                         UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

                                                     )
In re                                                )
                                                     )       Chapter 11 Case No.
FRD ACQUISITION CO.,                                 )
                                                     )       01-00436 (PJW)
                                                     )
                                    Debtor.          )
                                                     )


                     STIPULATION AND AGREEMENT OF SETTLEMENT

                  This Stipulation and Agreement of Settlement (the "Stipulation
and Agreement") is made as of the 19th day of February, 2002, and is entered
into by and among FRD Acquisition Co. (the "Debtor" or "FRD"), the Official
Committee of Unsecured Creditors of FRD Acquisition Co. (the "Creditors'
Committee"), Advantica Restaurant Group, Inc. ("Advantica"), Denny's, Inc.
("Denny's"), FRI-M Corporation ("FRI-M"), Coco's Restaurants, Inc. ("Coco's"),
and Carrows Restaurants, Inc. ("Carrows") (each a "Party" and, collectively, the
"Parties").

                  The Parties have agreed to a global resolution of various
disputes relating to the administration of the Debtor's chapter 11 case and
jointly to support a chapter 11 plan for the Debtor consistent with the terms
hereof.

                  All actions, conduct, or statements made by the Parties in
connection with the transactions contemplated by this Stipulation and Agreement
relate to a compromise and settlement and at all times shall be governed by Rule
408 of the Federal Rules of Evidence and any and all similar and applicable
statutory provisions and rules of law.


                                        1

<PAGE>



A.    TERMS OF STIPULATION

                1.   As of January 31, 2002, there is $48,745,556 in principal
amount in loans, plus accrued but unpaid interest, fees, and expenses (as such
amounts may increase or decrease from time to time, the "Outstanding Loans") and
$9,598,000 in letters of credit (as such amount may decrease from time to time,
the "Outstanding L/Cs") in connection with certain potential workers'
compensation liability of FRD (the "L/C Liability") outstanding under that
certain Credit Facility dated as of May 14, 1999 among Coco's, Carrows, jojos
Restaurants, Inc., as borrowers, FRD, FRI-M, as Guarantors, the lenders named
therein, and Credit Lyonnais, as Administrative and Collateral Agent (the
"Credit Facility"). The Outstanding Loans and Outstanding L/Cs are asserted by
Advantica and Denny's to reflect obligations of the Debtor's indirect operating
subsidiaries, Coco's and Carrows, to Denny's, and to be the subject of a
guarantee claim by Denny's against the Debtor's estate. On the terms and
conditions set forth in this Stipulation and Agreement and its Schedules: (a)
Denny's will (i) forbear from exercising any rights or remedies it may have with
respect to any defaults that exist under the Credit Facility on the date hereof
for a period ending 120 days from the date of Court approval of the Stipulation
and Agreement (the "Forbearance Period") and (ii) provide FRD and its operating
subsidiaries with the option of repaying the Outstanding Loans at the discounts
as provided for herein until the end of the 120-day Forbearance Period (the date
of such payment, the "Refinancing Date"); and (b) all litigation and discovery
among the Parties shall be stayed until the end of the Forbearance Period and
dismissed with prejudice upon the occurrence of the Refinancing Date.

                                        2

<PAGE>


                2.   During the Forbearance Period, the Creditors' Committee,
its members, FRD, its management, and its operating subsidiaries will, in good
faith, use their best efforts to obtain financing (the "New Senior Debt")
sufficient to repay the Outstanding Loans, less a $10 million discount (the
"Maximum Discounted Repayment").

                3.   If, by or prior to the end of the Forbearance Period, FRD
obtains sufficient financing to make the Maximum Discounted Repayment in full,
Denny's will accept the Maximum Discounted Repayment in full and complete
satisfaction of the Outstanding Loans. For example, if the Refinancing Date
occurred on the date hereof, Denny's would accept a Maximum Discounted Repayment
of $38,745,556, plus any accrued but unpaid interest and fees, in cash in full
and complete satisfaction of the $48,745,556 in Outstanding Loans, plus any
accrued interest and fees currently outstanding.

