) in favor of the nine (9)
nominees to the Board of Directors, (ii) in favor of the selection of Deloitte &
Touche LLP as the principal independent auditors of Advantica and its
subsidiaries for the year 1999, (iii) in favor of the proposal to approve
Advantica's 1999 Incentive Program for the Company's employees, and (iv) in
favor of the proposal to amend the Advantica Stock Option Plan. If any other
matter or business is brought before the meeting, the proxy holders may vote the
proxies at their discretion.
ADVANTICA 401(k) PLAN PARTICIPANT VOTING
Under the Advantica 401(k) Plans (the "Plans") shares of Common Stock
attributable to certain plan participants who have selected the Advantica stock
fund investment option under the Plans will be voted by the Plan Trustee in
accordance with the employee's instructions and absent such instructions, in
accordance with the
1
<PAGE> 5
instruction of the Plan Administrator (a Board appointed committee responsible
for the administration of the Plans).
EQUITY SECURITY OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 23, 1999, the beneficial
ownership of Common Stock by each stockholder known by the Company to own more
than 5% of the outstanding shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AMOUNT AND NATURE OF THAT MAY BE ACQUIRED
BENEFICIAL OWNERSHIP THROUGH THE EXERCISE PERCENTAGE OF
NAME AND ADDRESS OF OUTSTANDING SHARES OF WARRANTS COMMON STOCK
- ---------------- --------------------- -------------------- -------------
<S> <C> <C> <C>
Loomis Sayles & Company, L.P. ("Loomis")
(and related entities)
One Financial Center
Boston, MA 02111......................... 9,294,821(1) -- 23.2
CNA Financial Corporation ("CNA")
(and related entities)
CNA Plaza 23 South
Chicago, IL 60685........................ 3,877,287(2) -- 9.7
Moore Capital Management, Inc.
("Moore Capital")
(and related entities)
1251 Avenue of the Americas
New York, NY 10020....................... 3,863,077(2) -- 9.7
Morgan Stanley Dean Witter & Co.
("Morgan Stanley")
(and related entities)
1585 Broadway
New York, NY 10036....................... 3,392,163(2) -- 8.5
Magten Asset Management Corp. ("Magten")
(and related entities)
35 East 21st Street
New York, NY 10010....................... 2,784,387(2) -- 7.0
GBU, Inc. ("GBU")
(and related entities)
70 East 55th Street, 12th Floor
New York, NY 10022....................... 1,235,908(2) 1,282,231(2)(3) 6.1(3)
</TABLE>
- ---------------
(1) Shares which may be beneficially owned by Loomis and certain related
entities are as reported to the Company by Loomis as of March 23, 1999.
According to the latest Schedule 13D filing by Loomis, Loomis is an
investment advisor to certain managed accounts (the "Loomis Managed
Accounts"), each of which is entitled to the pecuniary interest (including,
without limitation, the sole right to receive dividends, proceeds and
profits from sale) in the shares allocated to such Loomis Managed Account.
According to such Schedule 13D, as investment advisor to the Loomis Managed
Accounts, Loomis retains the right to dispose of, and either retains or
shares with the Loomis Managed Accounts the right to vote, such shares.
According to such Schedule 13D, no Loomis Managed Account holds more than 5%
of the outstanding shares of the Common Stock. Of the total number of shares
of Common Stock listed for Loomis, management believes based on information
provided to the Company by Loomis as of March 23, 1999, that Loomis has (1)
sole voting power with respect to up to 8,219,884 shares, (2) shared voting
power with respect to 764,760 shares, and (3) sole dispositive power with
respect to all such shares.
(2) Shares shown as beneficially owned by CNA, Moore Capital, Morgan Stanley,
Magten and GBU and their related entities are as reported on the latest
Schedule 13G filing by each such stockholder. Such filings reflect that each
such stockholder, with the exception of Magten, has shared voting and
investment power with respect to those shares reported as beneficially
owned. Magten has shared voting power with respect to 1,758,277 shares and
shared investment power with respect to all such shares reported as
beneficially owned.
2
<PAGE> 6
(3) The percentage of the Common Stock listed in this column for GBU and related
entities reflects 1,282,231 shares of Common Stock which GBU currently has
the right to acquire through the exercise of warrants to purchase Common
Stock. Such warrants were issued to GBU by Advantica pursuant to the Plan of
Reorganization (as defined on page 5).
MANAGEMENT
The following table sets forth, as of March 23, 1999, the beneficial
ownership of Common Stock by: (i) each director and nominee to the Board of
Directors of Advantica, (ii) each executive officer of the Company included in
the Summary Compensation Table on page 13, and (iii) all directors and executive
officers of Advantica as a group. Except as otherwise noted, the persons named
in the table below have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME BENEFICIAL OWNERSHIP(1) COMMON STOCK
- ---- ----------------------- -------------
<S> <C> <C>
James B. Adamson............................................ 450,000 1.1
Robert H. Allen............................................. 7,602 *
Ronald E. Blaylock.......................................... 4,702 *
Vera King Farris............................................ 4,702 *
James J. Gaffney............................................ 11,702 *
Irwin N. Gold............................................... 19,202 *
Robert E. Marks............................................. 14,702 *
Charles F. Moran............................................ 10,702 *
Elizabeth A. Sanders........................................ 6,702 *
Donald R. Shepherd.......................................... 23,702 *
Craig S. Bushey............................................. 65,575 *
Ronald B. Hutchison......................................... 52,000 *
Rhonda J. Parish............................................ 50,500 *
John A. Romandetti.......................................... 66,000 *
All current directors and executive officers as a group (17
persons).................................................. 940,543 2.3
</TABLE>
- ---------------
* less than one (1) percent.
(1) The Common Stock listed as beneficially owned by the following individuals
includes shares of Common Stock which such individuals currently have the
right to acquire through the exercise of stock options: (i) Mr. Adamson
(250,000 shares), (ii) Messrs. Allen, Blaylock, Gaffney, Gold, Marks, Moran
and Shepherd and Mss. Farris and Sanders (2,000 shares each), (iii) Messrs.
Bushey, Hutchison, Romandetti and Ms. Parish (50,000 shares each) and (iv)
all current directors and executive officers as a group (618,000 shares).
Each of the above mentioned options were granted by the Company pursuant to
either the Advantica Restaurant Group Officer Stock Option Plan or the
Advantica Restaurant Group Director Stock Option Plan.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS OF ADVANTICA
Pursuant to Advantica's Bylaws, the Board has set at nine (9) the number of
directors to constitute the Board of Directors of Advantica as of the Annual
Meeting. It is intended that proxies in the accompanying form will be voted at
the meeting for the election to the Board of Directors of the following
nominees, each of whom currently serves as a director of Advantica and has
consented to continue to serve if elected: James B. Adamson, Ronald E. Blaylock,
Vera King Farris, James J. Gaffney, Irwin N. Gold, Robert E. Marks, Charles F.
Moran, Elizabeth A. Sanders and Donald R. Shepherd, each to serve until the 2000
Annual Meeting of Stockholders and until his or her successor shall be elected
and shall qualify, except as otherwise provided in Advantica's Restated
Certificate of Incorporation and Bylaws, each as amended. Robert H. Allen will
not stand for re-election to the Board of
3
<PAGE> 7
Directors. See also "Executive Compensation -- Employment Agreements -- Adamson
Employment Agreement" regarding the election of Mr. Adamson to the Board. If for
any reason any nominee named above is not a candidate when the election occurs,
it is intended that proxies in the accompanying form will be voted for the
election of the other nominees named above and may be voted for any substitute
nominee or, in lieu thereof, the Board of Directors may reduce the number of
directors in accordance with Advantica's Restated Certificate of Incorporation
and Bylaws. Holders of Common Stock voting by proxy may withhold votes as to any
director-nominee by writing the name of such nominee in the space provided on
the proxy card or, if voting by telephone or the Internet, by following the
instructions provided in connection therewith.
The name, age, present principal occupation or employment, and the material
occupations, positions, offices, or employments for at least the past five
years, of each director and nominee to the Board of Directors of Advantica are
set forth below. Unless otherwise indicated, each such person has held the
occupation listed opposite his or her name for at least the past five years.
