RUBY TUESDAY, INC.

2006 EXECUTIVE INCENTIVE COMPENSATION PLAN

 

I. INTRODUCTION

 

1.1.         Purpose. The purpose of this Plan is to enable Ruby Tuesday, Inc.
(the “Company”) to recruit and retain highly qualified eligible executives,
provide incentives to such individuals to attain the goals of the Company and
its Affiliates (as defined below) and provide such executives with incentive
compensation based on the performance of the Company consistent with the overall
goal of enhancing shareholder value. The Plan is designed to ensure that the
incentive awards paid hereunder to eligible participants are deductible under
Section 162(m) of the Code (as defined below). This Plan is meant to supercede
in its entirety the Ruby Tuesday, Inc. Chief Executive Officer’s Incentive Bonus
Plan (the “Prior Plan”) effective as of the Company’s 2007 fiscal year;
provided, however, that the adoption of this Plan shall not affect incentive
compensation awards for the Company’s 2006 fiscal year previously established
under the Prior Plan or, if the Plan, as amended and restated, is not approved
by shareholders of the Company at the 2006 annual meeting of shareholders, the
operation of the Prior Plan during the 2007 fiscal year or future fiscal years.

 

1.2.         Description. This Plan is the means by which the Committee (as
defined below) shall determine incentive awards and implement awards for
participating employees hereunder.

 

II. DEFINITIONS

 

As used in this Plan, the following terms shall have the following meanings:

 

“Affiliate” means (a) an entity that directly or through one or more
intermediaries is controlled by the Company, and (b) any entity in which the
Company has a significant equity interest, as determined by the Company.

 

“Average Base Compensation” means the average annual base salary paid to a
Participant over a Performance Period, exclusive of bonus and other incentive
compensation, commissions, fringe benefits, employee benefits, expense
allowances (nonaccountable or otherwise) and other nonrecurring forms of
remuneration.

 

“Board” means the Board of Directors of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” means the Compensation Committee of the Board, which shall consist
of two or more members of the Board of Directors of the Company, each of whom
shall be an “outside director” within the meaning of Section 162(m) of the Code;
provided, however, that, if the Compensation Committee of the Board is not
comprised solely of members who are “outside directors”, the term “Committee”
shall mean the subcommittee of the Compensation Committee established by the
Compensation Committee and comprised of two or more members of the Compensation
Committee, each of whom shall be an “outside director” within the meaning of
Section 162(m) of the Code.

 

“Eligible Employee” means each employee of the Company holding a position of
President or above. No employees of an Affiliate shall be eligible for the Plan.

 

“Incentive Award” means an award payable with respect to a Performance Period
determined in accordance with Article V hereof.

 

“Participant” means any Eligible Employee for the Performance Period(s) as to
which he or she is eligible to receive an Incentive Award, as designated by the
Committee.

 

“Performance Measures” means the measurable performance objectives, if any,
established by the Committee for a Performance Period that are to be achieved
with respect to an Incentive Award granted to a Participant under the Plan.
Performance Measures may be described in terms of (i) Company-wide objectives,
(ii) objectives that are related to performance of the division, department or
function within the Company or an Affiliate in which the Participant receiving
the Incentive Award is employed or on which the Participant’s efforts have the
most influence, (iii) performance solely in relation to objectives achieved
during the Performance Period or as compared to past performance periods, and/or
(iv) performance relative to the performance by a company or group of companies
selected by the Committee with respect to one or more Performance Measures
established by the Committee.

 

The Compensation Committee will establish Performance Measures under an
objective formula or standard consisting of one or any combination of the
following criteria:

 

Cash flow

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

Earnings per share (EPS)

Net operating profit after taxes (NOPAT)

Return on net assets (RONA)

Return on assets (ROA)

Return on equity (ROE)

Return on invested capital (ROIC)

Company, franchise or system comparable restaurant sales (SRS)

Company, franchise or system traffic growth (Guest Count Growth)

Market share or related strength of brand measures related to consumer
perception, including but not limited to, brand relevance and guest
satisfaction, in each case based on objective data such as guest or market
surveys

Economic Value Added (dollar spread between return on capital and cost of
capital) (EVA)

Gross revenues

Operating income

Operating cash flow

Retention of Company team members in general or in any specific category or
level of employment

Earnings before interest, depreciation and amortization (EBIDA)

Earnings before interest and taxes (EBIT)

Earnings before interest, taxes, depreciation, and rent (EBITDAR)

