ADVANTICA RESTAURANT GROUP
OFFICER STOCK OPTION PLAN
(As adopted on January 28, 1998 and amended on September 28, 1998)
1. Purpose of the Plan
-------------------
This Advantica Restaurant Group Officer Stock Option Plan (the "Plan") is
intended to promote the interest of Advantica Restaurant Group, Inc.
("Advantica" or the "Company") by providing the Officers of Advantica, who are
largely responsible for the management, growth and protection of the business of
the Company, with incentives and rewards to encourage them to continue in their
employment with the Company.
2. Definitions
-----------
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Agreement" shall mean the agreement, in the form the Committee may approve
from time to time, which evidences an Option granted pursuant to the Plan and
entered into, at the direction of the Committee, with an Optionee.
(b) "Board of Directors" shall mean the Board of Directors of Advantica.
(c) "Cause" when used in connection with the termination of service of an
officer of the Company, shall mean the termination of the Participant as an
Officer of the Company because of (A) an act or acts by him, or any omission by
him, constituting a felony, if the Participant has entered a guilty plea or
confession to, or has been convicted of, such felony, (B) any act of fraud or
dishonesty by the Participant which results in or is intended to result in any
material financial or economic harm to the Company as determined by the
Committee in its sole discretion or (C) a breach of a material provision of any
employment agreement between the Participant and the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(e) "Committee" shall mean the Committee designated by the Board of Directors
pursuant to Section 4 hereof from time to time.
(f) "Common Stock" shall mean Advantica's common stock, $.01 par value per
share.
(g) "Company" shall mean Advantica, a Delaware corporation, and each of its
Subsidiaries.
(h) "Disability" shall mean any physical or mental condition which would qualify
a Participant for a disability benefit under the long-term disability plan
maintained by the Company and applicable to that particular Participant.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" of a share of Common stock on any day shall be the fair
market value of the Common Stock on such day as determined by utilizing a
reasonable valuation method established by the Committee in its sole discretion
to be applied on a consistent basis to all optionees.
(k) "Incentive Stock Option" shall mean an Option that is intended to satisfy
the requirements applicable to an "incentive stock option" as that term is
described in Section 422(b) of the Code.
(l) "Nonqualified Stock Option" shall mean an Option that is not intended to be
treated as an "incentive stock option" as that term is described in Section
422(b) of the Code.
(m) "Officer" shall mean any vice president or higher ranking officer of the
Company.
(n) "Option" shall mean an option to purchase shares of Common Stock granted
pursuant to Section 6 hereof. Each Option shall be identified by the Committee
in the Agreement as either a Nonqualified Stock Option or an Incentive Stock
Option.
(o) "Participant" shall mean an individual who is eligible to participate in the
Plan pursuant to Section 5 hereof and to whom an Option is granted pursuant to
the Plan, and, upon his death, his successors, heirs, executors, and
administrators, as the case may be.
(p) "Plan" shall mean this Advantica Restaurant Group Officer Stock Option Plan,
as it may be amended from time to time.
(q) "Securities Act" shall mean the Securities Act of 1933, as amended.
(r) "Subsidiary" shall mean any corporation in which, at the time of reference,
Advantica owns, directly or indirectly, stock comprising more than fifty percent
of the total combined voting power of all classes of stock of such corporation.
(s) "Voluntary Termination" shall mean any voluntary termination by the
Participant as an Officer of the Company.
3. Stock Subject to the Plan
-------------------------
Subject to the adjustment as provided in Section 7 hereof, the Committee may
grant Options under the Plan with respect to a number of shares of Common Stock
that, in the aggregate when combined with the total number of shares authorized
under the Advantica Restaurant Group Stock Option Plan, does not exceed
4,888,888 shares and, with respect to any individual Participant, does not
exceed 3,000,000 shares during any calendar year. In the event that any
outstanding Option expires, terminates or is canceled for any reason, the shares
of Common Stock subject to the unexercised portion of such Option shall again be
available for grants under the Plan for purposes of the 4,888,888 share limit
stated above. Shares of Common Stock issued under the Plan may be either newly
issued shares or treasury shares, at the discretion of the Committee.