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- --- -------------------------------------------
<S> <C> <C>
James B. Adamson 51 Chairman of Advantica; Chief Executive Officer and President
of Advantica (1995 to present); Chief Executive Officer of
Burger King Corporation (1993 to 1995); Chief Operating
Officer of Burger King Corporation (1991 to 1993); President
of Burger King U.S.A. Retail Division (1991); Executive Vice
President, Marketing of Revco, Inc. (1988 to 1991). Director
of Kmart Corporation.
Robert H. Allen 75 Director of Advantica; Marketing Consultant, R. H. Allen
Associates, Westport, Connecticut, a marketing and business
development consulting firm (1988 to present); Vice
President and Product Group Manager of ITT Corporation (1965
to 1987).
Ronald E. Blaylock 39 Director of Advantica; President and Chief Executive Officer
of Blaylock and Partners, L.P., a New York based investment
banking firm (1993 to present); Director of Fine Host
Corporation.
Vera King Farris 58 Director of Advantica; President of the Richard Stockton
College of New Jersey (1983 to present); Director of
National Utilities Investors, Inc.
James J. Gaffney 58 Director of Advantica; Chairman, Vermont Investments
Limited, a diversified holding company involved in
manufacturing and distribution (1997 to present); President
and Chief Executive Officer, General Aquatics, Inc., a
company involved in swimming pool equipment manufacturing
and construction (1995 to 1997); President and Chief
Executive Officer of KDI Corporation, a company involved in
swimming pool construction and manufactured products,
defense and cellular electronics, and the engineering and
metal plating industries (1993 to 1995); Director of London
Fog Industries, Inc., SCP Pool Corporation and Alliance
Entertainment Corp.
Irwin N. Gold 42 Director of Advantica; Senior Managing Director and Director
of Houlihan, Lokey, Howard and Zukin, Inc., a specialty
investment banking firm (1993 to present); Director of Cole
National Corporation.
Robert E. Marks 47 Director of Advantica; President of Marks Ventures, Inc.,
New York, New York, a private equity investment firm (1994
to present); Managing Director of Carl Marks & Co., Inc.
(1982 to 1994); Director of Robert Fleming Capital Mutual
Fund Group, Inc.
Charles F. Moran 69 Director of Advantica; Retired; Senior Vice President of
Administration of Sears, Roebuck and Co. (1989 to 1993);
Senior Vice President and Chief Information Officer of
Sears, Roebuck and Co. (1988 to 1989).
Elizabeth A. 53 Director of Advantica; Management Consultant, The Sanders
Sanders Partnership, Sutter Creek, California, a consulting firm
(1990 to present); Vice President and General Manager of
Nordstrom, Inc. (1981 to 1990); Director of Washington
Mutual, Inc., Wal-Mart Stores, Inc., Wellpoint Health
Networks, Inc. and Wolverine Worldwide, Inc.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR
NAME AGE EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---- --- -------------------------------------------
<S> <C> <C>
Donald R. Shepherd 62 Director of Advantica; Retired; Chairman of Loomis, Sayles &
Company, L.P., Boston, Massachusetts, an investment
management firm (1992 to 1995); Chief Executive Officer and
Chief Investment Officer of Loomis, Sayles & Company, L.P.
(1990 to 1995).
</TABLE>
In early 1997, the Company's management determined, in light of operating
trends and the Company's liquidity and capital needs, to recapitalize the
Company's enterprise over the long-term and through a prepackaged plan pursuant
to Chapter 11 of Title 11 of the United States Code. In that regard, Flagstar
Companies, Inc. ("FCI") and Flagstar Corporation ("Flagstar"), predecessor
corporations of Advantica, commenced a voluntary Chapter 11 Case (the "Chapter
11 Case") on July 11, 1997 in the United States Bankruptcy Court for the
District of South Carolina (the "Bankruptcy Court"). A joint plan of
reorganization (the "Plan of Reorganization") was confirmed by the Bankruptcy
Court pursuant to an order entered as of November 12, 1997 and became effective
on January 7, 1998 (the "Effective Date"). On the Effective Date, pursuant to
the Plan of Reorganization, among other things, Flagstar merged with and into
FCI, FCI changed its name to Advantica Restaurant Group, Inc., FCI's $.50 par
value common stock (the "Old Common Stock") was canceled, extinguished and
retired, and Advantica issued 40,000,000 shares of the Common Stock to certain
classes of former debtholders of Flagstar.
Additionally, on the Effective Date, as part of the Plan of Reorganization,
a new slate of directors was elected to the Board of Directors of Advantica.
This new slate of directors included Messrs. Allen, Blaylock, Gaffney, Gold,
Marks, Moran and Shepherd. Also added as directors were Mr. Adamson and Mss.
Farris and Sanders who had served on the boards of FCI and Flagstar. Also, each
current executive officer served the Company as an executive officer during the
Chapter 11 Case.
COMMITTEES OF THE BOARD OF DIRECTORS, LEAD DIRECTOR DESIGNATION AND MEETINGS
There are three standing committees of the Board of Directors of Advantica,
the Audit Committee, the Compensation and Incentives Committee and the Public
Affairs Committee. The Audit Committee currently consists of Messrs. Marks,
Allen, Gaffney, Gold and Moran, with Mr. Marks serving as Chairman. The
Compensation and Incentives Committee is comprised of Messrs. Shepherd and
Blaylock and Mss. Farris and Sanders, with Mr. Shepherd serving as Chairman. The
Public Affairs Committee is comprised of each member of the Board of Advantica,
with Mr. Adamson serving as Chairman. Set forth below is a summary of the
principal functions of each committee and the number of meetings held by each
committee and the Board during 1998.
AUDIT COMMITTEE. The Audit Committee, which held four meetings in 1998,
recommends the appointment of the Company's independent auditors, reviews the
planned scope of the annual audit, reviews the conclusions of such auditors and
reports the findings and recommendations thereof to the Board, reviews with the
Company's auditors the adequacy of the Company's system of internal controls and
procedures and the role of management in connection therewith, reviews
transactions between the Company and its officers, directors and principal
stockholders, and performs such other functions and exercises such other powers
as the Board from time to time may determine.
COMPENSATION AND INCENTIVES COMMITTEE. The Compensation and Incentives
Committee (the "Committee"), approves and administers the compensation and
employee benefit plans of the Company, oversees and advises the Board regarding
the compensation of Company officers, reviews and makes recommendations to the
Board concerning compensation practices, policies, procedures and retirement
benefit plans and programs for the employees of the Company and oversees the
activities of plan administrators and trustees and other fiduciaries under the
Company's various employee benefit plans. It also administers the Company's
stock option plans and such other similar plans as may from time to time be
adopted by the Company, reviews and makes recommendations to the Board regarding
compensation practices, policies and procedures for members of the Board and
performs such other functions and exercises such other powers as the Board from
time to time may determine. In 1998, the Committee held five meetings.
5
<PAGE> 9
PUBLIC AFFAIRS COMMITTEE. The Public Affairs Committee considers and
reviews the policies and practices established by the Company from time to time
to address issues of social and public concern, reviews significant legislative
and other social trends and developments of importance to the Company and its
employees, customers and vendors, monitors and reports to the Board of Directors
concerning the Company's compliance with and progress toward the goals of its
Fair Share Agreement with the NAACP, and performs such other functions and
exercises such other powers as the Board from time to time may determine. In
1998, the Public Affairs Committee held two meetings.
The Company currently has no standing nominating committee.
In addition to the above mentioned Committee assignments, the Board in
January, 1999 appointed Ms. Sanders as Lead Director. As Lead Director, Ms.
Sanders will serve as interim Chairman of the Board and Chief Executive Officer
of the Company in the event Mr. Adamson is unable to serve due to accident,
disability or other unexpected circumstances. Additionally, Ms. Sanders will
meet with Mr. Adamson and senior executives to discuss and develop a roster of
potential successors for Mr. Adamson in the event he is unable to serve as a
result of the circumstances mentioned above.
During 1998, there were eleven meetings of the Board of Directors of
Advantica. During 1998, with the exception of Mr. Blaylock, each director of
Advantica attended at least 75% of the meetings of the Board of Directors of
Advantica (and, as applicable, committees thereof).
COMPENSATION OF DIRECTORS
Directors of Advantica other than Mr. Adamson receive the following
compensation: (i) a $30,000 annual cash retainer (paid in $7,500 installments on
a quarterly basis), (ii) an annual restricted stock retainer with a requirement
that the restricted stock be held until the director resigns or retires from the
Board (the size of the stock award to be determined annually by the Committee;
1,000 shares were awarded to each director in 1998 and 1,702 shares have been
awarded to each director in 1999), and (iii) a stock option grant in the amount
of 6,000 shares every three (3) years. Such options have a term of 10 years,
become exercisable at a rate of 33 1/3% per annum for three consecutive years
beginning on the first anniversary of the date of grant and have an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Also, Ms. Sanders receives an additional $10,000 annually for her service as
Lead Director.