                4.   Alternatively, if FRD obtains less than sufficient
financing to make the Maximum Discounted Repayment in full, Denny's will
receive, in full and complete satisfaction of the Outstanding Loans, (x) the
net available proceeds of the financing (plus, to the extent necessary or
appropriate, such cash on hand at FRD's operating subsidiaries as is required to
make the net proceeds payable to Denny's not less than $20 million), (y) the New
Junior Secured Notes (as described in Schedule I annexed hereto) in an aggregate
principal amount equal to the Outstanding Loans, less (i) the cash proceeds
actually received by Denny's on the Refinancing Date and (ii) any applicable
initial repayment discount as set forth on Schedule III, and (z) equity in


                                        3


<PAGE>


reorganized FRD equal to a maximum of 10% of the common stock (calculated before
any dilution as a consequence of the issuance of stock to new management)
reduced by .5556% for each $1 million over $20 million paid to Denny's on the
Refinancing Date. The New Junior Notes shall be subject to certain prepayment
discounts as set forth in Schedule III annexed hereto. For example, if the
Refinancing Date occurred on the date hereof (and assuming for the purposes of
simplicity that the Outstanding Loans total $48 million) and Denny's received
$29 million in cash, it would also receive (x) $14 million in aggregate
principal amount of New Junior Notes (which represents the remaining balance of
$19 million, less a $5 million initial discount) and (y) equity equal to 5% of
the new common stock of FRD.

                5.   The Parties will explore commercially reasonable options,
including, without limitation, the posting of bonds, to replace the Outstanding
L/Cs and cause the cash collateral supporting such L/Cs to be released. If,
however, FRD is unable to replace the Outstanding L/Cs with a commercially
reasonable alternative, Denny's agrees that the Outstanding L/Cs will stay in
place and be allowed to run off in the ordinary course. In the event the
Outstanding L/Cs are not replaced, Denny's will receive an L/C Note (as
described on Schedule II annexed hereto) to provide reimbursement if any
Outstanding L/Cs are drawn upon. FRD will pay Denny's an L/C commitment fee
payable annually in cash equal to 6% per annum on the cash collateralizing the
pending L/C exposure as reduced over time. Denny's agrees to use, in good faith,
its reasonable best efforts to obtain a renewal of such Outstanding L/Cs by the
issuing financial institution(s) to the extent such Outstanding L/Cs continue to
be


                                        4

<PAGE>


required to support the L/C Liability. In the event the Outstanding L/Cs are not
replaced and the issuing financial institution refuses to renew such Outstanding
L/Cs upon their expiration, Denny's agrees to cash collateralize replacement
letters of credit from one or more alternative financial institutions. Any fees
incurred in connection with such new letters of credit will be payable by FRD.

                6.   To the extent requested by FRD, Advantica shall provide
FRD, pursuant to a mutually satisfactory management and services agreement (the
"Services Agreement"), with management services consistent with the services
currently being provided to FRD and/or its operating subsidiaries by Advantica
as set forth in Schedule IV hereto (the "Management Services") at the annual
cost specified therein. Advantica shall bill FRD for the Management Services
monthly, which bills FRD shall promptly pay in cash. Advantica agrees to provide
such services for a one-year period following the Refinancing Date. Such
one-year period shall be extended, at FRD's exclusive option, for an additional
90-day period (at a pro rated cost) upon the transmission of written notice
thereof to Advantica no later than 60 days prior to the end of the initial
one-year period. FRD may at any time terminate the agreement for the provision
of some or all of the Management Services by providing Advantica with 60-days
prior written notice of such termination.

                7. Advantica further agrees to provide FRD and/or its operating
subsidiaries pursuant to the Services Agreement with the services of its current
or a replacement information technology contractor consistent with the services
currently being provided to FRD and/or its operating subsidiaries by Affiliated
Computer Services,


                                        5

<PAGE>





Inc. (the "IT Services") at Advantica's actual cost for such services for a
one-year period following the Refinancing Date. Advantica shall bill FRD for the
actual cost of the IT Services on a monthly basis, which bills FRD shall
promptly pay in cash. Such one-year period shall be extended, at FRD's exclusive
option, for an additional six months upon the transmission of written notice
thereof to Advantica no later than 60 days prior to the end of the initial
one-year period. FRD may at any time terminate the agreement for the provision
of such IT Services by providing Advantica with 60-days prior written notice of
such termination.