4. Administration of the Plan
--------------------------
The Plan shall be administered by a Committee of the Board of Directors
consisting of three or more persons as designated by the Board of Directors. The
Committee shall have full authority to designate, from time to time, those
individuals who shall be granted Options and the number of shares of Common
Stock covered by such Options.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Option issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties.
The Committee may, in its absolute discretion, accelerate the date on which any
Option becomes exercisable or upon termination of the Participant's service as
an Officer, permit the term of a terminated Officer's options to continue for
the remainder of the term of such options or any portion thereof. In addition,
the Committee may, in its absolute discretion, grant Options to Participants on
the condition that such Participants surrender to the Committee for cancellation
such other Options (including, without limitation, Options with higher exercise
prices) as the Committee specifies. In such case, both the option that is deemed
to be canceled and the option that is deemed to be granted shall reduce the
maximum number of shares for which options may be granted to any individual
participant as set forth in Section 3.
The Committee shall have full authority to delegate to a subcommittee of
directors (the "Subcommittee") any and all authority granted to the Committee
with respect to the Plan, such Subcommittee to be constituted and to have such
authority as may be necessary to satisfy any and all requirements of Rule 16b-3
promulgated under Section 16 of the Exchange Act and/or Section 162(m) of the
Code and the regulations thereunder with respect to any Option granted or
exercised pursuant to the terms of the Plan.
No member of the Committee or Subcommittee shall be liable for any action,
omission, or determination relating to the Plan, and Advantica shall indemnify
and hold harmless each member of the Committee or Subcommittee and each other
director or employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any cost
or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of Advantica) arising out of any action,
omission or determination relating to the Plan, unless, in either case, such
action, omission or determination was taken or made by such member, director or
employee in bad faith and without reasonable belief that it was in the best
interests of the Company.
5. Eligibility
-----------
The persons who shall be eligible to receive Options pursuant to the Plan shall
be such Officers of the Company who are responsible for the management, growth
and protection of the business of the Company (whether or not they are directors
of Advantica) as the Committee in its sole discretion shall select from time to
time.
6. Options
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Options granted pursuant to the Plan shall be evidenced by an Agreement. Options
shall comply with and be subject to the following terms and conditions:
(a) Identification of Options
-------------------------
All Options granted under the Plan shall be identified in the Agreement
as either a Nonqualified Stock Option or an Incentive Stock Option; however,
unless specifically designated and identified by the Committee as an Incentive
Stock Option, each Option granted shall be deemed to be a Nonqualified Stock
Option.
(b) Exercise Price
--------------
The exercise price in respect of each share of Common Stock covered by any
Option granted under the Plan shall be such price as the Committee shall
determine on the date on which such Option is granted.