SELECTION OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP as
the principal independent public auditors of the Company for the year 1999.
Deloitte & Touche LLP has acted in such capacity for the Company since 1986.
This selection is submitted for approval by the stockholders at the Annual
Meeting.
Representatives of Deloitte & Touche LLP will attend the Annual Meeting.
They will have an opportunity to make a statement, if they so desire, and to
respond to appropriate questions.
APPROVAL OF 1999 INCENTIVE COMPENSATION
The Committee and the Board of Directors of Advantica have approved certain
incentive compensation arrangements for 1999 for each of Advantica's executive
officers and certain other key employees pursuant to Advantica's 1999 Incentive
Program (the "1999 Incentive Program"). The Board is presenting such
arrangements to the stockholders for their approval at the Annual Meeting to the
extent required under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), in order to maximize the tax deductibility to the Company
of amounts that may ultimately be paid under such arrangements to the Company's
Chief Executive Officer and the four highest compensated officers for the
taxable year.
Under the 1999 Incentive Program, plan participants will receive target
awards ("Target Awards") equal to a percentage of their base salary depending on
the group classification assigned to such participant. Depending on an
individual participant's role and position with the Company and its various
business concepts, 75% of a participant's award will be determined based on the
Company and/or his or her concept attaining various Same Store Sales
6
<PAGE> 10
("SSS") and EBITDA (i.e., earnings before interest, taxes, depreciation and
amortization) performance levels. A participant will be designated either a
corporate participant or a concept participant. Each corporate participant and
non-officer concept participant will receive 40% of his or her Target Award if
Company or concept SSS, respectively, equals the SSS target performance level
and an additional 35% of his or her Target Award if the Company or concept
achieves its EBITDA target performance level. A concept participant who is a
concept officer will receive 40% of his or her Target Award if concept SSS
equals the SSS target performance level, an additional 25% of his or her Target
Award if the participant's concept achieves its EBITDA target performance level
and another 10% of his or her Target Award if the Company achieves its EBITDA
target performance level. The remaining 25% of a plan participant's potential
award is represented by the Strategic Initiatives Award. The purpose of the
Strategic Initiatives Award is to allow the Company to reward participants for
the successful completion of several critical initiatives and projects during
the year. Such target initiatives and projects will vary by department and
concept. The target performance levels and strategic initiatives were
established by the Company and the Committee during the first quarter of the
performance period.
If the Company and/or concept SSS and/or EBITDA target performance levels
are exceeded, a participant's award will be increased by incremental amounts in
direct relation to the excess performance amounts, but in no event may these
incremental awards attributable to additional performance exceed 50% of the
total incremental dollar increase in actual EBITDA over targeted EBITDA.
Additionally, participants may earn a portion of their Target Awards if
Advantica achieves at least 90% of the SSS target performance level or Advantica
achieves its 1998 actual EBITDA performance.
Payments of awards under the 1999 Incentive Program will be made as soon as
practicable after the end of the calendar year and the compilation of final
financial results. Eighty percent (80%) of the 1999 award payments made to
Company officers (vice presidents and higher) will be paid in cash with the
remaining 20% being paid in Company stock valued at $5.875 per share, the
closing price of the Common Stock on January 13, 1999. The remaining
participants' awards will be paid 100% in cash. The Board has reserved the right
to cancel, modify or amend the 1999 Incentive Program at any time up through and
including the day before the end of the performance period, and such
cancellation, modification or amendment may be retroactive to the beginning of
the year. A total of approximately 400 employees are participants in the 1999
Incentive Program.
The benefits or amounts that will be received by or allocated to the Chief
Executive Officer, to the other current officers named in the Summary
Compensation Table and to other individuals or categories of employees under
these incentive compensation arrangements are set forth in the table below based
upon the assumption that such individuals or categories of individuals receive
100% of their respective Target Awards under the terms of the 1999 Incentive
Program. For further discussion of Mr. Adamson's incentive bonus arrangement see
"Executive Compensation -- Employment Agreements -- Adamson Employment
Agreement."
7
<PAGE> 11
NEW PLAN BENEFITS
1999 INCENTIVE PROGRAM
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE($)(1) SHARES(2)
- ----------------- ------------------ ---------
<S> <C> <C>
James B. Adamson
Chairman, Chief Executive Officer and President of
Advantica.............................................. $ 825,000 28,085
Craig S. Bushey
Executive Vice President of Advantica and President,
Coco's/Carrows Division................................ 240,500 8,187
Ronald B. Hutchison
Executive Vice President and Chief Financial Officer of
Advantica.............................................. 204,750 6,970
Rhonda J. Parish
Executive Vice President, General Counsel and Secretary of
Advantica.............................................. 185,250 6,306
John A. Romandetti
Executive Vice President of Advantica and Chief Executive
Officer and President, Denny's Division................ 286,000 9,736
All current executive officers as a group................... 2,266,000 77,752
All current non-executive officer directors as a group...... -0- -0-
All current non-executive officer employees as a group...... 2,252,434 76,677
</TABLE>
- ---------------
(1) Dollar value of plan benefits includes the dollar value of the shares of
Common Stock representing 20% of the total Target Award payable under the
1999 Incentive Program in Common Stock.
(2) Reflects the number of shares of Common Stock representing 20% of the total
Target Award payable under the 1999 Incentive Program in Common Stock.
PROPOSED AMENDMENT TO THE ADVANTICA STOCK OPTION PLAN
The Board of Directors of Advantica has approved an amendment to
Advantica's Option Plan (as defined and further described below) to increase the
number of shares of Common Stock that may be issued under the Option Plan by an
additional 2,500,000, from 4,888,888 to 7,388,888, subject to stockholder
approval (the "Amendment"). Consistent with the Company's renewed emphasis on
long term compensation (see "Executive Compensation -- Compensation and
Incentives Committee Report"), this Amendment is being proposed to allow future
meaningful grants to the Company's officers and other key employees by providing
the means for the Company to further incent, through option grants, participants
currently holding a sizeable amount of "out-of-the-money" options and to provide
additional incentives and rewards to encourage them to continue in their
employment with the Company. No other amendments to the Option Plan are
proposed.
In 1998, Advantica established the Advantica Restaurant Group Stock Option
Plan (the "Non-Officer Plan") and the Advantica Restaurant Group Officer Stock
Option Plan (the "Officer Plan"). Pursuant to such plans, options to purchase a
total of approximately 3,325,000 shares of Common Stock were granted to
approximately 590 plan participants in 1998. Subsequently, early in 1999 the
Company merged the Non-Officer Plan with the Officer Plan to form the Advantica
Stock Option Plan (the "Option Plan"). At present, after taking into account the
termination of certain options after December 31, 1998 (and without giving
effect to the proposed Amendment), options representing a total of approximately
3,115,000 shares are outstanding (all of which, as of March 23, 1999, were
"out-of-the-money"), and options for approximately 1,773,000 additional shares
are available for future grant. There has been no decision with respect to the
number or terms of options that may be granted hereafter (following stockholder
approval of the Amendment) or the number or identity of future optionees under
the Option Plan.
MATERIAL TERMS OF THE OPTION PLAN
The Option Plan is administered by the Committee, which may delegate to a
subcommittee any and all authority granted to the Committee with respect to the
Option Plan as necessary to satisfy the requirements of
8
<PAGE> 12
Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and/or Section 162(m) of the Code and the
regulations thereunder for any option granted or exercised under the terms of
the Option Plan.
An option granted under the Option Plan (evidenced by an agreement in a
form approved by the Committee) entitles the participant to purchase shares of
Common Stock at a set option exercise price determined by the Committee. Option
agreements may provide for the exercise of options, in whole or in part, from
time to time during the term of the option or in such installments as the
Committee shall determine, subject to earlier termination upon the occurrence of
certain events as provided in the Option Plan. The Committee may, in its
discretion, accelerate the date on which an option becomes exercisable. Unless
designated by the Committee in its discretion as "incentive stock options"
("ISOs") intended to qualify under Section 422 of the Code, options granted
pursuant to the Option Plan are intended to be "non-qualified stock options".
