<PAGE>
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 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
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)(4) 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:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ADVANTICA]
203 East Main Street
Spartanburg, South Carolina 29319
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Annual
Meeting of Stockholders to be held at 10:00 a.m. on
Wednesday, May 24, 2000, at the Grand Hyatt Atlanta,
3300 Peachtree Road, Atlanta, GA 30305. 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. These cards are
attached together and enclosed with the 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>
[LOGO OF ADVANTICA]
-----------------
NOTICE OF MEETING
-----------------
Spartanburg, SC
April 10, 2000
The Annual Meeting of Stockholders of Advantica Restaurant Group, Inc.
("Advantica") will be held at the Grand Hyatt Atlanta, 3300 Peachtree Road,
Atlanta, Georgia 30305 on Wednesday, May 24, 2000, at 10:00 a.m. for the
following purposes as 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 2000.
3. To consider and vote upon a proposal to approve Advantica's 2000
Incentive Program for the Company's employees.
4. 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 28, 2000 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>
[LOGO OF ADVANTICA]
-----------------
PROXY STATEMENT
-----------------
GENERAL
April 10, 2000
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 24, 2000, at 10:00 a.m. at the Grand
Hyatt Atlanta, 3300 Peachtree Road, Atlanta, Georgia 30305 (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 28, 2000 (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 14, 2000.
As of the close of business on the Record Date, there were issued and
outstanding and entitled to be voted at the Annual Meeting, 40,078,543 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 Annual 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 2000, and (iii) in favor of the
proposal to approve Advantica's 2000 Incentive Program for the Company's
employees. If any other matter or business is brought before the Annual
Meeting, the proxy holders may vote the proxies at their discretion.
1
<PAGE>
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 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 April 1, 2000, the beneficial
ownership of Common Stock by each stockholder known by the Company to own more
than 5% of the outstanding shares.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
of Outstanding Percentage of
Name and Address Shares Common Stock
- ---------------- -------------------- -------------
<S> <C> <C>
Loomis Sayles & Company, L.P. ("Loomis")
(and related entities)
One Financial Center
Boston, MA 02111......................... 8,678,527(1) 21.7%
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) 9.6%
Lloyd I. Miller, III
(and related entities)
4550 Gordon Drive
Naples, FL 34102......................... 3,860,568(2)(3) 9.5%
Morgan Stanley Dean Witter & Co. ("Morgan
Stanley")
(and related entities)
1585 Broadway
New York, NY 10036....................... 3,115,319(2) 7.8%
</TABLE>
- -------
(1) Shares which may be deemed beneficially owned by Loomis and certain related
entities are as reported on the latest Schedule 13D filed by Loomis on
December 16, 1999. 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 Accounts. 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, the Company believes based on information provided to it by Loomis
as of December 16, 1999, that Loomis has (1) sole voting power with respect
to 7,603,588 shares, (2) shared voting power with respect to 764,762
shares, and (3) sole dispositive power with respect to all such shares.
2
<PAGE>
(2) Shares shown as beneficially owned by CNA, Moore Capital and Morgan
Stanley and their related entities are as reported on the latest Schedule
13G filing by each such stockholder. Such filings for CNA and Moore
Capital reflect that each such stockholder has shared voting and
investment power with respect to those shares reported as beneficially
owned. Filings for Morgan Stanley reflect Morgan Stanley has shared voting
power with respect to 3,108,569 shares and shared investment power with
respect to all such shares reported as beneficially owned. Shares shown as
beneficially owned by Lloyd Miller are as reported to the Company by Mr.
Miller as of April 1, 2000. The Company believes, based on the information
provided to it by Mr. Miller, that he has sole voting and investment power
with respect to 1,955,567 shares and shared voting and investment power
with respect to 1,905,001 shares.
(3) Shares shown as beneficially owned by Lloyd Miller include 756,233 shares
of Common Stock which Mr. Miller has the right to acquire through the
exercise of warrants to purchase Common Stock.
Management
The following table sets forth, as of April 1, 2000, the beneficial
ownership of Common Stock by: (i) each director and nominee to the Board of
Directors of Advantica (with the exception of nominee Lloyd Miller whose
Common Stock ownership is reflected under "--Principal Stockholders" above,
(ii) each executive officer of the Company included in the Summary
Compensation Table on page 10, 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........................ 600,000 1.5
Ronald E. Blaylock...................... 13,369 *
Vera King Farris........................ 13,369 *
James J. Gaffney........................ 20,369 *
Irwin N. Gold........................... 27,869 *
Robert E. Marks......................... 23,369 *
Charles F. Moran........................ 19,369 *
Elizabeth A. Sanders.................... 15,369 *
Donald R. Shepherd...................... 32,369 *
Craig S. Bushey......................... 98,075 *
Ronald B. Hutchison..................... 84,500 *
Rhonda J. Parish........................ 84,000 *
John A. Romandetti...................... 98,500 *
All current directors and executive
officers as a group (18 persons)....... 1,318,977 3.2
</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
(400,000 shares), (ii) Messrs. Blaylock, Gaffney, Gold, Marks, Moran and
Shepherd and Mss. Farris and Sanders (4,000 shares each), (iii) Messrs.