(c) Term and Exercise of Options
----------------------------
(1) Each Option shall be exercisable on such date or dates, during such period
and for such number of shares of Common Stock as shall be determined by the
Committee on the day on which such Option is granted and set forth in the Option
Agreement with respect to such Option; provided, however, that each Option shall
be subject to earlier termination, expiration or cancellation as provided in
this Plan. (2) Each Option shall be exercisable in whole or in part. Any partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof. (3) Subject to the provisions of
Section 11 hereof, an Option shall be exercised by delivering notice to
Advantica's principal office, to the attention of its Secretary or his or her
designee, in such form and in accordance with such procedures as may be provided
from time to time by the office of the Secretary of Advantica which may include
the requirement that such notice: (i) specify the number of shares of Common
Stock with respect to which the Option is being exercised and (ii) specify the
effective date of the proposed exercise. The Participant may withdraw such
notice at any time prior to the opening of business on the business day of the
proposed exercise. Payment for shares of Common Stock purchased upon the
exercise of an Option shall be made on the effective date of such exercise
either (i) in cash, by certified check, bank cashier's check or wire transfer;
(ii) subject to the disallowance by the Committee (such disallowance may be
made, in the Committee's sole discretion, for any reason whatsoever or for no
reason), in shares of Common Stock owned by the Participant and valued at their
Fair Market Value on the effective date of such exercise, or partly in shares of
Common Stock with the balance in cash, by certified check, bank cashier's check
or wire transfer, or (iii) subject to the disallowance by the Committee (such
disallowance may be made in the Committee's sole discretion, for any reason
whatsoever or for no reason) and at the election of the Participant, the Company
shall withhold a number of such shares determined by such Participant, the Fair
Market Value of which at the exercise date the Committee determines to be
sufficient to pay the exercise price. Any payment in shares of Common Stock
shall be effected by the delivery of such shares to the Secretary of Advantica,
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
together with any other documents and evidences as the Secretary of Advantica
shall require from time to time. (4) Certificates for shares of Common Stock
purchased upon the exercise of an Option shall be issued in the name of the
Participant or, at the election of the Participant, in the
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name of a broker designated by the Committee, in its sole discretion, to hold
such shares on behalf of and for the benefit of the Participant. Such shares
shall be delivered accordingly as soon as practicable following the effective
date on which the Option is exercised. (5) During the lifetime of a Participant,
unless otherwise so provided in the Agreement, each Option granted to him shall
be exercisable only by him. No option shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
Notwithstanding the foregoing, an Agreement may provide, at the sole discretion
of the Committee, that certain identified Options are transferable by gift to
such persons or entities and under such terms and conditions as specified in the
Agreement.
(d) Effect of Termination as an Officer
-----------------------------------
Except as otherwise provided in the Agreement or in an employment agreement
executed by the Company's President and subject to the provisions of Section 4
hereof: (1) In the event that the Participant terminates as an Officer of the
Company due to death, Disability or retirement of the Participant (i) Options
granted to such Participant, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the expiration of one
year after such termination, on which date they shall expire and terminate; and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire and terminate at the
close of business on the date of such termination; provided, however, that no
Option shall be exercisable after the expiration of its term. (2) In the event
of a Voluntary Termination or other termination as an Officer for any reason
other than for Cause, all outstanding Options, to the extent that they were
exercisable on the date of termination, shall continue to be exercisable for a
period of 60 days from the date of termination. After the lapse of such 60 days,
all Options, exercisable or not exercisable on the date of termination, shall
expire and be terminated; provided, however, that no Option shall be exercisable
after the expiration of its term. (3) In the event the termination of a
Participant as an Officer is for Cause, all outstanding Options granted to such
Participant, exercisable or not exercisable, shall expire and terminate at the
commencement of business on the date of such termination.
7. Adjustment Upon Changes in Common Stock
---------------------------------------
(a) Shares Available for Grants
---------------------------
In the event of any change in the number of shares of Common Stock
outstanding by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares or similar corporate change,
the maximum aggregate number of shares of Common Stock with respect to which the
Committee may grant Options shall be appropriately adjusted by the Committee. In
the event of any change in the number of shares of Common Stock outstanding by
reason of any other event or transaction, the Committee may, but need not, make
such adjustments in the number and class of shares of Common Stock with respect
to which Options may be granted as the Committee may deem appropriate.
(b) Outstanding Options - Increase or Decrease in Issued Shares Without
-------------------------------------------------------------------
Consideration
-------------
Subject to any required action by the shareholders of Advantica, in the event of
any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
of consideration by Advantica, the Committee shall proportionally adjust the
number of shares of Common Stock subject to each outstanding Option and the
exercise price per share of Common Stock in respect of each such Option.
