EXHIBIT 10.1
 
RUBIO’S RESTAURANTS, INC.
2006 EXECUTIVE INCENTIVE PLAN
 
The Board of Directors of Rubio’s Restaurants, Inc. (“Company”) adopted the 2006
Executive Incentive Plan (“Plan”), on April 27, 2006 effective on the date set
forth in Section 14 below. The stockholders of the Company approved the Plan on
______, 2006.
 
1      Purpose.
 
The purpose of the Plan is to provide performance-based incentive compensation
in the form of cash payments or stock awards to executive officers and other
members of senior management of the Company and any of its subsidiaries which
might subsequently adopt the Plan. The Plan is intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
(“Section 162(m)”).
 
2.      Administration.
 
The Plan shall be administered by the Compensation Committee, provided, however,
that the Compensation Committee is composed solely of two or more outside
directors as defined in Section 162(m). All determinations under the Plan,
including those related to interpretation of the Plan and the forms of awards
provided for hereunder, eligibility, or the payment or pro-ration of any payment
shall be made by the Compensation Committee in its sole discretion, and such
determinations shall be final and binding on all employees.
 
3.     Stockholder Approval.
 
The Plan shall be approved by the stockholders of the Company. To the extent
necessary for the Plan to qualify as performance-based compensation under
Section 162(m) or its successor under then applicable law, the material terms of
the Plan shall be disclosed to and reapproved by the stockholders no later than
the first stockholder meeting that occurs in the fifth year following the year
in which stockholders previously approved the material terms of the Plan.
 
4.     Participants.
 
For each measurement period (which may but need not be a fiscal year of the
Company or which may be different for different participants), the Compensation
Committee will choose, in its sole discretion, those eligible employees who will
participate in the Plan during that measurement period and will be eligible to
receive payment under the Plan for that measurement period.
 
(a) Eligible Employees. Persons who are eligible to participate in the Plan are
all members of senior management of the Company and its subsidiaries. For
purposes of the Plan, senior management is defined as any officer of the Company
or its subsidiaries who is subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934, or who is designated as eligible
to participate in the Plan by the Compensation Committee in its sole discretion.
 
(b) Employment Criteria. In general, to participate in the Plan an eligible
employee must be continuously employed by the Company or a subsidiary for the
entire measurement period. In the event of death or disability, a participant
shall be vested in a pro rata share of an award based upon services rendered
during the measurement period.
 
If a participant is on unpaid leave status for any portion of the measurement
period, the Compensation Committee, in its discretion, may reduce the
participant’s payment on a pro rata basis.
 

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5.     Awards.
 
The Compensation Committee shall determine the size and terms of an individual
award that can be made in cash or stock. Stock awards may be settled in shares
of common stock of the Company reserved for issuance under (i) the Company’s
1999 Stock Incentive Plan or (ii) any stock option, equity incentive or similar
plan that may hereafter be adopted by the Company’s Board of Directors and
approved by its stockholders. The stock awards may be settled in cash at the
election of the Company. Stock awards granted pursuant to the Plan shall vest
upon the attainment of performance goals established by the Compensation
Committee under Section 6.
 
6.     Business Criteria on Which Performance Goals Shall be Based.
 
Payments in the form of cash and/or stock under the Plan shall be based on the
Company’s attainment of performance goals based on one or more of the following
business criteria:
 

·      
Return on equity, assets, or invested capital.

 

·      
Stockholder return, actual or relative to an appropriate index (including share
price or market capitalization).

 

·      
Actual or growth in revenues, orders, operating income, or net income (with or
without regard to amortization/impairment of goodwill).

 

·      
Free cash flow generation.

 

·      
Operational performance, including asset turns, revenues per employee or per
square foot, or comparable store sales.

 

·      
Individually designed goals and objectives that are consistent with the
participant’s specific duties and responsibilities, and that are designed to
improve the financial performance of the Company or a specific division, region
or subsidiary of the Company. The goals and objectives may be derived from and
consistent with the operating plan(s) adopted by the Board of Directors of the
Company for the Company, as a whole, or any division, region or subsidiary of
the Company for the particular year or years to which the participant’s
performance is measured.

 
7.     Establishing Performance Goals.
 
The Compensation Committee shall establish, for each measurement period:
 
(a)the length of the measurement period;
 
(b) the specific business criterion or criteria, or combination thereof, that
will be used;
 
(c) the specific performance targets that will be used for the selected business
criterion or criteria;
 

(d) 
any special adjustments that will be applied in calculating whether the
performance targets have been met to factor out extraordinary or non recurring
items;

 
(e) the formula for calculating compensation eligible for payment under the Plan
in relation to the performance targets;
 
(f) the eligible employees who will participate in the Plan for that measurement
period; and
 
(g) if applicable, the target amounts for each participant for the measurement
period.
 
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The Compensation Committee shall make these determinations in writing no later
than 90 days after the start of each measurement period, but in no event later
than the date 25% of the measurement period has elapsed, and while the outcome
or results of such determinations are substantially uncertain. Cash awards to
any one participant in any one fiscal or calendar year under the Plan shall not
exceed $2,000,000. Stock awards or restricted stock unit awards granted to any
one participant in any one fiscal or calendar year (which may vest over multiple
years) under the Plan shall not exceed a maximum of 300,000 shares of the
Company’s common stock. Such maximum amount of 300,000 shares shall be adjusted
in the discretion of the Compensation Committee in the event of any stock
dividend, stock split, extraordinary cash dividend, or similar recapitalization
of the Company.
 
