MARCUS CORPORATION
VMAX INCENTIVE PLAN TERMS

Plan Sponsor:
The plan will be sponsored by The Marcus Corporation (“Marcus Corporation” or
the “Company”).

Plan Objectives:
The objectives of The Marcus Corporation’s VMAX Incentive Plan are to:

• Reward employees for their contributions to profitability, returns, and
growth.

• Focus employees on the long-term success of The Marcus Corporation.

• Align employee rewards with shareholder interests.

• Provide competitive total compensation opportunities.

Effective Date:
The VMAX Incentive Plan will become effective as of June 1, 2003.

Plan Year:
A Plan Year is from June 1st to May 31st and coincides with Marcus Corporation’s
fiscal year.

Administration:
The Plan will be administered by the Compensation Committee of The Marcus
Corporation’s Board of Directors (the “Committee”), which reserves the authority
to amend, interpret, or terminate the plan in whole or in part at any time. The
Committee may delegate responsibility for plan administration to such officers
of the Company as it determines in its sole discretion from time to time.

Eligibility and Participation:
All salaried employees are eligible to participate. Participants will be
selected annually by the Chairman and Chief Executive Officer.

Participating positions will vary by division. In addition, participation will
be phased in over the first two Plan Years.

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Base Salary:
Base Salary used to determine actual incentive awards will be an individual’s
actual rate of Base Salary in effect at the end of the Plan Year, without regard
to voluntary salary reductions, such as under the 401(k) Plan, Flexible Benefit
Spending Plan, etc. See sections discussing New Hires, Promotions, and Transfers
for additional information.

Incentive Opportunity:
Each participant’s target incentive opportunity will be expressed as a
percentage of Base Salary and will be determined annually by the CEO and
Division Presidents. Target incentive awards will be earned if relevant
consolidated, division, district/city, and facility Economic Profit (EP) targets
are achieved. In addition, VMAX-eligible division employees will have a portion
of their incentive opportunity based on the achievement of operating goals other
than EP.

VMAX incentive opportunities will be communicated to employees by the CEO and
Division Presidents after consolidated, division, district/city, facility, and
individual goals are set at the beginning of each fiscal year.

Incentive Opportunity Weighting and Allocation:
The percentage of incentive opportunity that will be determined by the
achievement of consolidated, division, district/city, and/or facility EP
performance varies by level within the organization. These weightings may be
revised annually based on the CEO’s discretion and Marcus Corporation’s business
objectives. (Example: a district director’s incentive opportunity might be
weighted 80% based upon achievement of district goals and 20% based upon
achievement of division goals).

EP Performance Goals:
chieving sustained growth in EP is the primary goal of the VMAX incentive
program. Based on an analysis of shareholders’expected returns, an initial
three-year EP target path has been identified for Marcus Corporation and each
Division reflecting an expected level of annual improvement in EP. Each year’s
target EP performance is expected to be equal to the previous year’s actual EP
plus the required improvement amount. The EP target path and required annual EP
improvement amounts will be reassessed approximately every three years, or when
there is a significant change in the structure of the Company, or if external
influences affecting investors’ expectations for the lodging and motion picture
theatre industries significantly change.

Other Performance Factors:
To retain focus on non-EP operational results, a portion of individual incentive
amounts will be paid based on other performance factors. In all cases,
incentives based on other performance measures will not be paid out if EP is
below a predetermined level.

Operating Positions: All participants in operating positions will have 20% of
their total incentive opportunity based on non-EP performance goals.

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Staff Positions: Separate awards of up to 20% of target incentive opportunity
are available for staff positions to reward extraordinary contributions or
performance. An incentive pool will be funded for this purpose. Awards made from
this pool will be determined by the appropriate Division President or the CEO,
as appropriate based on the participant’s position.

Individual Performance:
Division Presidents and the CEO reserve the right to eliminate a participant’s
incentive award on the basis of sub-standard individual performance. All
participants with a performance rating below a predetermined level will be
reviewed for this purpose.

Initial Incentive Award Calculation:
The first step in determining an incentive payment is to measure the
consolidated, division, district/city and facility EP earned during the Plan
Year. The EP calculation method at each division will address the specific needs
and considerations of each division. The calculated EP amount is compared to
target EP and the EP interval for the Plan Year to determine the percentage of
target EP-based incentives earned. The table below illustrates how the interval
helps determine the incentive payout assuming an EP interval of $10 million.