Under the terms of the Option Plan, grants of ISOs will be limited to officers
of the Company.
The exercise price and the term of all options granted pursuant to the
Option Plan is determined by the Committee at the time of grant. However, in the
case of an ISO, the exercise price may not be less than the fair market value of
the Common Stock on the date of grant of the option and the term of the option
may not exceed ten years from the date of grant. In the case of an ISO granted
to any holder on the date of grant of more than 10% of the total combined voting
power of all classes of stock of the Company, the exercise price may not be less
than 110% of the fair market value of the Common Stock on the date of grant and
the term of the option may not exceed five years from the date of grant. The
exercise price of shares of Common Stock purchased upon the exercise of an
option may be paid: (1) in cash, (2) subject to disallowance by the Committee,
by surrender of other shares of Common Stock having a fair market value on the
date of exercise equal to such exercise price or partly by surrender of shares
of Common Stock with the balance in cash, or (3) subject to disallowance by the
Committee and at the election of the participant, by withholding a number of
shares from the number of shares to be issued upon exercise which have a fair
market value on the date of exercise equal to such exercise price.
Upon termination of the services of a participant, all options granted to
such participant that are not then exercisable shall expire and terminate.
Subject to certain limitations in the case of ISOs, if such termination is by
reason of death, retirement or disability, such holder's exercisable options
shall remain exercisable for one year following termination. If such termination
is due to voluntary termination or termination without cause, such holder's
exercisable options shall generally remain exercisable for sixty days following
termination. If such termination is for cause, all of such holder's options
shall expire and terminate as of the date of termination of employment.
Options granted under the Option Plan are nontransferable and nonassignable
by the optionee, other than by will or the laws of descent and distribution, and
are exercisable during his or her lifetime only by the optionee. Notwithstanding
the foregoing, the Committee may allow non-qualified stock options to be
transferred subject to the conditions and restrictions specified in the option
agreement. No option may be exercised after the expiration of its term. The
Company receives no proceeds upon the grant of options. Any proceeds received by
the Company from the sale of Common Stock on the exercise of options shall be
used for general corporate purposes. The partial exercise of an option shall not
cause the termination of the remaining portion thereof.
Upon the occurrence of certain events involving a recapitalization or
reorganization of the Company, the Committee will make appropriate adjustments
to the number of shares covered by each outstanding option and the per share
exercise price thereof, redeem such options (whether or not then exercisable),
or make other appropriate adjustments, in its discretion, to prevent dilution or
enlargement of rights. The Board of Directors of Advantica may at any time
suspend, discontinue or terminate the Option Plan or revise or amend it in any
respect (subject to any stockholder approval requirements and rights of existing
option holders).
9
<PAGE> 13
Set forth below is information with respect to options granted in 1998 to
the officers named in the Summary Compensation Table and other specified groups
under predecessors of the Option Plan.
NEW PLAN BENEFITS
ADVANTICA STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE($)(1) UNITS(2)
- ----------------- ------------------ ---------
<S> <C> <C>
James B. Adamson
Chairman, Chief Executive Officer and President of
Advantica.............................................. -- 700,000
Craig S. Bushey
Executive Vice President of Advantica and President,
Coco's/Carrows Division................................ -- 150,000
Ronald B. Hutchison
Executive Vice President and Chief Financial Officer of
Advantica.............................................. -- 150,000
Rhonda J. Parish
Executive Vice President, General Counsel and Secretary of
Advantica.............................................. -- 150,000
John A. Romandetti
Executive Vice President of Advantica and Chief Executive
Officer and President, Denny's Division................ -- 150,000
All current executive officers as a group................... -- 1,750,000
All current non-executive officer directors as a group...... -- --
All current non-executive officer employees as a group...... -- 1,575,600
</TABLE>
- ---------------
(1) The dollar value of each of the options granted is not determinable due to
fluctuating market prices.
(2) All such options granted in 1998 were granted either on January 28, 1998 or
September 11, 1998 and have a ten-year term subject to earlier termination
as described above. The January 28 option grants have an exercise price of
$10.00 per share and the September 11 option grants have an exercise price
of $4.69 per share. As of March 23, 1999, the Common Stock had a closing
price of $4.50 per share. For more information regarding 1998 stock option
grants, see "Executive Compensation -- Stock Options -- Option Grants in
1998" below.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences of
options granted under the Option Plan. The summary is not intended to be
exhaustive or cover all tax consequences that could apply to a particular
individual or to the Company.
There are no federal tax consequences to an Option Plan participant or the
Company upon the grant of a non-qualified stock option. Holders of such options
will, however, recognize ordinary income in the year in which the option is
exercised in the amount by which the fair market value of the purchased shares
on the date of exercise exceeds the option exercise price. Additionally, any
appreciation in the value of the purchased shares after the date of exercise
will be taxed as capital gains when such stock is ultimately sold. The Company
is entitled to a compensation expense deduction at the time such option is
exercised equal in amount to the ordinary income recognized by the optionee.
If the option exercise price under any non-qualified stock option is paid
for by surrendering shares of Common Stock previously acquired, then the
optionee will recognize ordinary income on the exercise as described above (any
shares acquired under the option in excess of the number of shares surrendered
being treated as having been acquired without consideration), but will not
recognize any taxable gain or loss on the difference between the optionee's
basis in the surrendered shares and their current fair market value. For federal
income tax purposes, newly acquired shares equal to the number of shares
surrendered will have the same basis and holding period as the
10
<PAGE> 14
surrendered shares. Any additional newly acquired shares will have a basis equal
to their fair market value at exercise and their holding period will begin at
the date of exercise as described above.
Regarding an ISO that is issued under the Option Plan, there will be no
federal income tax consequences to the Company at the time of grant or at the
time the option is exercised. The optionee will generally not recognize any
taxable income at the time of grant or at the time the option is exercised
provided the option is exercised while the optionee is an employee or within
three months thereafter, but the holder must treat the excess of the fair market
value on the date of exercise over the exercise price as an item of tax
adjustment for alternative minimum tax purposes. If the Common Stock acquired as
a result of the exercise is held for a period of one year after the ISO is
exercised and a period of two years after the ISO is granted, the disposition of
such Common Stock will ordinarily result in capital gains or losses to the
holder for federal income tax purposes equal to the difference between the
amount realized on disposition of the Common Stock and the exercise price.
Should the optionee sell the Common Stock acquired as a result of the ISO
exercise prior to the expiration of the one and two year holding periods
described above, a portion of any gain resulting from such sale will be taxed as
ordinary income. The portion so taxed is equal to the excess of the fair market
value of the shares when the ISO is exercised over the option exercise price, or
if less, the entire gain. Any additional gain upon sale of the stock will be
taxed as a capital gain. The Company will be entitled to deduct as compensation
expense only the amount of appreciation treated as ordinary income by the
optionee.
EXECUTIVE COMPENSATION
COMPENSATION AND INCENTIVES COMMITTEE REPORT
COMPENSATION PHILOSOPHY
Under the oversight and direction of the Compensation and Incentives
Committee of Advantica's Board of Directors, which is made up solely of
independent, outside directors, the Company has developed and implemented a
compensation program for its executive officers designed to attract and retain
top quality leadership talent while ensuring senior leaders' interests are
sufficiently aligned with the interests of stockholders.
In 1998, the Company retained the services of an outside independent
international human resources consulting firm, Hewitt Associates LLC, to conduct
a study of the Company's compensation program for its top executive and
management positions. To form a basis of comparison, Hewitt Associates conducted
a compensation measurement study against a custom group of 14 food,
entertainment, retail and hospitality companies. The study concluded that
Advantica's total compensation package for senior management was in line with
the current market. Reflecting the Company's recent restructuring and lack of
stock value throughout the 1990's, base salary and incentive bonuses have
represented the largest components of total compensation. Given the completion
of the recent financial restructuring, the Company is now placing a greater
emphasis on long term compensation by issuing stock options and requiring all
officers (vice presidents and above) to take a significant portion of their 1999
incentive compensation in the form of Company stock.