Unless otherwise specified by the Compensation Committee in establishing the
criteria for the particular measurement period, if the Company or its
subsidiaries consummate one or more acquisitions during the measurement period
that, individually or in the aggregate, constitute a “triggering acquisition”
(“Triggering Acquisition”), the measurement period shall end early, on the last
day of the calendar quarter immediately before the consummation of the first
acquisition that constitutes a Triggering Acquisition (either individually or
when aggregated with prior acquisitions during the measurement period), and
pro-rated payments shall be paid based on the degree of attainment of the
performance goals during the shortened measurement period. For purposes of this
paragraph, a Triggering Acquisition means an acquisition (or combination of
acquisitions) in which the acquired entity’s operating earnings (earnings before
transaction-related expense) for the four quarters completed immediately before
consummation of the acquisition is equal to 10% or more of the pro-forma
operating earnings for the same four quarters for the combination of the Company
and its subsidiaries and the acquired entity. If either the Company and its
subsidiaries or the entity being acquired had consummated other acquisitions
during the four quarters in question, the calculation described in the prior
sentence shall be done using pro-forma earnings for each combined entity.
 
If an employee joins the Company or a subsidiary of the Company during any
particular measurement period established for executive officers or other
members of senior management of the Company and becomes an eligible employee
pursuant to Section 4(b) with respect to that measurement period, and if the
employee is a “covered employee” within the meaning of Section 162(m), then to
the extent necessary for the Plan to qualify as performance-based compensation
under Section 162(m) or its successor under then applicable law, all relevant
elements of the performance goals established pursuant to Sections 6 and 7 of
this Plan for that employee must be established on or before the date on which
25% of the time from the commencement of employment to the end of the
measurement period has elapsed, and the outcome or results under the performance
goals for the measurement period must be substantially uncertain at the time
those elements are established.
 
8.     Determination of Attainment of Performance Goals.
 
The Compensation Committee shall determine, pursuant to the performance goals
and other elements established pursuant to Sections 6 and 7 of the Plan, the
amounts to be paid to each employee for each measurement period or the extent to
which awards have vested. The Compensation Committee’s determinations shall be
final and binding on all participants and shall be memorialized in the minutes
of the Compensation Committee. The Compensation Committee shall not have
discretion to increase the amount of an award or accelerate the vesting of an
award to any employee who is a “covered employee” within the meaning of Section
162(m) if such action would cause the award or any part thereof to not be
deductible under the Internal Revenue Code.
 
9.     Amendments.
 
The Compensation Committee may not amend or terminate the Plan so as to
increase, reduce or eliminate awards under the Plan for any given measurement
period retroactively, that is, on any date later than 90 days after the start of
the measurement period. The Compensation Committee may amend or terminate the
Plan at any time on a prospective basis and/or in any fashion that does not
increase, reduce or eliminate awards retroactively. The foregoing
notwithstanding, except as required by applicable law, the Compensation
Committee shall not have the power to amend the Plan in any fashion that would
cause the Plan to fail to qualify as performance-based compensation with respect
to any “covered employee” as defined under Section 162(m) or its successor.
Without limiting the generality of the foregoing, to the extent it would cause
the Plan to fail to qualify as performance-based compensation with respect to
any “covered employee” as defined under Section 162(m) or its successor under
then applicable law, the Compensation Committee shall not have the power to
change the material terms of the performance goals unless (i) the modified
performance goals are established by the Compensation Committee no later than 90
days after the start of the applicable measurement period, on or before 25% of
the measurement period has elapsed, and while the outcome or results are
substantially uncertain; and (ii) no payments are made under the modified
performance goals until after the material terms of the modified performance
goals are disclosed to and approved by the Company’s stockholders.
 
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10.  Rule 10b5-1 Trading Plans; Stock Withholding.
 
It is expected that participants under the Plan will establish or modify stock
trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 to
provide for the sale of Company shares and remit to the Company the proceeds to
meet the Company’s withholding obligations in connection with stock awards
hereunder. To the extent participants fail to establish or modify 10b5-1 plans
in accordance with the foregoing, the Company shall at its election either
require the participant to pay cash sufficient to meet the withholding
obligations or the Company shall withhold the number of shares under a stock
award sufficient (based on the fair market value of the Company’s common stock)
to meet such withholding obligation.
 
11.  Effect on Employment/Right to Receive.
 
Nothing in the Plan shall interfere with or limit in any way the right of the
Company or its subsidiaries to terminate any participant’s employment or service
at any time, with or without cause or notice. Furthermore, the Company expressly
reserves the right, which may be exercised at any time and without regard to any
measurement period, to terminate any individual’s employment with or without
cause, and to treat him or her without regard to the effect which such treatment
might have upon him or her as a participant under the Plan. For purposes of the
Plan, transfers of employment between the Company and/or its subsidiaries shall
not be deemed a termination of employment. No person shall have the right to be
selected to receive any award under the Plan, or, having been so selected, have
the right to receive a future award.
 
12.  Successors.
 
All obligations of the Company under the Plan, with respect to awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all the business or
assets of the Company.
 
13.  Nontransferability of Awards.
 
No award granted under this Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will, by the laws of descent
and distribution, or to the extent permitted by the Company’s 1999 Stock
Incentive Plan, or other equity plan, to the extent an award is payable from
such plans. All rights with respect to an award granted under this Plan shall be
available during his or her lifetime only to the participant to whom the award
is granted.
 
14. Effectiveness; Prior Plans Superseded.
 
The Plan shall be effective upon adoption by the Board of Directors of the
Company, subject to stockholder approval within twelve months of its adoption by
the Board of Directors. Any award granted under the Plan before it is approved
by the stockholders of the Company shall be null and void and of no force and
effect if the stockholders of the Company do not approve of the Plan within the
twelve month period following adoption by the Board of Directors.
 
 
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