Bushey, Hutchison, Romandetti and Ms. Parish (82,500 shares each) and (iv)
all current directors and executive officers as a group (944,500 shares).
Each of the above mentioned options were granted by Advantica pursuant to
the Advantica Stock Option Plan.
3
<PAGE>
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. Accordingly, it
is intended that proxies in the accompanying form will be voted at the Annual
Meeting for the election of nine (9) nominees to the Board of Directors of
Advantica. These nominees are: James B. Adamson, Ronald E. Blaylock, Vera King
Farris, James J. Gaffney, Robert E. Marks, Lloyd I. Miller, Charles F. Moran,
Elizabeth A. Sanders and Donald R. Shepherd, each of whom has consented to
serve and will serve as a director of Advantica, if elected, until the 2001
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. With the exception
of Lloyd I. Miller, each nominee currently serves as a director. Irwin N. Gold
will not stand for re-election to the Board of 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, directorships
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 52 Chairman of Advantica; Chief Executive Officer and President of Advantica
(1995 to present); Chief Executive Officer and President of Denny's, Inc.
("Denny's") (February 2000 to present); Chief Executive Officer of Burger
King Corporation (1993 to 1995). Director of Kmart Corporation.
Ronald E. Blaylock 40 Director of Advantica; President and Chief Executive Officer of Blaylock
and Partners, L.P., a New York based investment banking firm (1993 to
present).
Vera King Farris 59 Director of Advantica; President of the Richard Stockton College of New
Jersey (1983 to present); Director of National Utilities Investors, Inc.
James J. Gaffney 59 Director of Advantica; Vice Chairman, Viking Pacific Holdings Limited, a
diversified holding company headquartered in Auckland, New Zealand with
approximately 23 different businesses based primarily in New Zealand
(1998 to present); Chairman, Vermont Investments Limited, a diversified
holding company involved in manufacturing and distribution (1997 to
1998); 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 SCP
Pool Corporation and Hvide Marine Incorporated.
Irwin N. Gold 43 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, and Cole National
Group, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Current Principal Occupation or
Name Age Employment and Five-Year Employment History
- ---- --- -------------------------------------------
<S> <C> <C>
Robert E. Marks 48 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.
Lloyd I. Miller, III 45 Registered Investment Advisor (1990 to present); Director of Porta
Systems Corp. and Dualstar Technologies Corporation.
Charles F. Moran 70 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. Sanders 54 Director of Advantica; Principal of The 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.
Donald R. Shepherd 63 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); Director of Hvide Marine
Incorporated.
</TABLE>
In early 1997, the Company determined, in light of operating trends and the
Company's liquidity and capital needs, to recapitalize the Company's
enterprise over the long-term 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 proceeding (the "Chapter 11
Proceeding") 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. Blaylock, Gaffney, Gold, Marks,
Moran and Shepherd. Also elected 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 of Advantica served the Company as an executive
officer or officer during the Chapter 11 Proceeding.
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,
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 1999.
Audit Committee. The Audit Committee, which held four meetings in 1999,
recommends the appointment of the Company's outside auditors and monitors and
evaluates such auditors' independence and performance, 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 with the outside auditors the Company's interim financial results to
be included in the Company's quarterly reports to be filed with the Securities
and Exchange Commission (the "SEC") and matters related thereto, reviews
transactions between the Company and its officers, directors and principal
stockholders, reviews the adequacy of the Audit Committee's Charter on an
annual basis and performs such other functions and exercises such other powers
as the Board from time to time may determine.
5
<PAGE>
Compensation and Incentives Committee. The Compensation and Incentives
Committee (the "Compensation 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 recommends
candidates for election to the Board, 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 1999, the Committee held four
meetings.
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 1999, the Public Affairs Committee held one meeting.
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 and Board members 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
and generally will stay abreast of Company issues in a more in-depth manner
than required of other board members.
During 1999, there were eleven meetings of the Board of Directors of
Advantica. During 1999, with the exception of Messrs. Blaylock and Gold, 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
Each director of Advantica other than Mr. Adamson receives 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 (the size of
such award determined annually by the Compensation Committee) with a
requirement that the restricted stock be held until the director resigns or
retires from the Board (for the years 1998, 1999 and 2000, 1,000, 1,702 and
6,667 shares, respectively, were awarded to each director) 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. In addition to the above described compensation,
Ms. Sanders receives $10,000 annually for her service as Lead Director and
beginning in the year 2000, the chairmen of the Audit Committee and the
Compensation Committee will each receive compensation of $10,000 annually for
their service as the committee chair.