Gross profit

Company, franchise or system restaurant growth in number of new restaurants

Average restaurant volume growth

Fixed charge coverage ratio

Sales and earnings performance

Total shareholder return

General and administrative costs (as a percentage of net sales or flat dollar
amount)

Consolidated net income

Management of capital or operating expenditures

Appreciation of stock price

Market Value Added (Company market value less total capital employed)

 

If the Committee determines that, as a result of a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which the Company conducts its business, or any other events or
circumstances, including, but not limited to a change in applicable law, the
Performance Measures are no longer suitable, the Committee may in its discretion
modify such Performance Measures or the related minimum acceptable level of
achievement, in whole or in part, with respect to a period as the Committee
deems appropriate and equitable. In such case, the Committee shall consider
whether any modification of the Performance Measures or minimum acceptable level
of achievement would cause the exemption under Code Section 162(m) to become
unavailable.

“Performance Period” means, with respect to an Incentive Award, a period of time
within which the Performance Measures relating to such Incentive Award are to be
measured. The Performance Period, if any, will be established by the Committee
pursuant to Section 5.1 at the time the Incentive Award is granted.

 

“Plan” means the Ruby Tuesday, Inc. 2006 Executive Incentive Compensation Plan,
as in effect and as amended from time to time.

 

III. ADMINISTRATION

 

The administration and operation of the Plan shall be supervised by the
Committee with respect to all matters. The Committee may delegate responsibility
for the day-to-day administration and operation of the Plan to such employees of
the Company as it shall designate from time-to-time. The Committee shall
interpret and construe any and all provisions of the Plan and any determination
made by the Committee under the Plan shall be final and conclusive. Neither the
Board nor the Committee, nor any member of the Board, nor any employee of the
Company shall be liable for any act, omission, interpretation, construction or
determination made in connection with the Plan (other than acts of willful
misconduct) and the members of the Board and the Committee and the employees of
the Company shall be entitled to indemnification and reimbursement by the
Company to the maximum extent permitted at law in respect of any claim, loss,
damage or expense (including counsel’s fees) arising from their acts, omissions
and conduct in their official capacity with respect to the Plan. The Plan shall
be interpreted in view of the intention that any grant of compensation pursuant
to the Plan is intended to qualify as performance-based compensation within the
meaning of Code Section 162(m) and the regulations and interpretations
promulgated thereunder.

 

IV. PARTICIPATION

 

The Committee shall designate those Eligible Employees who are to be
Participant(s) for a Performance Period within ninety (90) days of the first day
of the Performance Period. A Participant may be eligible to receive awards under
the Plan for one or more Performance Periods, as determined by the Committee.

 

V. INCENTIVE AWARD

 

5.1.         Establishment of Performance Period and Performance Measures. From
time to time while the Plan is maintained by the Company, the Committee may
establish Performance Period(s) for one or more Participants. Within ninety (90)
days of the first day of a Performance Period, but in any event prior to the
expiration of twenty-five percent (25%) of the applicable Performance Period,
the Committee shall establish the Performance Measures for the payment of
Incentive Awards under the Plan. At the time any Performance Measures are
established, the outcome as to whether the Performance Measures will be met must
be substantially uncertain. The Performance Period(s), Performance Measures and
other terms of the Incentive Awards contemplated under this Article V shall be
set forth in writing in such detail so that a third party having knowledge of
the relevant Performance Period(s), Performance Measures and performance results
could calculate whether the Performance Measures have been met and the amount of
the Incentive Award to be paid to each Participant.

 

5.2.         Incentive Awards. The Committee may establish either flat dollar
amount(s) or percentage(s) of each Participant’s Average Base Compensation to be
paid as an Incentive Award under this Article V upon the attainment of one or
more of the Performance Measures for a Performance Period. After establishing
the dollar amount of an Incentive Award or the percentages of Average Base
Compensation to be paid as an Incentive Award under this Article V for each
Participant, the Committee may reduce, but not increase, by up to twenty-five
percent (25%) of the amount of the Incentive Award which would have otherwise
been payable to the Participant based upon the Committee’s determination of the
performance of such Participant for the Performance Period in other

quantitative and qualitative goals established by the Committee from time to
time. In no event shall the amount of the Incentive Award payable to any
Participant attributable to a Performance Period exceed $3,000,000 if the
Performance Period consists of twelve (12) months or less or exceed $6,000,000
if the Performance Period consists of more than twelve (12) months.

 

5.3.         Determination of Achievement of Performance Measures. The Committee
shall certify the level of achievement of the Performance Measures as soon as
practical after the end of the Performance Period for which the determination is
being made.