(c) Outstanding Options - Certain Mergers
-------------------------------------
Subject to any required action by the shareholders of Advantica, in the event
that Advantica shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Common Stock receive securities of another corporation), each Option outstanding
on the date of such merger or consolidation shall pertain to and apply to the
securities which a holder of the number of shares of Common Stock subject to
such Option would have received in such merger or consolidation.
(d) Outstanding Options - Certain Other Transactions
------------------------------------------------
In the event of (i) a dissolution or liquidation of Advantica, (ii) a sale of
all or substantially all of Advantica's assets, (iii) a merger or consolidation
involving Advantica in which Advantica is not the surviving corporation or (iv)
a merger or consolidation involving Advantica in which Advantica is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Committee shall, in its absolute discretion, have the power to: (i) cancel,
effective immediately prior to the occurrence of such event, each Option
outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the Participant to whom
such Option was granted an amount in cash for each share of Common Stock subject
to such Option, equal to the excess of (a) the value, as determined by the
Committee in its absolute discretion, of the property (including cash) received
or to be received by the holder of a share of Common Stock as a result of such
event over (b) the exercise price in respect of each share of Common Stock
covered by such Option; or (ii) provide for the exchange of each Option
outstanding immediately prior to such event (whether or not then exercisable)
for an option on some or all of the property for which each share of Common
Stock subject to such Option is exchanged and, incident thereto, make an
equitable adjustment as determined by the Committee in its absolute discretion
in the exercise price of the Option, or the number of shares or amount of
property subject to the Option or, if appropriate, provide for a cash payment to
the Participant to whom such Option was granted in partial consideration for the
exchange of the Option.
(e) Outstanding Options - Other Changes
-----------------------------------
In the event of any change in the capitalization of Advantica or corporate
change other than those specifically referred to in Section 7(a),(b),
or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject
Page 3
to Options outstanding on the date on which such change occurs and in the per
share exercise price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f) No Other Rights
---------------
Except as expressly provided in the Plan, no Participant shall have any rights
by reason of any subdivision or consolidation of shares of stock of any class,
the payment of any dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger or consolidation of
Advantica or any other corporation. Except as expressly provided in the Plan, no
issuance by Advantica of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of Common Stock
subject to an Option or the exercise price of any Option.
8. Rights as a Stockholder
-----------------------
No person shall have any rights as a stockholder with respect to any shares of
Common Stock covered by or relating to any Option granted pursuant to this Plan
until the date of the issuance of a stock certificate with respect to such
shares. Except as otherwise expressly provided in Section 7 hereof, no
adjustment to any Option shall be made for dividends or other rights for which
the record date occurs prior to the date on which such stock certificate is
issued.
9. No Special Employment Rights; No Right to Option
------------------------------------------------
Nothing contained in the Plan or any Option shall confer upon any Participant
any right with respect to the continuation of his employment or Officer status
with the Company or interfere in any way with the right of the Company, subject
to the terms of any separate employment agreement to the contrary, at any time
to terminate such relationship or to increase or decrease the compensation of
the Participant from the rate in existence at the time of the grant of an
Option. No person shall have any claims or right to receive an Option hereunder.
The Committee's granting of an Option to a Participant at any time shall neither
require the Committee to grant an Option to such Participant or any other
Participant or other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or other person.
10. Securities Law Matters
----------------------
(a) Advantica shall be under no obligation to effect the registration pursuant
to the Securities Act of any shares of Common Stock to be issued hereunder or to
effect similar compliance under any state laws. Notwithstanding anything herein
to the contrary, Advantica shall not be obligated to cause to be issued or
delivered any certificates evidencing shares of Common Stock pursuant to the
Plan unless and until Advantica is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any securities
exchange on which shares of Common Stock are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing shares of
Common Stock pursuant to the terms hereof, that the recipient of such shares
make such covenants, agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems necessary or
desirable. (b) The exercise of any Option granted hereunder shall only be
effective at such time as counsel to Advantica shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange or market on which shares of Common
Stock are traded. Advantica may, in its sole discretion, defer the effectiveness
of any exercise of an Option granted hereunder in order to allow the issuance of
shares of Common Stock pursuant thereto to be made pursuant to an effective
registration statement or an exemption from such registration or other methods
for compliance available under federal or state securities laws. Advantica shall
inform the Participant in writing of its decision to defer the effectiveness of
the exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain the refund of any
amount paid or delivered with respect thereto.