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 2000.
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.
6
<PAGE>
APPROVAL OF 2000 INCENTIVE COMPENSATION
The Compensation Committee and the Board of Directors of Advantica have
approved certain incentive compensation arrangements for 2000 for Advantica's
executive officers and certain other key employees pursuant to Advantica's
2000 Incentive Program (the "2000 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 other than the Chief Executive Officer, for the taxable year.
Under the 2000 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. A participant will
be designated as either a Corporate Participant (Advantica and Denny's
participating employees) or a Concept Participant (Coco's and Carrows
participating employees). With the exception for certain designated officers
described further below, 90% of a Corporate Participant's award will be
determined based on Denny's attaining various Same Store Sales ("SSS") and
EBITDA (i.e., earnings before interest, taxes, depreciation and amortization)
performance levels. Each Corporate Participant will receive 50% of his or her
Target Award if Denny's SSS equals the SSS target performance level and an
additional 40% of his or her Target Award if Denny's achieves its EBITDA
target performance level. The remaining 10% of a Corporate Participant's
potential award is represented by the "Service Metrics" Award. The purpose of
the Service Metrics Award is to allow the Company to reward participants for
the successful completion of certain defined customer service criteria during
the year. A Concept Participant will receive 50% of his or her Target Award if
the participant's concept achieves its SSS target performance level and an
additional 50% of his or her Target Award if the participant's concept
achieves its EBITDA target performance level. The target performance levels
were established by the Company and the Compensation Committee during the
first quarter of the performance period. For certain designated officers, 40%
of the officer's award will be determined based upon the Company's SSS and
EBITDA performance levels (i.e., 20% for each) with the remaining 60% of the
officer's award based upon the achievement of certain other performance goals
known as "Strategic Execution" goals established by the Company and
Compensation Committee for each such officer. Such Strategic Execution goals
include (a) the divestiture of Coco's and Carrows, (b) achieving certain
changes in the Company's capital structure necessary to execute the Company's
business plan, (c) the achievement of certain defined Denny's refranchising
targets, (d) achieving certain expense reduction targets, (e) the development
of a lower cost Denny's reimage model and (f) not exceeding certain levels of
debt for the current fiscal year.
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.
Participants may earn a portion of their Target Awards if the Company achieves
at least 90% of the SSS target performance level.
Payments of awards under the 2000 Incentive Program will be made as soon as
practicable after the end of the calendar year and the compilation of final
financial results. The Board has reserved the right to cancel, modify or amend
the 2000 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 500 employees are participants in the 2000 Incentive Program.
The benefits or amounts that will be received by or allocated to the Chief
Executive Officer, to the other 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 2000 Incentive
Program. For further discussion of Mr. Adamson's incentive bonus arrangement,
which is separate from and not a part of the 2000 Incentive Program, see
"Executive Compensation--Employment Agreements--Adamson Employment Agreement."
7
<PAGE>
NEW PLAN BENEFITS
2000 Incentive Program
<TABLE>
<CAPTION>
Number
of
Name and Position Dollar Value ($) Units
- ----------------- ---------------- ------
<S> <C> <C>
James B. Adamson
Chairman, Chief Executive Officer and President of Advantica and Denny's.......... $ -0- --
Craig S. Bushey
Executive Vice President and Chief Operating Officer of Denny's................... 240,500 --
Ronald B. Hutchison
Executive Vice President and Chief Financial Officer of Advantica and Denny's..... 217,750 --
Rhonda J. Parish
Executive Vice President, General Counsel and Secretary of Advantica and Denny's.. 195,000 --
John A. Romandetti
Former Executive Vice President of Advantica and Chief Executive Officer and Pres-
ident, Denny's................................................................... -0- --
All current executive officers as a group (10 persons)............................. 1,627,075 --
All current non-executive officer directors as a group............................. -0- --
All current non-executive officer employees as a group (495 persons)............... 4,358,743 --
</TABLE>
EXECUTIVE COMPENSATION
Compensation and Incentives Committee Report
Compensation Philosophy
Under the oversight and direction of the Compensation and Incentives
Committee, which is made up solely of 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 June, 1998, an outside, independent international human resources
consulting firm, Hewitt Associates LLC ("Hewitt"), completed a study of the
Company's compensation program for its top executive and management positions.