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$10 million
below target EP

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$5 million below
target EP

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Target EP
 

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$5 million above
target EP

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$10 million above
target EP

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EP Incentive Earned 0% of target 50% of target 100% of target 150% of target
200% of target

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The actual performance is translated into a percentage of target incentive
opportunity (e.g., 50% of target, 150% of target, etc.) by comparing the
difference between target and actual EP to the EP interval and interpolating to
arrive at the percentage of target incentive earned.

The actual VMAX incentive earned as a percentage of salary is then calculated by
multiplying the percentage of target award earned by the participant’s target
award expressed as a percentage of salary. This percentage is then multiplied by
the participant’s Base Salary, as defined for purposes of the Plan, to calculate
the amount of the participant’s initial incentive award.

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Incentive Banking:
Once each participant’s initial incentive has been calculated, any incentive
amount earned based on EP goal achievement will be subject to the incentive
banking process.

In the event that the participant has a percentage of his or her target bonus
opportunity allocated to non-EP performance goals, the incentive earned based on
non-EP goal achievement will not be banked. Only incentives earned based on EP
performance will be banked.

An individual incentive bank balance will be maintained for each participant. In
the event of a transfer or other change in a participant’s position, the
participant’s bank balance, positive or negative, will remain linked to him or
her. The incentive bank balance is a notional amount. It is not funded and is
not property of the employee.

The incentive banking process is designed to pay out each year a participant’s
balance up to the annual target incentive opportunity, plus one third of any
bank balance above the target opportunity amount. The steps below are followed
to determine each participant’s annual payout from the incentive bank.

1. In Year 1, the starting bank balance is zero. In subsequent years, a starting
bank balance may be carried forward from the prior year (see step 5 below).

2. Once the initial EP incentive is determined, it is added to the starting bank
balance for the year.

3. The resulting bank balance will be paid out in full, up to the participant’s
target EP-based incentive amount.

4. If the individual’s bank balance for the year after the addition of the
initial incentive amount exceeds target, one-third of any amount over target
will also be paid out to the participant.

5. The remaining two-thirds of the amount over target will be retained and
carried forward as the next year’s beginning bank balance. Future initial
incentive amounts will offset any negative incentive bank balance.

Attachment A provides example incentive banking calculations.

Eligibility for Incentive Award:
To receive an incentive payment for a Plan Year, a participant must:

• Be actively employed for at least three months of the Plan Year; and

• Be employed on the date on which incentive awards are paid to plan
participants.

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Form and Timing of Payout:
Amounts earned based on EP performance and paid out from the incentive bank and
amounts earned based on achievement of other performance measures will be paid
in cash following the end of the Plan Year. It is anticipated that payment will
be made within 90 days following the Plan Year.

Determination and Communication of Performance Measures and Goals:
Target EP for each Plan Year will be determined for the Company, each Division,
and each participating city, district, and property as soon as practicable after
the EP results from the previous year are finalized. Non-EP operating
performance measures and goals will be determined by each Division President and
approved by the CEO. All goals will be finalized and communicated to incentive
plan participants as close as possible to the beginning of the Plan Year.

Communication of Performance Achievement
Progress towards the achievement of consolidated, division, district/city, and
facility EP goals will be communicated periodically during the Plan Year. A
final communication of actual achievement against goals will be issued as soon
as possible after results are available following the end of the Plan Year.

New Hires
A newly hired employee will be eligible to participate in the VMAX incentive
plan if he/she meets the eligibility and participation criteria and begins work
at leastthree months prior to the end of the Plan Year. The newly hired
employee’s actual rate of Base Salary at the end of the Plan Year will be
prorated based on the number of months worked rounded to the nearest whole month
as a proportion of the Plan Year.

Promotions
Eligible participants who are promoted during the Plan Year will receive a
prorated incentive payment based on:

  • The number of months worked in each position, rounded to the nearest whole
month, as a fraction of the number of months worked during the Plan Year, and

  • The participant's previous and new rates of base salary and incentive
opportunities, and

  • If applicable, the EP and other performance goals and actual performance
applicable to the participant’s previous and new positions.

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Transfers
Participants who transfer between functional areas during the Plan Year will
receive a prorated incentive payment based on:

  • The number of months worked in each role, rounded to the nearest whole
month, as a fraction of the number of months worked during the Plan Year, and

  • The participant's previous and new rates of base salary and incentive
opportunities (if applicable), and

  • If applicable, the EP and other performance goals and actual performance
applicable to the participant’s previous and new positions.

Exceptions may be made in the event that a participant is transferred late in
the Plan Year and does not serve a minimum number of months in his or her new
position. In this case, his/her incentive may be based fully on the results of
the pre-transfer location.