                8.   The Parties agree to take such steps as are necessary to
retain as soon as practicable a mutually-acceptable executive search firm at
FRD's expense to identify mutually-acceptable new senior management for the
reorganized FRD. The Parties further agree to discuss, and in good faith seek to
agree on, an appropriate incentive program for existing senior management so as
to facilitate the full cooperation of such management in ensuring that the terms
and provisions of this Stipulation and Agreement are effectuated, and so as to
provide for an efficient transition of management services for a reorganized
FRD.

                9.   The Parties further agree to use their best efforts to
ensure that, as soon as practicable, the Uniform Franchise Offering Circulars
for Coco's and Carrows are brought into compliance with all applicable
requirements and are approved by the relevant regulatory authorities at the
earliest possible time.

                10. The Parties further agree to analyze and, where appropriate,
implement strategic initiatives for FRD's business operations, such as
sale-leaseback

                                        6

<PAGE>




or similar transactions.

                11.  The Parties also agree to cooperate in good faith in all
matters relating to the administration of FRD's estate and the operation of
FRD's businesses.

                12.  All of the Parties acknowledge and understand that the
primary responsibility and obligation of Advantica and Denny's, and their
respective managements, is their management of the day-to-day operation of
Denny's.

                13.  Upon Bankruptcy Court approval of this Stipulation and
Agreement, in order to implement the agreements set forth herein, including,
without limitation, the preparation and prosecution of a chapter 11 plan
consistent with the terms hereof, the Parties agree that Coco's and Carrows will
upstream funds to FRD in the amount of $933,309.22, which amount is equal to 75%
of the fees and 100% of the expenses of Berlack, Israels & Liberman LLP (as of
February 1, 2002, known as Brown Rudnick Berlack Israels LLP) ("Berlack") and
The Bayard Firm ("Bayard"), that have been approved by the Bankruptcy Court as
of January 31, 2002. In addition, the parties agree that Coco's and Carrows will
periodically upstream funds to FRD sufficient to pay Berlack, Bayard, and Chanin
& Company LLC ("Chanin") 75% of all fees and 100% of all expenses incurred by
those entities during the period commencing February 1, 2002 through the earlier
to occur of (x) the Refinancing Date and (y) the end of the Forbearance Period
as set forth in each such professional's monthly fee application, as such term
is used in the April 4, 2001 Administrative Order entered in this case (the
"Administrative Order") that are not subject to objection pursuant to the terms
of the Administrative Order. Payment of such fees and expenses shall be made to
Berlack,

                                       7

<PAGE>



Bayard, and Chanin, consistent with the foregoing, within ten business days of
the expiration of the 20-day objection period provided for in the Administrative
Order. The balance of fees and expenses through the Refinancing Date due to
Berlack, Bayard, and Chanin, as well as all of the other professionals retained
in the Debtor's chapter 11 case, will be paid, subject to Bankruptcy Court
approval, by FRD or on or after the Refinancing Date as directed by final order
of the Bankruptcy Court. In addition to the foregoing, sufficient funds as
necessary for the payment of reasonable executive search costs and due
diligence, commitment, and similar fees (not related to retained professionals)
associated with the refinancing referenced, inter alia, in paragraph A(2) of
this Stipulation and Agreement, will be upstreamed to the Debtor.

                14.  The Parties agree to take all reasonable steps to minimize
ongoing administrative expenses of the FRD estate. To that end, with the
exception of the counsel to FRD (Bayard) and the counsel and financial advisor
to the Creditors' Committee (Berlack and Chanin), the activities in connection
with this case of all other professionals retained at FRD's expense in this case
will be suspended upon the Parties' entry into this Stipulation and Agreement;
provided, however, that the Special Committee of the FRD Board of Directors (the
"Special Committee") may consult with such professionals to the extent that the
Special Committee deems necessary to comply with its fiduciary duties.