To form a basis of comparison, Hewitt 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 continue to represent the largest components
of total compensation. Given the completion of the recent financial
restructuring and the findings of the Hewitt study, in 1999 the Company has
continued to move toward a greater emphasis on long-term compensation by
issuing additional stock options and creating for fiscal years 2000 and 2001,
a leadership incentive program tied substantially to stock price performance.
1999 Executive Officer Compensation Program
The 1999 executive officer compensation program of Advantica had three
primary components: (1) Base Salary, (2) Short-term Incentives, and (3) Long-
term Incentives. Base Salary is established on the basis of (i) annual
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. Short-term Incentives under the Company's 1999 Incentive
Program (which is substantially similar to the 2000 Incentive Plan described
elsewhere herein -- see "Approval of 2000 Incentive Compensation"), are based
primarily upon the achievement of certain Company or concept quantitative
performance goals with a lesser amount based upon the achievement of certain
non-quantitative performance objectives known as "Strategic Initiatives"
designed to reward participants for the successful completion of certain
critical initiatives and projects during the year. These initiatives and
projects varied by department and concept and were established by the Company
and the Compensation Committee during the first quarter of the performance
period. In 1999, the Company did not pay full bonus amounts to employees
because all of the Company and concept quantitative performance goals were
8
<PAGE>
not achieved. However, as a result of the achievement of certain of the
quantitative performance goals and based upon the achievement of the Strategic
Initiatives, such as documented procurement savings and the successful
completion of the Denny's and Coco's remodel plan, Denny's franchise
development plans and the Y2K and internal computer systems conversions, the
Compensation Committee did approve the payment of partial awards to employees,
including executive officers, in accordance with the terms of the 1999
Incentive Program. Long-term Incentives for 1999 consisted solely of stock
options. During 1999, certain executive officers of the Company were granted
options under the Company's stock option plan. The Compensation 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, Company executives are eligible to participate in certain
Company retirement and savings plans, 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 underlying regulations
pertaining to the deductibility of compensation to certain executive officers
in excess of $1 million, the Compensation Committee has adopted a policy 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 Compensation Committee has also
determined that some flexibility is required, notwithstanding these statutory
and regulatory provisions, 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 and other payments, Mr. Adamson
received in 1999 the compensation reflected and described in the Summary
Compensation Table set forth below. Such compensation to Mr. Adamson was in
accordance with the terms of his employment agreement, described elsewhere
herein, and followed generally the philosophy and programs described above for
Advantica's executive officers.
Such compensation was based upon the Compensation Committee's and the
Company's consideration of certain factors such as the successful strides made
in restoring the Company's public image and reputation; 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.
Compensation and Incentives Committee
Donald R. Shepherd, Chairman
Ronald E. Blaylock
Vera K. Farris
Elizabeth A. Sanders
9
<PAGE>
Compensation of Officers
The following summary compensation table sets forth, for the Company's last
three (3) completed fiscal years, the compensation provided by the Company to
its Chief Executive Officer and four most highly compensated executive
officers, other than the Chief Executive Officer, who were serving as
executive officers at the end of 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Awards
Compensation (1) ------------
------------------------ Securities All Other
Name and Principal Underlying Compensation
Position Year Salary($)(2) Bonus($)(3) Options (#) ($)(4)(5)
- ------------------ ---- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James B. Adamson 1999 $1,096,519 $825,000 -- $ 42,634
Chairman, Chief Execu-
tive Officer and 1998 1,096,597 787,500 700,000 5,819,315
President of Advantica
and Denny's 1997 1,047,243 -- -- 1,666,842
Craig S. Bushey 1999 369,504 230,753 150,000 109,519
Executive Vice Presi-
dent and Chief 1998 334,183 211,255 150,000 319,973
Operating Officer of
Denny's 1997 320,992 -- -- 73,801
Ronald B. Hutchison 1999 301,535 178,753 150,000 186,160
Executive Vice Presi-
dent and Chief 1998 267,174 162,505 150,000 158,750
Financial Officer of
Advantica and Denny's 1997 246,286 -- -- 50,000
Rhonda J. Parish 1999 277,575 175,500 150,000 185,639
Executive Vice Presi-
dent, General Counsel 1998 247,951 146,250 150,000 153,880
and Secretary of
Advantica and Denny's 1997 224,657 -- -- 50,000
John A. Romandetti
Former Executive Vice
President of 1999 420,428 260,005 150,000 190,994
Advantica and Chief Ex-
ecutive Officer 1998 390,364 243,750 150,000 197,681
and President, Denny's 1997 355,149 10,122 -- 50,000
</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 bonus payments received in the
respective year by the named executive officers under the Company's
incentive programs which may relate to the prior fiscal year.