TERMINATION OF EMPLOYMENT

Voluntary or Involuntary Termination
Upon an employee’s voluntary termination of employment or the involuntary
termination of an employee’s employment by The Marcus Corporation with or
without cause during the Plan Year, any incentive that would have been earned
during the Plan Year will be forfeited. In addition, the employee will forfeit
his/her incentive bank balance.

Retirement
Upon a participant’s retirement from The Marcus Corporation at normal or early
retirement age, a prorated incentive payment will be made based on the number of
months the participant was employed during the Plan Year, rounded to the nearest
whole month. This payment will be made at the time that incentive awards are
paid to active participants, and will be based on actual goal achievement. All
prorata amounts awarded based on EP performance will be subject to the incentive
banking process, and the participant’s incentive bank balance will be paid out
in full.

Death
Upon a participant’s death, a prorated incentive payment will be made to his/her
beneficiary as designated under the Company’s Pension Plus plan, or if no
beneficiary has been designated, to the participant’s estate, based on the
number of months the participant was employed during the Plan Year, rounded to
the nearest whole month. This payment will be made at the time that incentive
awards are paid to active participants, and will be based on actual goal
achievement. All prorata amounts awarded based on EP performance will be subject
to the incentive banking process, and the participant’s incentive bank balance
will be paid out in full.

Disability
Upon termination of a participant’s employment due to permanent disability, as
defined in the Company’s Long Term Disability Plan, a prorated incentive payment
will be made based on the number of months the participant was employed during
the Plan Year, rounded to the nearest whole month.

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This payment will be made at the time that incentive awards are paid to active
participants, and will be based on actual goal achievement. All prorata amounts
awarded based on EP performance will be subject to the incentive banking
process, and the participant’s incentive bank balance will be paid out in full.

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ATTACHMENT A: ILLUSTRATION OF INCENTIVE BANKING

ASSUMPTIONS:

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Base Salary   $50,000 
  % of Salary  Dollars 
Total Target Bonus Opportunity 10% $  5,000               Based on EP 8%
$  4,000               Based on Other Measures 2% $  1,000 
Year 1 Initial Incentive Amounts Earned              EP Performance   150% of
target               Performance on Other Measures   100% of target 

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CALCULATION:

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Initial Incentive Amounts                EP Performance (150% of $4,000 target
opportunity) $6,000               Performance on Other Measures (100% of $1,000
target opportunity) 1,000 
Incentive Banking1              Initial EP Incentive Amount 6,000 
             Beginning Bank Balance 0               Initial Incentive Banked
6,000               Subtotal (Bank Balance) 6,000 
             Amount Paid from Bank (Bank Balance up to target) 4,000 
             Subtotal (Bank Balance over target) 2,000 
             Amount Paid from Bank (1/3 of Bank Balance over target)     667 
             Ending Bank Balance2 1,333 
             Total EP-based Incentive Paid 4,667               Incentive Paid
Based on Other Measures 1,000                    Total Incentive Paid $5,667 

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1 Only EP-based incentive amounts are banked.

2 Subject to forfeiture on termination of if future performance results in
negative incentive amounts.

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ATTACHMENT A: ILLUSTRATION OF INCENTIVE BANKING (CONTINUED)1

ASSUMPTIONS:

Salary $50,000  Target Opportunity (EP-based opportunity only) 8%  Target Total
Incentive (EP-based opportunity only) $  4,000 
Annual Payment Bank balance up to target + 1/3 of balance over target 

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Year 1 Year 2 Year 3 Year 4 Year 5

EP Performance   150% of
Target Target 50% of
Target Negative Target
Initial EP Incentive Amount A $6,000 $4,000 $2,000 ($2,000) $4,000
Beginning Bank Balance B=F (previous year)          0  1,333       889
         0 (2,000) Initial Incentive Banked C=A  6,000  4,000  2,000 (2,000)
 4,000 Subtotal (Bank Balance) D=B+C  6,000  5,333  2,889 (2,000)  2,000 Amount
Paid from Bank (Bank Balance up to target) E=D up to target  4,000  4,000  2,889
         0  2,000 Subtotal (Bank Balance over target) F=D-E  2,000  1,333
         0          0          0 Amount Paid from Bank (1/3 of Bank Balance over
target) G=1/3 F       667       444          0          0          0 Ending Bank
Balance2 H=F-G  1,333       889          0 (2,000)          0
Total EP Incentive Paid I=E+G $4,667 $4,444 $2,889         $0 $2,000

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1 Only EP-based performance incentives are banked.

2 Subject to forfeiture upon termination or if future performance results in
negative incentive amounts.

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