                15. The material terms of this Stipulation and Agreement shall
promptly be incorporated into a chapter 11 plan, satisfactory in form and
substance to all Parties, that shall be filed with the Court, with a goal of
having an effective date of such chapter

                                        8

<PAGE>



11 plan on or before the end of the Forbearance Period. Each of the Creditors'
Committee, FRD, Advantica, and Denny's agrees to be a joint proponent, and to
support the confirmation, of such chapter 11 plan.

                16.  On the Refinancing Date, Advantica, Denny's, FRD, FRI-M,
Coco's, and Carrows, the creditors of FRD, the Creditors' Committee, its
members, and their respective affiliates, direct or indirect subsidiaries,
officers, directors, and advisors will automatically be released from all claims
and causes of action of every kind and nature, from the beginning of time
through the Refinancing Date, whether known or unknown, that Advantica, Denny's,
FRD, FRI-M, Coco's, Carrows, or creditors of FRD (including, but not limited to,
the Creditors' Committee and its individual members) and their respective
affiliates, direct or indirect subsidiaries, officers, directors, and advisors
may have against any of them that in any way relate to, or arise in connection
with, FRD, FRI-M, Coco's, or Carrows, including, without limitation, their
businesses, operations, or financing, including, without limitation, the Credit
Facility. Notwithstanding the foregoing, the Parties specifically agree that
this paragraph shall not release (i) any claims related to or arising out of
claims filed by the Pension Benefit Guaranty Corporation in the Debtor's chapter
11 case, (ii) the specific undertakings set forth in this Stipulation and
Agreement, (iii) FRD from any claims creditors of FRD may have against FRD or
its estate, or (iv) creditors of FRD from any claims FRD or its estate may have
against such creditors. The chapter 11 plan to be filed pursuant to the terms of
this Stipulation and Agreement will also contain a release consistent with the
foregoing in a form and in substance reasonably satisfactory to the Parties.


                                        9

<PAGE>



                17.  Conditions precedent to the effectiveness of this
Stipulation and Agreement shall be: (i) its approval by the Boards of
Directors of FRD, Advantica, and Denny's; (ii) approval by the Creditors'
Committee; and (iii) the consent of Denny's working capital lender, which
consent Denny's shall seek, in good faith, to acquire as soon as possible.

                18.  In order to implement the terms of this Stipulation and
Agreement, the Creditors' Committee, FRD, Advantica, and Denny's will file a
joint motion on an expedited basis, seeking approval of the terms and conditions
of this Stipulation and Agreement in accordance with Bankruptcy Rule 9019. Each
of the Parties agrees to support this motion. Approval of the terms of this
Stipulation and Agreement in all material respects by the Bankruptcy Court
pursuant to Bankruptcy Rule 9019 shall be a condition precedent to the
effectiveness of the other provisions set forth herein.

                19.  The Parties agree that all affirmative efforts by FRD and
its professionals related to a potential sale of FRD or its assets to a third
party shall be suspended during the Forbearance Period in order to ensure that
the Parties' focus and efforts are directed exclusively toward the consummation
of the refinancing transactions and related matters contemplated herein. The
foregoing shall not preclude the review of any unsolicited purchase offers that
may be received by FRD or its professionals.

II.   REPRESENTATIONS AND WARRANTIES

                Each of the Parties represents and warrants to the other Parties
 that:

                1.   It has carefully read this Stipulation and Agreement and
knows and understands its contents completely; it has consulted its attorneys
and is executing

                                       10

<PAGE>




this Stipulation and Agreement of its own free will, act, and deed; and in
making this Stipulation and Agreement, it is not relying upon any statements or
representations other than as expressly stated herein or in any other written
agreements between the Parties hereto.

                2.   Each individual signing this Stipulation and Agreement has
complete authority to act for the named Party and has the authority to bind it
and all other persons or entities with any right, title, or interest therein.

                3.   It has received full and adequate consideration for the
execution and delivery of this Stipulation and Agreement, and the Stipulation
and Agreement constitutes its legal and valid obligation and is binding upon it
in accordance with its terms.

III.    GENERAL PROVISIONS

                1.   The terms of this Stipulation and Agreement are
contractual and are not mere recitals.

                2.   Any modification or waiver of any provision of this
Stipulation and Agreement, or any consent to any departure from the terms of
this Stipulation and Agreement, shall not be binding unless the same is in
writing and signed by all of the Parties then in existence.