11. Withholding Taxes
-----------------
(a) Cash Remittance
---------------
Whenever shares of Common Stock are to be issued upon the exercise of an Option,
the Participant shall be required, as a condition to the exercise of the related
Option, to remit to the Company in cash an amount sufficient to satisfy federal,
state and local withholding tax requirements, if any, attributable to such
exercise prior to the delivery of any certificate or certificates for such
shares.
(b) Stock Remittance
----------------
At the election of the Participant, subject to the disallowance of the Committee
(such disallowance may be made by the Committee in its sole discretion for any
reason whatsoever or for no reason), when shares of Common Stock are to be
issued upon the exercise of any Option, in lieu of the cash remittance required
by Section 11(a) hereof, the Participant may tender to the Company a number of
shares of Common Stock determined by such Participant, the Fair Market Value of
which at the tender date the Committee determines, in its sole discretion, to be
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise and not greater than the Participant's
calculated total federal, state and local tax obligations associated with such
exercise.
(c) Stock Withholding
-----------------
At the election of the Participant, subject to the disallowance of the Committee
(such disallowance may be made by the Committee in its sole discretion for any
reason whatsoever or for no reason), when shares of Common Stock are to be
issued upon the exercise of an Option, in lieu of the cash remittance required
by Section 11(a) hereof, the Company shall withhold a number of such shares
determined by such Participant, the Fair Market Value of which at the exercise
date the Committee determines (in its sole discretion) to
Page 4
be sufficient to satisfy the federal, state and local withholding tax
requirements, if any, attributable to such exercise and not greater than the
Participant's calculated total federal, state and local tax obligations
associated with such exercise.
12. Amendment of the Plan; Term of the Plan
---------------------------------------
The Board of Directors or the Committee may at any time suspend, discontinue or
terminate the Plan. Additionally, the Board of Directors or the Committee may
revise or amend the Plan in any respect whatsoever subject only to any
applicable law, regulation or exchange/market requirement, provided that no
amendment or discontinuance may, in the absence of written consent to the change
by the affected Participant, adversely affect the rights of any Participant
under any Option granted under the Plan prior to the date such amendment is
adopted by the Board or the Committee. The Plan shall continue in existence
until terminated by the Board of Directors pursuant to the terms set forth
herein.
13. No Obligation to Exercise
-------------------------
The grant to a Participant of an Option shall impose no obligation upon such
Participant to exercise such Option.
14. Transfers Upon Death
--------------------
Unless otherwise provided in the Agreement, upon the death of a Participant,
outstanding Options granted to such Participant may be exercised only by the
executors or administrators of the Participant's estate or by any person or
persons who shall have acquired such right to exercise by will or by the laws of
descent and distribution. No transfer by will or the laws of descent and
distribution of any Option, or the right to exercise any Option, shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Option that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Option.
15. Expenses
--------
The expenses of the Plan shall be paid by the Company.
16. Failure to Comply
-----------------
In addition to the remedies of the Company elsewhere provided for herein, if a
Participant shall fail to comply with any of the terms or conditions of the Plan
or the Agreement, the Committee may cancel such Option and cause such Option to
be forfeited, in whole or in part, as the Committee, in its absolute discretion,
may determine, unless such failure is remedied by such Participant within ten
days after such Participant's receipt of written notice of such failure from the
Committee or the Company.
17. Effective Date
--------------
The Plan shall be effective on the date that the Plan is approved by the Board
of Directors, contingent upon approval of the Plan by the shareholders of the
Company at the next annual meeting of shareholders following such Board of
Director approval.