1998 EXECUTIVE OFFICER COMPENSATION PROGRAM
The 1998 executive officer compensation program of Advantica had three
primary components: (1) BASE SALARY established on the basis of (i) quantitative
market data in the form of salary comparisons to peer position groupings within
the restaurant and food service industry and other industries for positions not
unique to the food service sector, and (ii) Company specific factors such as
positions of responsibility and authority, years of experience and performance;
(2) SHORT-TERM INCENTIVES under the Company's 1998 Incentive Program (which is
substantially similar to the 1999 Incentive Plan described elsewhere herein --
see "Approval of 1999 Incentive Compensation"), based primarily upon the
achievement of certain Company or concept performance goals with a lesser amount
based upon the Committee's discretion to make awards based upon the achievement
of certain non-quantitative performance objectives and other criteria which it
may determine in its discretion from time to time throughout the year. The
Committee approved the payment of awards under the 1998 Incentive Program to
employees, including executive officers, based upon Company and concept EBITDA
and SSS results and the achievement of certain non-quantitative performance
objectives such as the successful sale of Hardee's and
11
<PAGE> 15
Quincy's concepts at substantial earnings multiples and improved sales and/or
guest traffic trends in all concepts; and (3) LONG-TERM INCENTIVES, which for
1998 consisted solely of stock options. During 1998, each executive officer of
the Company was granted options under the Company's officer stock option plan.
The Committee, administering such plan, allocated options to the Company's
executive officers and others based on an evaluation of their relative levels of
responsibility for and their potential contribution to the Company's operating
results (in relation to the Company's other optionees) in order to provide them
significant long-term incentives to enhance stockholder value as well as taking
into consideration the aforementioned compensation study, market data and
surveys.
Additionally, certain Company executives are eligible to participate in the
Company pension plan and all may participate in the Advantica Secured Savings
Plan, a non-qualified deferred compensation plan, as well as various other
benefit plans intended to provide a safety net of coverage against various
events, such as death, disability and retirement.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
With respect to Section 162(m) of the Code and the underlying IRS
regulations pertaining to the deductibility of compensation to certain executive
officers in excess of $1 million, the Committee has adopted a policy that it
will attempt to comply with such limitations, to the extent practicable,
including its presentation of the Company's annual incentive compensation plans
to the stockholders for prior approval. However, the Committee has also
determined that some flexibility is required, notwithstanding these IRS
regulations, in negotiating and implementing the Company's incentive
compensation program. It has, therefore, retained the discretion to award some
bonus payments based on non-quantitative performance objectives and other
criteria which it may determine, in its discretion, from time to time.
CHIEF EXECUTIVE OFFICER COMPENSATION
In the form of base salary, bonus payments, stock, stock options and other
payments, Mr. Adamson received in 1998 the compensation reflected and described
in the Summary Compensation Table set forth below. The determination of such
compensation to Mr. Adamson followed generally the philosophy and programs
described above for Advantica executive officers and was based upon the
Committee's and the Company's consideration of certain factors such as the
successful completion of the recent financial restructuring; improved Company
performance; Mr. Adamson's previous work experience and positions of
responsibility and authority; his performance in these previous positions and
the competitive rate in the industry for such experience and responsibility.
With the exception of the September, 1998 option grant, each item of
compensation paid in 1998 was based upon Mr. Adamson's employment agreement as
described elsewhere herein.
COMPENSATION AND INCENTIVES COMMITTEE
Donald R. Shepherd, Chairman
Ronald E. Blaylock
Vera K. Farris
Elizabeth A. Sanders
12
<PAGE> 16
COMPENSATION OF OFFICERS
Set forth below is information for 1998, 1997 and 1996 with respect to the
compensation for services to the Company of the Company's Chief Executive
Officer and the four most highly compensated executive officers of the Company,
other than the Chief Executive Officer, who were serving as executive officers
at the end of 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------- ALL
COMPENSATION(1) SECURITIES OTHER
NAME AND -------------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(2) BONUS($)(3) OPTIONS(#)(4) ($)(5)(6)
------------------ ---- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
James B. Adamson 1998 $1,096,597 $787,500 700,000 $5,819,315
Chairman, Chief Executive Officer and 1997 1,047,243 -- -- 1,666,842
President of Advantica 1996 947,068 100,000 100,000 364,133
Craig S. Bushey 1998 334,183 211,255 150,000 319,973
Executive Vice President of Advantica and 1997 320,992 -- -- 73,801
President, Coco's/Carrows Division 1996 183,973(7) 40,000 200,000 213,678
Ronald B. Hutchison 1998 267,174 162,505 150,000 158,750
Executive Vice President and 1997 246,286 -- -- 50,000
Chief Financial Officer of Advantica 1996 167,523 30,000 45,000 --
Rhonda J. Parish 1998 247,951 146,250 150,000 153,880
Executive Vice President, General 1997 224,657 -- -- 50,000
Counsel and Secretary of Advantica 1996 200,263 40,000 125,000 30,000
John A. Romandetti 1998 390,364 243,750 150,000 197,681
Executive Vice President of Advantica and 1997 355,149 10,122 -- 50,000
Chief Executive Officer and President, 1996 226,275 112,200 125,000 90,793
Denny's Division
</TABLE>
- ---------------
(1) The amounts shown for each named executive officer exclude perquisites and
other personal benefits that did not exceed, in the aggregate, the lesser of
either $50,000 or 10% of the total of annual salary and bonus reported for
the named executive officer for any year included in this table.
(2) The amounts in this column include certain costs and credits to the named
executive officers relating to certain life, health and disability insurance
coverage provided through the Company.
(3) The amounts shown in this column reflect payments received in the respective
year by the named executive officers under the Company's incentive programs.
(4) All the options listed for 1996 have been canceled for no consideration to
the holder under the terms of the Plan of Reorganization, which canceled the
Company's Old Common Stock and all underlying options as of the Effective
Date. Excluding Mr. Adamson, option grants shown for 1996 for each named
executive officer reflect the 1996 option repricing with respect to the
number of shares of the Old Common Stock indicated.
(5) The amounts for Mr. Adamson include (a) Company-paid life insurance premium
payments of $16,880 for each year listed, (b) retention payments in 1997 and
1998 of $1,550,000 and $2,000,000, respectively, (c) a $1,950,000 payment in
1998 for the purchase of 200,000 shares of Common Stock (paid in lieu of a
scheduled $3,000,000 retention payment due to Mr. Adamson on January 2, 1999
pursuant to Mr. Adamson's employment agreement), (d) Company-paid travel
expenses for members of Mr. Adamson's family for 1997 and 1998 in the amount
of $37,003 and $22,819, respectively, (e) reimbursements of certain incurred
legal, personal tax and financial planning expenses totaling $14,927 in 1997
and $28,874 in 1998, and (f) reimbursement for certain tax payments totaling
$16,920 in 1996, $48,032 in 1997 and $1,780,942 in 1998. The 1996 amount for
Mr. Adamson also reflects additional compensation and/or reimbursement paid
in the amount of $330,333 in connection with the renegotiation and amendment
of Mr. Adamson's employment agreement related to the extension of his
employment term. For additional information see "Executive
Compensation -- Employment Agreements -- Adamson Employment Agreement".
(6) The 1998 amounts for Ms. Parish and Messrs. Adamson, Bushey, Hutchison and
Romandetti include Company contributions made to such officers' accounts
under the Advantica Secured Savings Plan, a non-qualified deferred
compensation plan, in the amounts of $3,880, $19,800, $4,588, $8,750 and
$13,032, respectively. Excluding
13
<PAGE> 17
Mr. Adamson, each named executive officer's amounts also reflect retention
payments of $50,000 in 1997 and $150,000 in 1998 paid in connection with the
Plan of Reorganization. The remaining amounts shown for Messrs. Bushey and
Romandetti and Ms. Parish consist of additional compensation and/or
reimbursement paid to such named executive officers at or near the time of,
or otherwise arising in connection with, their initial employment or
subsequent relocation with the Company.
(7) This amount reflects base salary paid for only the portion of the year in
which the named executive officer was employed by the Company.