                3.   Section headings are inserted for convenience only and
shall not affect any construction or interpretation of this Stipulation and
Agreement.

                4.   The language of all parts of this Stipulation and Agreement
shall in all cases be construed as a whole, according to its fair meaning, and
not strictly for or


                                       11

<PAGE>



against any Party, because the Stipulation and Agreement was
drafted by the mutual efforts of all the Parties hereto.

                5.   Each Party agrees to execute any and all documents
reasonably required to effectuate the purposes and intent of this Stipulation
and Agreement, at present or in the future.

                6.   The Stipulation and Agreement shall be binding upon, and
inure to the benefit of, each Party hereto and its respective predecessors,
representatives, successors, assigns, and all parties or entities acting in
concert with any of them.

                7.   This Stipulation and Agreement shall be governed by the
laws of the State of New York, without regard to its rules regarding choice of
law.

                8.   This Stipulation and Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
constitute one and the same instrument. This Stipulation and Agreement shall be
binding upon execution by all Parties.

Dated: February 19, 2002
                                       OFFICIAL COMMITTEE OF UNSECURED
                                       CREDITORS OF FRD ACQUISITION CO.

                                       By:      /s/Mark Zand
                                            ------------------------------------
                                            Title: Chairman


                                       FRD ACQUISITION CO.

                                       By:      /s/Raul R. Tapia
                                            ------------------------------------
                                            Title: Chairman

                                       12




                                       ADVANTICA RESTAURANT GROUP, INC.

                                       By:      /s/Andrew F. Green
                                            ------------------------------------
                                            Title: Senior Vice President and
                                                   Chief Financial Officer


                                       DENNY'S, INC.

                                       By:      /s/Andrew F. Green
                                            ------------------------------------
                                            Title: Senior Vice President and
                                                   Chief Financial Officer



                                       FRI-M CORPORATION

                                       By:      /s/David O. Devoy
                                            ------------------------------------
                                            Title: President and
                                                   Chief Financial Officer



                                       COCO'S RESTAURANTS, INC.

                                       By:      /s/David O. Devoy
                                            ------------------------------------
                                            Title: President and
                                                   Chief Financial Officer


                                       CARROWS RESTAURANTS, INC.

                                       By:      /s/David O. Devoy
                                            ------------------------------------
                                            Title: President and
                                                   Chief Financial Officer


SO ORDERED:
                                       /s/Peter J. Walsh
                                       --------------------------------
                                       Peter J. Walsh, U.S. B. J.



<PAGE>
                                   SCHEDULE I

                        TERMS OF NEW JUNIOR SECURED NOTES

COLLATERAL:             Second priority liens and security interests in and to
                        all of the assets of FRD and all of its subsidiaries,
                        subject only to the liens and security interests granted
                        to the exit financing lender (the "New Senior Debt")

INTEREST:               100 basis points over the rate for the New Senior Debt;
                        provided that if the interest rate on the New Senior
                        Debt is 12% or higher, the interest rate on the New
                        Junior Notes shall be equal to the interest rate on
                        the New Senior Debt

AMORTIZATION:           Interest only for first year, amortized thereafter based
                        on a ten-year schedule

PAYMENT:                4  years; repayable without penalty  as set forth in the
                        annexed repayment matrix; partial prepayments will be
                        entitled to a pro rata discount

DISCOUNTS:              Discounts shall be applied to the New Junior Secured
                        Notes as set forth in the annexed repayment matrix

COVENANTS
AND EVENTS OF DEFAULT:  Same as in the New Secured  Debt.  In addition, the
                        Junior Secured Notes will contain other covenants,
                        including, without limitations restrictions on the
                        permitted amount of senior debt.

ASSET SALES
AND FRANCHISING:        Denny's and the New Senior Debt lender will discuss an
                        intercreditor agreement that will, among other  things,
                        provide for a sharing formula among the New Senior Debt
                        lender and Denny's with respect to the proceeds of asset
                        sales and franchising; FRD and the Creditors' Committee
                        will cooperate, to the extent necessary, in such
                        negotiations.