(4) The amounts for Mr. Adamson for 1999 consist of Company-paid life
insurance premium payments of $17,249 and contributions of $25,385 made to
Mr. Adamson's account under the Advantica Secured Savings Plan (the
"ASSP"), a non-qualified deferred compensation plan. For the years 1997
and 1998, the amounts for Mr. Adamson include (a) Company-paid life
insurance premium payments of $16,880 for each year, (b) retention
payments 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 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 and $28,874,
respectively, (f) reimbursement for certain tax payments totaling $48,032
and $1,780,942, respectively, and (g) contributions to Mr. Adamson's ASSP
account for 1998 of $19,800. For additional information see "Executive
Compensation -- Employment Agreements -- Adamson Employment Agreement".
(5) The amounts for Ms. Parish and Messrs. Bushey, Hutchison and Romandetti
include Company contributions made to such officers' ASSP accounts, which
for 1999 amounted to $10,639, $8,557, $11,160 and $15,994 respectively,
and for 1998 amounted to $3,880, $4,588, $8,750 and $13,032, respectively.
Excluding Mr. Adamson and Mr. Bushey, each named executive officer's
amounts also reflect leadership retention payments of $175,000 in 1999,
$150,000 in 1998 and $50,000 in 1997. The amounts for Mr. Bushey reflect
leadership retention payments in 1999, 1998 and 1997 of $50,000, $275,000
and $50,000, respectively. The remaining amounts shown for Messrs. Bushey
and Romandetti consist of additional compensation and/or reimbursement
paid to such named executive officers at or near the time of, or otherwise
arising in connection with, their initial employment or subsequent
relocation with the Company.
10
<PAGE>
Stock Options
The following table sets forth information regarding all options to acquire
shares of Common Stock granted to the named executive officers during the
fiscal year ended December 29, 1999.
Option Grants in 1999
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
% of Potential Realizable Value
Number of Total at Assumed Annual Rates
Securities Options of Stock Price
Underlying Granted Exercise Appreciation for Option
Options to or Base Term
Granted Employees Price Expiration ---------------------------
(#)(1) in 1999 ($/sh)(2) Date 5% 10%
---------- --------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James B. Adamson........ -- -- -- -- -- --
Craig S. Bushey......... 150,000(3) 7.3% $3.50 6/25/09 $ 330,170 $ 836,715
Ronald B. Hutchison..... 150,000(3) 7.3% $3.50 6/25/09 $ 330,170 $ 836,715
Rhonda J. Parish........ 150,000(3) 7.3% $3.50 6/25/09 $ 330,170 $ 836,715
John A. Romandetti...... 150,000(3) 7.3% $3.50 6/25/09 $ 330,170 $ 836,715
</TABLE>
(1) Such options listed for named executive officers were granted under the
Advantica 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 are exercisable in 25% annual increments over a four year
period beginning on the first anniversary of the date of grant.
The following table sets forth information with respect to the 1999 year-
end values of unexercised options (all of which were granted by Advantica
pursuant to the Advantica Stock Option Plan including its predecessor plans)
held by the named executive officers at fiscal year-end.
Aggregated Option Exercises in 1999 and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-
Unexercised Money Options
Options at Fiscal
at Fiscal Year-End
Year-End (#) ($)
--------------- -------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- --------------- -------------
<S> <C> <C>
James B. Adamson........................... 300,000/400,000 -- / --
Craig S. Bushey............................ 62,500/237,500 -- / --
Ronald B. Hutchison........................ 62,500/237,500 -- / --
Rhonda J. Parish........................... 62,500/237,500 -- / --
John A. Romandetti......................... 62,500/237,500 -- / --
</TABLE>
No options held by the foregoing named executive officers were exercised in
1999.
Retirement Plans
The Advantica Pension Plan (the "Pension Plan"), a tax qualified defined
benefit retirement plan, is maintained by Advantica and certain other
Advantica subsidiaries. Such plan is described below.
11
<PAGE>
The following table shows the estimated annual benefits for a single life
annuity that could be payable under the 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>
Years of Service
--------------------------------------------
Average
Annual
Remuneration
Over
a Five-Year
Period 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000........................ $ 42,521 $ 56,694 $ 70,868 $ 85,041 $ 99,215
250,000........................ 53,771 71,694 89,618 107,541 125,465
300,000........................ 65,021 86,694 108,368 130,041 151,715
350,000........................ 76,271 101,694 127,118 152,541 177,965
400,000........................ 87,521 116,694 145,868 175,041 204,215
500,000........................ 110,021 146,694 183,368 220,041 256,715
600,000........................ 132,521 176,694 220,868 265,041 309,215
700,000........................ 155,021 206,694 258,368 310,041 361,715
800,000........................ 177,521 236,694 295,868 355,041 414,215
900,000........................ 200,021 266,694 333,368 400,041 466,715
1,000,000........................ 222,521 296,694 370,868 445,041 519,215
1,200,000........................ 267,521 356,694 445,868 535,041 624,215
1,400,000........................ 312,521 416,694 520,868 625,041 729,215
1,600,000........................ 357,521 476,694 595,868 715,041 834,215
</TABLE>
The Pension Plan is noncontributory and generally covers employees of
Advantica (but not employees of its subsidiaries Denny's, Coco's and Carrows).