STOCK OPTIONS
The following table sets forth information regarding all options to acquire
shares of Common Stock granted to the named executive officers during the fiscal
year ended December 30, 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
% OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED EXERCISE APPRECIATION FOR OPTION
OPTIONS TO OR BASE TERM
GRANTED EMPLOYEES PRICE EXPIRATION ---------------------------
NAME (#)(1) IN 1998 ($/SH)(2) DATE 5% 10%
- ---- ---------- --------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James B. Adamson....................... 500,000(3) 15.0% $10.00 1/28/08 $3,297,589 $8,212,524
200,000(4) 6.0% $ 4.69 9/11/08 $ 589,903 $1,494,930
Craig S. Bushey........................ 100,000(3) 3.0% $10.00 1/28/08 $ 659,518 $1,642,505
50,000(4) 1.5% $ 4.69 9/11/08 $ 147,476 $ 373,733
Ronald B. Hutchison.................... 100,000(3) 3.0% $10.00 1/28/08 $ 659,518 $1,642,505
50,000(4) 1.5% $ 4.69 9/11/08 $ 147,476 $ 373,733
Rhonda J. Parish....................... 100,000(3) 3.0% $10.00 1/28/08 $ 659,518 $1,642,505
50,000(4) 1.5% $ 4.69 9/11/08 $ 147,476 $ 373,733
John A. Romandetti..................... 100,000(3) 3.0% $10.00 1/28/08 $ 659,518 $1,642,505
50,000(4) 1.5% $ 4.69 9/11/08 $ 147,476 $ 373,733
</TABLE>
- ---------------
(1) Such options listed for named executive officers were granted under the
Advantica Restaurant Group Officer Stock Option Plan. All options listed
expire ten years from the date of the grant.
(2) The exercise price equals the closing price of Common Stock on the date of
or the date immediately preceding the date of grant.
(3) These options become exercisable over a four-year period in increments of
30% at the grant date, 20% on the first and second anniversaries of the date
of grant, and 15% on the third and fourth anniversaries of the grant date.
(4) These options are exercisable in 25% annual increments over a four year
period beginning on the first anniversary of the date of grant.
14
<PAGE> 18
The following table sets forth information with respect to the 1998
year-end values of unexercised options (all of which were granted by the Company
pursuant to the Advantica Restaurant Group Officer Stock Option Plan) held by
the named executive officers at fiscal year-end.
AGGREGATED OPTION EXERCISES IN 1998 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED IN-
UNDERLYING THE-MONEY OPTIONS
UNEXERCISED AT FISCAL
OPTIONS AT FISCAL YEAR-END
YEAR-END(#) ($)
----------------- -----------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ----------------- -----------------
<S> <C> <C>
James B. Adamson.............................. 150,000/550,000 --/130,000
Craig S. Bushey............................... 30,000/120,000 --/ 32,500
Ronald B. Hutchison........................... 30,000/120,000 --/ 32,500
Rhonda J. Parish.............................. 30,000/120,000 --/ 32,500
John A. Romandetti............................ 30,000/120,000 --/ 32,500
--------------- ---------
</TABLE>
No options held by the foregoing named executive officers were exercised in
1998.
RETIREMENT PLANS
A tax qualified benefit retirement plan is maintained by Advantica and
certain other Advantica subsidiaries. Such plan is described below.
The following table shows the estimated annual benefits for a single life
annuity that could be payable under the Advantica Pension Plan, as amended, and
the ancillary plan described below upon a person's normal retirement at age 65
if that person were in one of the following classifications of assumed
compensation and years of credited service.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
REMUNERATION YEARS OF SERVICE
OVER ----------------------------------------------------
A FIVE-YEAR PERIOD 15 20 25 30 35
- ------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000....................................... $ 42,665 $ 56,887 $ 71,109 $ 85,331 $ 99,553
250,000....................................... 53,915 71,887 89,859 107,831 125,000
300,000....................................... 65,165 86,887 108,609 130,331 150,000
350,000....................................... 76,415 101,887 127,359 152,831 175,000
400,000....................................... 87,665 116,887 146,109 175,331 200,000
500,000....................................... 110,165 146,887 183,609 220,331 250,000
600,000....................................... 132,665 176,887 221,109 265,331 300,000
700,000....................................... 155,165 206,887 258,609 310,331 350,000
800,000....................................... 177,665 236,887 296,109 355,331 400,000
900,000....................................... 200,165 266,887 333,609 400,331 450,000
1,000,000....................................... 222,265 296,887 371,109 445,331 500,000
1,200,000....................................... 267,665 356,887 446,109 535,331 600,000
1,400,000....................................... 312,665 416,887 521,109 625,331 700,000
1,600,000....................................... 357,665 476,887 596,109 715,331 800,000
</TABLE>
The Advantica Pension Plan is noncontributory and generally covers
employees of Advantica and its subsidiaries (but not employees of the Denny's,
El Pollo Loco, Coco's and Carrows concepts) who have attained the age of 21 and
who have completed one thousand hours of service. There are two entry dates per
year for new employees, January 1 and July 1. As a result of a plan amendment
effective January 1, 1989, a participant's annual retirement benefit under the
Advantica Pension Plan at normal retirement age is calculated by multiplying the
number of years of participation in the Advantica Pension Plan (not to exceed 35
years) by the sum of one percent
15
<PAGE> 19
of the average Compensation (as defined below) paid during 60 consecutive
calendar months chosen to produce the highest average ("Average Compensation"
for the purposes of this paragraph) plus an additional one-half of one percent
of the Average Compensation in excess of the average Social Security wage base.
Benefits payable cannot exceed 50% of the Average Compensation. Plan benefits
are normally in the form of a life annuity or, if the retiree is married, a
joint and survivor annuity. "Compensation" for the purpose of this paragraph
generally consists of all remuneration paid by the employer to the employee for
services rendered as reported or reportable on Form W-2 for federal income tax
withholding purposes (including the amount of any year-end bonus paid),
excluding reimbursements and other expenses allowances, fringe benefits, moving
expenses, deferred compensation and welfare benefits (such exclusions including,
without limitation, severance pay, relocation allowance, gross-up pay to
compensate for taxable reimbursements, hiring bonuses, cost of living
differentials, special overseas premiums, compensation resulting from
participation in, or cancellation of, stock option plans, contributions by the
employer to the Advantica Pension Plan or any other benefits plan and imputed
income resulting from the use of Company property or services). Except for
limited purposes described in the plan, Compensation also includes any deferred
compensation under a Section 401(k) plan maintained by the employer and salary
reduction amounts under a Section 125 plan maintained by the employer. The
funding of the Advantica Pension Plan is based on actuarial determinations.
Ancillary to the Advantica Pension Plan is a non-qualified plan for a
select group of management and highly compensated employees that provides for
benefits limited by the limits on benefits and compensation under the Code.
"Compensation" and "Average Compensation" are defined in this ancillary plan the
same way they are defined in the Advantica Pension Plan. Benefits payable under
the ancillary plan are included in the table above.
The maximum annual pension benefit payable under the Advantica Pension Plan
for 1998 was $130,000 (or, if greater, the participant's 1982 accrued benefit).
Except for the accrual of certain non-qualified benefits as described
herein, the Compensation included under the Advantica Pension Plan (including
the ancillary nonqualified plan) generally corresponds with the annual
compensation of the named executive officers in the Summary Compensation Table
above. Includable Compensation for 1998 for Ms. Parish and Messrs. Adamson,
Hutchison and Romandetti was $394,170, $1,887,504, $433,343 and $639,590,
respectively.
As of April 20, 1998, the estimated credited years of service under the
Advantica Pension Plan for Ms. Parish and Messrs. Adamson, Bushey, Hutchison and
Romandetti at normal retirement age was 27, 19, 1, 21, and 19, respectively.
The early retirement provisions of the Advantica Pension Plan were amended
effective January 1, 1989 to provide an improved benefit for long service
employees. Employees with age and service equaling or exceeding 85 and who are
within five years of the Social Security retirement age will receive no
reduction of accrued benefits. Employees who are at least 55 years of age with
15 years of service will receive a reduction of three percent in accrued
benefits for the first five years prior to normal retirement date and six
percent for the next five years. Accrued benefits for employees retiring with
less than 15 years of service will be actuarially reduced beginning at age 55.
Vesting of retirement benefits was also changed to comply with the law from
12-year graduating vesting to five-year cliff vesting for the plan.
EMPLOYMENT AGREEMENTS
ADAMSON EMPLOYMENT AGREEMENT
Mr. Adamson and Advantica entered into an employment agreement (as amended
on February 27, 1995, December 31, 1996 and amended and restated as of January
7, 1998, the "Adamson Employment Agreement") which took effect on January 23,
1995 and which provides that Advantica will employ Mr. Adamson as Chief
Executive Officer and President of Advantica until his death or termination of
employment by reason of permanent disability, voluntary termination of
employment or involuntary termination with or without cause (as defined).
Pursuant to the Adamson Employment Agreement, Mr. Adamson was appointed the
Chairman of the Board of Directors of Advantica and the Board shall continue to
nominate Mr. Adamson as a director of the Company during his employment term.