<PAGE>
                                  SCHEDULE II

                               TERMS OF L/C NOTES



NATURE OF INSTRUMENT:             Note  triggered  only  by a  draw  against any
                                  Outstanding L/Cs

COLLATERAL:                       Same as New Junior Secured Note.  The New
                                  Junior Secured Note and the L/C Note will be
                                  pari passu in priority

INTEREST AND AMORTIZATION:        There will not be any amortization or interest
                                  payable unless and until an Outstanding L/C
                                  is drawn upon. Once an Outstanding L/C is
                                  drawn upon, the aggregate principal amount of
                                  the drawn L/Cs will amortize quarterly and
                                  interest will be payable thereafter at the
                                  same rate as the New Senior Notes.

TERM:                             4  years;  prepayable  without  penalty at any
                                  time as set forth below

PREPAYMENT:                       The  L/C  Note  may be  prepaid in cash at any
                                  time.

EXPIRATION OF L/CS:               As   Outstanding   L/Cs   expire,   the   cash
                                  collateral supporting such  L/Cs will be
                                  released to Denny's

COVENANTS AND EVENTS OF DEFAULT:  Same  as  those  contained in the  New  Junior
                                  Secured Notes

<PAGE>

                                  SCHEDULE III

                                REPAYMENT MATRIX
                                ($ in millions)


                         Approximate Claim Amount: $48

<TABLE>
<CAPTION>
                     ------------------ ----------------- ----------------- ------------------ ----------------- -----------------
                       Call Period 1      Call Period 2     Call Period 3     Call Period 4      Call Period 5     Call Period 6
----  -------- ----  ------------------ ----------------- ----------------- ------------------ ----------------- -----------------
      Initial         Call  Call Total   Call  Call Total  Call Call  Total  Call  Call  Total  Call Call  Total  Call  Call Total
Cash  Discount Note  Price  Dcnt  Dcnt  Price  Dcnt Dcnt  Price Dcnt  Dcnt  Price  Dcnt  Dcnt  Price Dcnt  Dcnt  Price  Dcnt Dcnt
----  -------- ----  ------------------ ----------------- ----------------- ------------------ ----------------- -----------------
<S>     <C>    <C>   <C>    <C>  <C>   <C>    <C>  <C>   <C>    <C>   <C>   <C>    <C>  <C>    <C>    <C>  <C>   <C>    <C>  <C>
38.0    10.0    0.0  ---    ---  10.0   ---   ---  10.0    ---   ---  10.0   ---   ---  10.0   ---   ---  10.0   ---   ---  10.0
33.5     7.5    7.0  71.4%  2.0   9.5  75.0%  1.8   9.3   78.6%  1.5   9.0  82.1%  1.3   8.8  85.7%  1.0   8.5  89.3%  0.7   8.2
29.0     5.0   14.0  71.4%  4.0   9.0  75.0%  3.5   8.5   78.6%  3.0   8.0  82.1%  2.5   7.5  85.7%  2.0   7.0  89.3%  1.5   6.5
24.5     2.5   21.0  71.4%  6.0   8.5  75.0%  5.3   7.8   78.6%  4.5   7.0  82.1%  3.8   6.3  85.7%  3.0   5.5  89.3%  2.2   4.7
20.0     0.0   28.0  71.4%  8.0   8.0  75.0%  7.0   7.0   78.6%  6.0   6.0  82.1%  5.0   5.0  85.7%  4.0   4.0  89.3%  3.0   3.0




</TABLE>


                Call Schedule:

        Call Period       Months
        -----------       ------

             1             1-12
             2             13-24
             3             25-30
             4             31-36
             5             37-42
             6             43-48




<PAGE>


                                  SCHEDULE IV


                               MANAGEMENT SERVICES


                                                   Annual
              Category                              Cost
              --------                             ------

         Financial Services                       1,103,923

         Treasury                                   102,302

         Legal/Food Safety                          340,327

         Purchasing                                 292,997

         Risk Management                             17,912

         Tax                                         71,561

         Human Resources                            339,390

         Advantica Provided
          Information Technology
          Services                                  257,273

         Contractor Provided
          Information Technology
          Services                                5,200,000
                                                 ----------

                    Total                        $7,725,685
                                                 ==========