In 1999, the Pension Plan was amended to effect the following changes (1) no
new participants will be allowed into the plan after December 31, 1999; (2)
all future pension benefit accruals for highly compensated employees will be
earned beginning January 1, 2000 under the ancillary plan described below, and
(3) all benefit accruals earned under the plan and ancillary plan will be
frozen as of December 31, 2004. Participants in the Pension Plan, therefore,
are limited to those employees who, on or prior to December 31, 1999, had
attained the age of 21 and had completed one thousand hours of service. A
participant's annual retirement benefit under the Pension Plan at normal
retirement age is calculated by multiplying the number of years of
participation in the Pension Plan (not to exceed 35 years, and not including
years after 1999 for highly compensated participants or years after 2004 for
other participants) by the sum of one percent of the average Compensation (as
defined below) paid during 60 consecutive calendar months chosen to produce
the highest average through 1999 for highly compensated participants or
through 2004 for other participants ("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 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 Pension Plan is based on actuarial determinations.
Ancillary to the 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 Pension Plan except that the accrual of all further
benefits under the ancillary plan shall cease on and after December 31, 2004.
Benefits payable under the ancillary plan are included in the table above.
The maximum annual pension benefit payable under the Pension Plan for 1999
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 Pension Plan (including the
ancillary non-qualified plan) generally corresponds with the annual
compensation of the named
12
<PAGE>
executive officers in the Summary Compensation Table above. Includable
Compensation for 1999 for Ms. Parish and Messrs. Adamson, Hutchison and
Romandetti was $452,519, $1,912,873, $481,029 and $684,882, respectively.
As of December 31, 1999, 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 9, 9, 1, 8, and 2, respectively.
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 have entered into an employment agreement (as
entered into effective January 23, 1995, amended on February 27, 1995 and
December 31, 1996, amended and restated as of January 7, 1998, and further
amended pursuant to an addendum agreement effective January 1, 2000, the
"Adamson Employment Agreement") which provides that Advantica will employ Mr.
Adamson as Chief Executive Officer and President of Advantica and Denny's
until the earlier of January 1, 2002, 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 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 (i) an
annual base salary as determined by the Board during Mr. Adamson's term of
employment, but in no event less than $1,100,000 unless the Company implements
a broad scale salary reduction initiative, (ii) a cash payment of $1,300,000
from the proceeds received by the Company from the sale of Mr. Adamson's
Charleston, SC residence, (iii) during the remaining term of his employment
agreement, Success Bonuses available to be earned in amounts totaling no less
than $7,405,750 (i.e., an amount equal to the sum of 200% of his annual target
bonus plus 299% of his base salary and his targeted bonus) upon the successful
completion of certain strategic initiatives such as the divestiture of Coco's
and Carrows, achieving certain changes in the Company's capital structure
necessary to execute the Company's business plan, CEO succession and the
achievement of certain customer growth, service, refranchising, reimaging and
financial health targets, (iv) a lump sum payment of $1,500,000 for the
purchase of Mr. Adamson's Greenville, SC residence to be paid within ten (10)
business days after January 1, 2002 or earlier upon the occurrence of Mr.
Adamson's termination without cause or the Company's relocation, (v) cash
payments of $1 million, if, at anytime prior to January 1, 2002, the closing
bid price for any consecutive thirty (30) day period equals or exceeds $5 per
share, and $500,000 if the average closing bid price for Common Stock for the
thirty (30) day period immediately prior to January 1, 2002 equals or exceeds
$5 per share and (vi) life insurance coverage maintained by the Company with
death benefits of at least $3,250,000 in the aggregate. Such Success Bonuses,
however, will not be due or owing for the successful completion of any of the
above referenced strategic initiatives on or after the commencement of a
financial restructuring under Chapter 11 of the United States Bankruptcy Code
or analogous law unless the distribution received per share under such
proceeding by holders of Common Stock equals or exceeds the average of the
closing bid and asked prices for such a share on the last trading day
immediately preceding the commencement of the proceeding.
In 1998, under the Adamson Employment Agreement, Mr. Adamson received under
the Advantica Stock Option Plan an option (the "Adamson Option") 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
exercisable immediately with the remaining portion becoming exercisable at a
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 option 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 in which Advantica is not the surviving corporation or
13
<PAGE>
in which 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).