The Adamson Employment Agreement prohibits Mr. Adamson from soliciting for
16
<PAGE> 20
employment the employees of the Company or its affiliates and from engaging in
certain competitive activities generally during his term of employment and for a
period of two years after the later of the termination of his employment or the
date on which the Company is no longer required to make certain termination
benefits. The Adamson Employment Agreement further prohibits Mr. Adamson from
using or disclosing certain "confidential" or "proprietary" information for
purposes other than carrying out his duties with the Company.
Under the Adamson Employment Agreement, Mr. Adamson is entitled to receive
(i) an annual base salary in the amount of $1,100,000 for the calendar year
ending December 31, 1998 (for each calendar year thereafter during Mr. Adamson's
term of employment, such base salary shall be determined by the Board but shall
not be less than $1,100,000, unless the Company implements a broad scale salary
reduction initiative), (ii) an annual performance bonus at an annual rate up to
200% of his base salary (targeted to equal 75% of his base salary) if the
Company and Mr. Adamson achieve budgeted financial and other performance targets
to be established by the Committee, (iii) a grant (as soon as practical after
January 7, 1998) of an option (the "Adamson Option"), under the Company's then
newly adopted stock option plan, to purchase 500,000 shares of the Common Stock,
with an exercise price equal to the fair market value of the Common Stock on the
date of grant (30% of such option grant exercisable immediately upon stockholder
approval of the Officer Plan with the remaining portion of the option becoming
exercisable at rate of 20% per year for the first and second anniversary dates
of the option grant and 15% per year for the third and fourth anniversary dates,
provided, that such options shall become 100% exercisable in the event of (a)
termination without cause, (b) a dissolution or liquidation of Advantica, (c) a
sale of all or substantially all of Advantica's assets, (d) a merger or
consolidation involving Advantica where Advantica is not the surviving
corporation or where holders of the Common Stock receive securities or other
property from another corporation, or (e) a tender offer for at least a majority
of the outstanding Common Stock), (iv) as soon as practical after January 7,
1998, a number of shares of Common Stock with an aggregate value (based upon a
fair market value of $10 per share) most nearly equal to $2,000,000, (v) on the
date of grant of the Common Stock referenced in (iv) above, a cash payment equal
to $1,750,000 which payment is intended to assist Mr. Adamson in the payment of
federal, state and local income taxes associated with the above referenced
receipt of Common Stock, and (vi) life insurance coverage maintained by the
Company with death benefits of at least $3,250,000 in the aggregate. The Adamson
Employment Agreement also entitles Mr. Adamson to certain other privileges and
benefits, including participation in all of the Company's benefit plans
generally applicable to the Company's executive officers.
In the event of Mr. Adamson's termination of employment during the term of
the Adamson Employment Agreement, the Company is required to make payments as
follows based upon the cause of such termination: (i) if by reason of death, Mr.
Adamson's surviving spouse is entitled to be paid an amount equal to Mr.
Adamson's base salary and annual bonus and continuation of certain benefits for
a one-year period after his death; (ii) if by reason of permanent disability,
Mr. Adamson is entitled to be paid one-half of his base salary and annual bonus
and continuation of certain benefits for a period of two years after termination
of employment; and (iii) if by the Company other than for "cause", Mr. Adamson
is, in general, entitled to (a) a lump sum in an amount equal to 299% of his
base salary and his targeted annual bonus, (b) the immediate vesting of 100% of
the Adamson Option to be exercisable as of the date of termination, and (c)
continuation of certain benefits and other contract rights. Furthermore, in the
event of termination for "cause" or voluntary termination, the Company shall pay
Mr. Adamson generally the benefits due him under the Company's benefit plans for
his services rendered to the Company through his date of termination.
OTHER EMPLOYMENT AGREEMENTS
Each of the named executive officers other than Mr. Adamson are parties to
separate letter agreements with the Company dated December 3, 1997, which
provide, for the named executive officer, the following compensation and
benefits: (1) retention payments at June 30 in the amount of $50,000 and at
December 31 in the amounts of $100,000, $125,000 and $175,000 for years 1997,
1998 and 1999, respectively, provided the named executive officers remain
employed with the Company as of such dates; (2) options to purchase 100,000
shares of Common Stock (contingent upon the effective waiver and release of
certain change of control and severance benefits which expired six months after
the Effective Date) which are exercisable over a ten-year period at an exercise
price of the fair market value of the stock on the date of grant of such
options, and (3) the payment of severance benefits (in a single lump amount
within 5 days following termination) equal to two times the named executives'
then current base pay
17
<PAGE> 21
(but not less than two times their base pay as of December 3, 1998) plus 200% of
the named executives' targeted annual bonus (but not less than 65% of their then
current base salary) plus an amount equal to actual benefit credits for an
eighteen-month period as well as accrued unused vacation time. Such payment
shall be guaranteed by certain subsidiaries of the Company. The letter
agreements further provide that (i) the stock options referenced immediately
above shall become 100% exercisable in the event of (a) termination without
cause, (b) a dissolution or liquidation of Advantica, (c) a sale of all or
substantially all of Advantica's assets, (d) a merger or consolidation involving
Advantica where Advantica is not the surviving corporation or where holders of
the Common Stock receive securities from another corporation, or (e) a tender
offer for at least a majority of the outstanding Common Stock, and (ii) in the
event the named executive officers are terminated during a calendar year for
which an annual bonus is paid by the Company, the annual bonus to which the
named executive would have otherwise been entitled shall be prorated and
included as a part of his/her severance payment, provided the named executive
was employed for at least six (6) months during that year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Compensation and Incentives
Committee of the Board of Directors during the fiscal year ended December 30,
1998: Ronald E. Blaylock, Vera K. Farris, Elizabeth A. Sanders and Donald R.
Shepherd. None of the members of the Committee were officers or employees of the
Company or had any relationship directly or indirectly with the Company
requiring disclosure under Securities and Exchange Commission (the "SEC")
regulations.
18
<PAGE> 22
STOCKHOLDER RETURN PERFORMANCE GRAPH
Pursuant to the Plan of Reorganization on the Effective Date, all of the
Old Common Stock existing as of the Effective Date was canceled, extinguished
and retired. On the Effective Date, Advantica issued the Common Stock, which has
been registered under Section 12 of the Exchange Act. Consequently, set forth
below is a line graph comparing the cumulative total stockholders' return on the
Common Stock against the cumulative total return of the Russell 2000(R) Index
and a peer group index for the latest fiscal year commencing on January 8, 1998,
the date the Common Stock was listed on The Nasdaq Stock Market(R), and ending
December 30, 1998. The graph and table assume that $100 was invested on January
8, 1998 in each of the Company's Common Stock, the Russell 2000(R) Index and the
peer group index and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Russell 2000 Peer Group
(Fiscal Year Covered) Index(1) Index(2) Advantica
<S> <C> <C> <C>
01/08/98 100.00 100.00 100.00
04/01/98 113.97 121.14 98.68
07/01/98 108.29 101.71 107.24
09/30/98 86.00 79.17 50.00
12/30/98 97.64 85.54 56.25
</TABLE>
- ---------------
(1) A broad equity market index of 2,000 companies (including Advantica) with
comparable market capitalization to Advantica. The average market
capitalization of companies within the index was approximately $592 million
with the median market capitalization being approximately $500 million.
(2) This peer group index consists of the following six other leading public
companies in the family-style restaurant category: Bob Evans Farms, Inc.
(BOBE), CBRL Group, Inc. (CBRL), Friendly Ice Cream Corporation (FRND), IHOP
Corp. (IHOP), Shoney's, Inc. (SHN) and VICORP Restaurants, Inc. (VRES).
19
<PAGE> 23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent (10%) of the
Company's Common Stock to file initial reports of ownership and changes in
ownership with the SEC. Additionally, SEC regulations require that the Company
identify any individuals for whom one of the referenced reports was not filed on
a timely basis during the most recent fiscal year or prior fiscal years. To the
Company's knowledge, based solely on review of reports furnished to it and
written representations that no other reports were required during and with
respect to the fiscal year ended December 30, 1998, all Section 16(a) filing
requirements applicable to its executive officers, directors and more than 10%
beneficial owners were complied with.
CERTAIN TRANSACTIONS
During Advantica's last fiscal year, there were no transactions occurring
or relationships that existed between the Company and its management that
require disclosure under SEC regulations.
OTHER MATTERS
EXPENSES OF SOLICITATION
The Company will pay the costs of solicitation of proxies, including the
cost of assembling and mailing this Proxy Statement and the material enclosed
herewith. In addition to the use of the mails, proxies may be solicited
personally, or by telephone or telegraph, by corporate officers and employees of
the Company without additional compensation. The Company intends to request
brokers and banks holding stock in their names or in the names of nominees to
solicit proxies from their customers who own such stock, where applicable, and
will reimburse them for their reasonable expenses of mailing proxy materials to
their customers.
DISCRETIONARY PROXY VOTING
In the event that any matters other than those referred to in the
accompanying notice should properly come before and be considered at the Annual
Meeting, it is intended that proxies in the accompanying form will be voted
thereon in accordance with the judgment of the person or persons voting such
proxies.
2000 STOCKHOLDER PROPOSALS
In order for stockholder proposals intended to be presented at the year
2000 Annual Meeting of Stockholders to be eligible for inclusion in the
Company's proxy statement and the form of proxy for such meeting, they must be
received by the Company at its principal offices in Spartanburg, South Carolina
no later than December 7, 1999. Regarding stockholder proposals intended to be
presented at the year 2000 Annual Meeting but not included in the Company's
proxy statement, pursuant to the Company's bylaws, written notice of such
proposals, to be timely, must be received by the Company no more than 90 days
and no less than 60 days prior to the meeting. However, in the event that less
than 70 days public notice of the date of the meeting is given, notice of such a
stockholder proposal, to be timely, must be received not later than the close of
business on the 10th day following the day on which the public notice of meeting
was made. All such proposals for which timely notice is not received in the
manner described above will be ruled out of order at the meeting resulting in
the proposal's underlying business not being eligible for transaction at the
meeting.
FORM 10-K
A copy of the Company's Form 10-K as filed with the SEC is available,
without charge, upon written request directed to Larry Gosnell, Director of
Investor Relations, at the corporate address set forth above.
20
<PAGE> 24
(ADVANTICA RESTAURANT GROUP LOGO)
Notice of Annual Meeting
and
Proxy Statement
Annual Meeting
of Stockholders
to be held
May 19, 1999
<PAGE> 25
PROXY BY MAIL Please mark
your votes [X]
ADVANTICA RESTAURANT GROUP, INC. like this
203 East Main Street, Spartanburg, SC 29319
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
YOUR SHARES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED OR
IF YOUR PROXY IS NOT PROPERLY COMPLETED AND RECEIVED BY MAY 14, 1999,
YOUR SHARES WILL BE VOTED BY THE PLAN TRUSTEE "FOR" PROPOSALS 1, 2, 3 & 4.
The undersigned hereby appoints James B. Adamson and Elizabeth A.
Sanders as Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of the Common Stock of Advantica Restaurant Group, Inc. (the "Company")
held of record by the undersigned on March 23, 1999 at the Annual Meeting of
Stockholders to be held on May 19, 1999 or any adjournment thereof.
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
1. To elect nine (9) directors
WITHHELD
Nominees: FOR FOR ALL
01 James B. Adamson 06 Robert E. Marks
02 Ronald E. Blaylock 07 Charles F. Moran [ ] [ ]
03 Vera K. Farris 08 Elizabeth A. Sanders
04 James J. Gaffney 09 Donald R. Shepherd
05 Irwin N. Gold
WITHHELD FOR: (Write that nominee's name in the space provided below).
______________________________________________________________________
FOR AGAINST ABSTAIN
2. To consider and vote upon a proposal to ratify the
selection by the Board of Directors of Deloitte & [ ] [ ] [ ]
Touche LLP as the principal independent auditors of
Advantica and its subsidiaries (collectively, the
"Company") for the year 1999.
3. To consider and vote upon a proposal to approve the [ ] [ ] [ ]
1999 Incentive Program for the Company's employees.
4. To consider and vote upon a proposal to amend the [ ] [ ] [ ]
Advantica Stock Option Plan, as previously amended,
to increase the authorized shares issuable there-
under.
5. To transact such other business as may properly come
before the meeting.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS ON THE REVERSE
SIDE.
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature__________________________Signature_____________________Date___________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE AND READ THE REVERSE SIDE *
[ADVANTICA LOGO]
ADMITTANCE CARD
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1999 - 10:00 a.m.
The Waldorf Astoria Hotel
301 Park Avenue
New York, New York 10022
If you plan to attend the Annual Meeting, please sign and
return the self addressed, postage pre-paid portion of this card.
You will need to present this Admittance Card in order to be
admitted to the Annual Meeting on May 19, 1999.
- --------------------------------------------------------------------------------
I plan to attend the Annual Meeting of Stockholders of Advantica
Restaurant Group, Inc. on May 19, 1999.
___________________________________________________
Signature
___________________________________________________
Please print/type full name
Address:
___________________________________________________
___________________________________________________
<PAGE> 26
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
[ADVANTICA LOGO]
* You can now vote your shares electronically through the Internet or the
telephone.
* This eliminates the need to return the proxy card.
* Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to
create an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in
hand when you call. You will be prompted to enter the company number, proxy
number and account number. Follow the voting instructions to vote your
shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED ELECTRONICALLY
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 82 SPARTANBURG, SC
POSTAGE WILL BE PAID BY ADDRESSEE
Advantica Restaurant Group
Attn: Corporate Secretary
203 East Main Street
Spartanburg SC 29319-9725
<PAGE> 27
PROXY BY MAIL Please mark
ADVANTICA RESTAURANT GROUP, INC. your votes [X]
203 East Main Street, Spartanburg, SC 29319 like this
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS
INDICATED, WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 & 4.
The undersigned hereby appoints James B. Adamson and Elizabeth A.
Sanders as Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of the Common Stock of Advantica Restaurant Group, Inc. (the "Company")
held of record by the undersigned on March 23, 1999 at the Annual Meeting of
Stockholders to be held on May 19, 1999 or any adjournment thereof.
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
1. To elect nine (9) directors
WITHHELD
Nominees: FOR FOR ALL
01 James B. Adamson 06 Robert E. Marks
02 Ronald E. Blaylock 07 Charles F. Moran [ ] [ ]
03 Vera K. Farris 08 Elizabeth A. Sanders
04 James J. Gaffney 09 Donald R. Shepherd
05 Irwin N. Gold
WITHHELD FOR: (Write that nominee's name in the space provided below).
______________________________________________________________________
FOR AGAINST ABSTAIN
2. To consider and vote upon a proposal to ratify the
selection by the Board of Directors of Deloitte & [ ] [ ] [ ]
Touche LLP as the principal independent auditors of
Advantica and its subsidiaries (collectively, the
"Company") for the year 1999.
3. To consider and vote upon a proposal to approve the [ ] [ ] [ ]
1999 Incentive Program for the Company's employees.
4. To consider and vote upon a proposal to amend the [ ] [ ] [ ]
Advantica Stock Option Plan, as previously amended,
to increase the authorized shares issuable there-
under.
5. To transact such other business as may properly come
before the meeting.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS ON THE REVERSE
SIDE.
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature__________________________Signature_____________________Date___________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE AND READ THE REVERSE SIDE *
[ADVANTICA LOGO]
ADMITTANCE CARD
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1999 - 10:00 a.m.
The Waldorf Astoria Hotel
301 Park Avenue
New York, New York 10022
If you plan to attend the Annual Meeting, please sign and
return the self addressed, postage pre-paid portion of this card.
You will need to present this Admittance Card in order to be
admitted to the Annual Meeting on May 19, 1999.
- --------------------------------------------------------------------------------
I plan to attend the Annual Meeting of Stockholders of Advantica
Restaurant Group, Inc. on May 19, 1999.
___________________________________________________
Signature
___________________________________________________
Please print/type full name
Address:
___________________________________________________
___________________________________________________
<PAGE> 28
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
[ADVANTICA LOGO]
* You can now vote your shares electronically through the Internet or the
telephone.
* This eliminates the need to return the proxy card.
* Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to
create an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in
hand when you call. You will be prompted to enter the company number, proxy
number and account number. Follow the voting instructions to vote your
shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED ELECTRONICALLY
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 82 SPARTANBURG, SC
POSTAGE WILL BE PAID BY ADDRESSEE
Advantica Restaurant Group
Attn: Corporate Secretary
203 East Main Street
Spartanburg SC 29319-9725