The Adamson Employment Agreement also entitles Mr. Adamson to certain other
privileges, reimbursements and benefits, including participation in all of the
Company's benefit plans generally applicable to the Company's executive
officers and reimbursement of certain professional fees and travel and
relocation expenses. Additionally, his agreement entitles him to generally
participate in the Company's welfare benefits in addition to any continuation
coverage to which he is entitled, for two (2) years after the completion of
his current employment term on January 1, 2002.
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) the payment of $7,405,750
(less the sum of the amount of Success Bonus already paid or not paid for
failure to attain the applicable strategic initiatives), (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. In the event of a termination by the Company of Mr. Adamson's
employment for some reason other than for cause following the consummation of
a change of control of the Company that occurs prior to January 1, 2002, Mr.
Adamson shall be paid $7,405,750 less the sum of the Success Bonus already
paid or not paid for failure to attain the applicable strategic initiatives.
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 February 9, 2000, which
update and replace similar prior agreements and provide, for the named
executive officers, the following compensation and benefits. Leadership
retention payments totaling $250,000 in the aggregate are to be paid
periodically to each of the named executive officers over a two (2) year
period provided the named executive officer remains employed with the Company
as of such payment dates. Each such scheduled payment is subject to upward
adjustment based upon improved stock price performance. In addition to the
leadership retention payments, each named executive officer will also be
entitled to the payment of severance benefits equal to the sum of (a) two
times the named executives' then current base pay and targeted annual bonus,
(b) an amount, grossed up for applicable taxes, equal to actual benefit
credits for an eighteen-month period and vested benefits under the ancillary
non-qualified pension plan, (c) a lump sum amount equal to two (2) times the
named executive's annual car allowance and (d) an amount equal to any accrued
but unused vacation time. Such severance payment shall be guaranteed by
certain subsidiaries of the Company. The letter agreements further provide
that the named executive officers will receive career placement benefits upon
a termination without cause and that all stock options granted by the Company
to the named executive officer 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 in which Advantica is not the surviving
corporation or in which 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.
Compensation Committee Interlocks and Insider Participation
The following persons served as members of the Compensation Committee
during the fiscal year ended December 29, 1999: 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 SEC regulations.
14
<PAGE>
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. Also 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 Company's fiscal years 1998 and
1999, commencing on January 8, 1998, the date the Common Stock was listed on
The Nasdaq Stock Market(R), and ending December 29, 1999. 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.
[GRAPH]
1/8/98 7/1/98 13/30/98 6/30/99 12/29/99
Russell 2000(R) Index(1) 100.00 108.22 96.76 107.51 116.75
Peer Group Index(2) 100.00 101.71 85.54 75.13 50.85
Advantica 100.00 107.24 56.25 36.19 15.14
- -------
(1) A broad equity market index of 2,000 companies (including Advantica, as of
June 30, 1999) with comparable market capitalization to Advantica. The
average market capitalization of companies within the index was
approximately $526.4 million with the median market capitalization being
approximately $428 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).
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 29, 1999, all Section 16(a) filing
requirements applicable to its executive officers, directors and more than 10%
beneficial owners were complied with.
15
<PAGE>
CERTAIN TRANSACTIONS
During Advantica's last fiscal year, except as otherwise described herein,
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, by telephone or telegraph or 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.
2001 Stockholder Proposals
In order for stockholder proposals intended to be presented at the year
2001 Annual Meeting of Stockholders to be eligible for inclusion in
Advantica's proxy statement and the form of proxy for such meeting, they must
be received by Advantica at its principal offices in Spartanburg, South
Carolina no later than December 11, 2000. Regarding stockholder proposals
intended to be presented at the year 2001 Annual Meeting but not included in
Advantica's Proxy Statement, pursuant to Advantica Bylaws, written notice of
such proposals, to be timely, must be received by Advantica 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 Kenneth E. Jones, Vice
President and Treasurer, at the corporate address set forth above.
16
<PAGE>
[LOGO OF ADVANTICA]
Notice of Annual Meeting
and
Proxy Statement
Annual Meeting
of Stockholders
to be held
May 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
PROXY BY MAIL
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ADVANTICA RESTAURANT GROUP, INC.
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 on the other side, all
the shares of the Common Stock of Advantica Restaurant Group, Inc. ("Advantica")
held of record by the undersigned on March 28, 2000 at the Annual Meeting of
Stockholders to be held on May 24, 2000 or any adjournment thereof.
(Continued, and to be marked, dated and signed on the other side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE AND READ THE REVERSE SIDE .
Access to Advantica stockholder account information and
other stockholder services are now available on the Internet!
Visit Continental Stock Transfer's website at
www.continentalstock.com
------------------------
for their new Internet Stockholder Service -
ContinentaLink
Through this new service, stockholders can select a Personal Identification
Number or "PIN" to secure access to personal stockholder records. With a PIN,
stockholders can change addresses, receive electronic forms, and view account
transaction history and dividend history.
To access this new service, visit the website listed above. From the home page,
select ContinentaLink Full Service. From there, you can either Test Drive the
service (choose "Test Drive" button) or you can Sign-Up (choose "Sign-Up"
button). If you choose to sign-up, enter your taxpayer identification number or
social security number as your ID Number. Your personal Security Code can be
found on the reverse side of this card in the bottom left corner. Enter any four
alphanumeric characters you would like to use for your PIN. Re-enter the same
PIN in the PIN Verification field. Your PIN will be activated overnight, and you
will be able to access your stockholder records the following day.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROXY BY MAIL Please mark
ADVANTICA RESTAURANT GROUP, INC. your votes [X]
203 East Main Street like this
Spartanburg, SC 29319
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 and 3.
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
1. To elect nine (9) directors
Nominees: WITHHELD
01 James B. Adamson 06 Lloyd I. Miller, III FOR FOR ALL
02 Ronald E. Blaylock 07 Charles F. Moran
03 Vera K. Farris 08 Elizabeth A. Sanders [_] [_]
04 James J. Gaffney 09 Donald R. Shephard
05 Robert E. Marks
2. 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 2000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. A proposal to approve the 2000 Incentive Program for the Company's employees.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To transact such other business as may properly come before the meeting.
WITHHELD FOR: (Write that nominee's name in the space provided below).
_______________________________________________________________________
- --------------------------------------------------------------------------------
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW.
- --------------------------------------------------------------------------------
================================================================================
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 .
VOTE BY TELEPHONE OR INTERNET
[GRAPHIC] QUICK *** EASY *** IMMEDIATE [GRAPHIC]
[LOGO OF ADVANTICA]
[_] 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
-----------------------------------------------------------
SECURITY CODE
<PAGE>
- --------------------------------------------------------------------------------
PROXY BY MAIL
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ADVANTICA RESTAURANT GROUP, INC.
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 on the other side, all
the shares of the Common Stock of Advantica Restaurant Group, Inc. ("Advantica")
held of record by the undersigned on March 28, 2000 at the Annual Meeting of
Stockholders to be held on May 24, 2000 or any adjournment thereof.
(Continued, and to be marked, dated and signed on the other side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE AND READ THE REVERSE SIDE .
THIS AREA INTENTIONALLY LEFT BLANK
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROXY BY MAIL Please mark
ADVANTICA RESTAURANT GROUP, INC. your votes [X]
203 East Main Street like this
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 RECIEVED BY
MAY 19, 2000, YOUR SHARES WILL BE VOTED BY THE PLAN TRUSTEE
"FOR" PROPOSALS 1,2, and 3.
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
1. To elect nine (9) directors
Nominees: WITHHELD
01 James B. Adamson 06 Lloyd I. Miller, III FOR FOR ALL
02 Ronald E. Blaylock 07 Charles F. Moran
03 Vera K. Farris 08 Elizabeth A. Sanders [_] [_]
04 James J. Gaffney 09 Donald R. Shephard
05 Robert E. Marks
2. 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 2000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. A proposal to approve the 2000 Incentive Program for the Company's employees.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To transact such other business as may properly come before the meeting.
WITHHELD FOR: (Write that nominee's name in the space provided below).
_______________________________________________________________________
- --------------------------------------------------------------------------------
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW.
- --------------------------------------------------------------------------------
================================================================================
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 .
VOTE BY TELEPHONE OR INTERNET
[GRAPHIC] QUICK *** EASY *** IMMEDIATE [GRAPHIC]
[LOGO OF ADVANTICA]
[_] 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
-----------------------------------------------------------
SECURITY CODE
<PAGE>
Appendice B
[LOGO OF ADVANTICA]
ANNUAL MEETING OF STOCKHOLDERS
May 24, 2000 10:00 a.m.
Grand Hyatt Atlanta
3300 Peachtree Road NE
Atlanta, GA 30305
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 portion of the card in order to be admitted to the
Annual Meeting on May 24, 2000.
I plan to attend the Annual Meeting of Stockholders of Advantica Restaurant
Group on May 24, 2000.
----------------------------------------
Signature
----------------------------------------
Please print/type full name
Address:
----------------------------------------
----------------------------------------
<PAGE>
--------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
--------------------------------------------- --------------
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO. 82 SPARTANBURG, SC
---------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
Attn: Corporate Secretary (P-12-2)
Advantica Restaurant Group
203 East Main Street
Spartanburg SC 29306-9926
[BAR CODE]