 

 

5.4.

Payment of Incentive Awards.

 

(a)          As soon as practicable after the expiration of each Performance
Period, but not later than two and one-half (2½) months thereafter, each
eligible Participant shall be entitled to receive payment of his or her
Incentive Award, as determined in accordance with the terms of the Incentive
Award and this Article V. For purposes of this Section 5.4(a), an “eligible”
Participant shall include each Participant who has remained in the employ of the
Company until the last day of the Performance Period and any Participant whose
Incentive Award provides for a pro rata payment in the event the Participant
ceases to be employed by the Company during the Performance Period. Whether an
Incentive Award provides for a pro rata payment in the event of certain types of
cessations of employment shall be determined by the Committee in its sole
discretion at the time the terms of an Incentive Award are established in
accordance with Section 5.1 and may include cessations of employment
attributable to death, disability or any other reason specified by the
Committee; provided that such other reason(s) shall not cause the Incentive
Award to cease to qualify as performance-based compensation because of whether
and how the Incentive Award becomes payable. Any Incentive Award that provides
for a pro rata payment in accordance with this Subsection (a) shall be prorated
based on the number of days elapsed during such Performance Period prior to the
date of the Participant’s cessation of employment divided by the total number of
days in such Performance Period. Payment of Incentive Awards shall be made in a
lump sum as soon as practicable after the last day of the Performance Period,
but not prior to the Committee’s certification contemplated by Section 5.4(c).
Incentive Awards shall be paid in cash unless the Committee determines that all
or a portion of the Incentive Award shall be made in shares of the Company’s
common stock; provided, however, that any portion of an Incentive Award paid in
shares of the Company’s common stock shall be funded under the Ruby Tuesday,
Inc. 2003 Stock Incentive Plan (or any successor plan), subject to any
additional limitations therein, if any.

 

(b)          The Committee may, in its discretion, institute a program allowing
Participants to defer the receipt of all or a portion of their Incentive Award
otherwise payable under Subsection (a) of this Section 5.4 in accordance with
and subject to the rules and regulations promulgated under Code Section 409A.

 

(c)          Before any Incentive Award is paid to any Participant or
beneficiary of a Participant, the Committee shall certify in writing that the
applicable Performance Measures were in fact satisfied.

 

5.5.         Participants’ Rights Unsecured. The right of any Participant or
beneficiary of a Participant to receive an Incentive Award under the Plan shall
constitute an unsecured claim against the general assets of the Company.

 

5.6.        Withholding Taxes. The Company shall have the right to deduct from
each Incentive Award payment any federal, state and local taxes required by the
laws of such jurisdictions to be withheld with respect to such payment.

 

5.7.         Limitation on Other Incentive Awards. A Participant may have one or
more Performance Periods for which he or she is designated as an eligible
Participant by the Committee,

which Performance Periods may overlap. A Participant shall not be eligible to
participate in any other similar performance-based compensation programs
maintained by the Company during any Performance Period for which the
Participant is designated as an eligible Participant by the Committee other than
as contemplated in. Plan Section 5.4(a) and except that such Participant may
receive equity awards under any shareholder approved equity incentive plan
maintained by the Company that complies with Section 162(m) of the Code;
provided, however, that no grant of such equity awards shall be made contingent
upon the failure of the Participant to attain the Performance Measures pursuant
to this Plan. Nothing in this Section 5.7 or any other provision of the Plan
shall preclude the payment by the Company of discretionary bonuses to eligible
Participants; provided, however, that, as a preliminary matter, the Committee
shall reasonably conclude that the payment of any discretionary bonus shall not
cause the payment of any Incentive Award under this Plan to fail to qualify as
performance-based compensation within the meaning of Code Section 162(m).

 

VI. GENERAL PROVISIONS

 

6.1.         Adjustment of Performance Measures. The Committee may amend or
adjust the Performance Measures or other terms and conditions of an outstanding
Incentive Award in recognition of unusual or nonrecurring events of a material
nature affecting the Company or its financial statements or changes in law or
accounting. In making any such adjustment, the Committee shall consider whether
it would cause any portion of the award, upon payment, to be nondeductible
pursuant to Section 162(m) of the Code.

 

6.2.         Amendment and Termination. The Committee may at any time amend,
suspend, discontinue or terminate the Plan except to the extent that the terms
of any Incentive Award provides otherwise and in no event will such amendment,
suspension, discontinuance or termination without the consent of the holder of
an Incentive Award adversely affect the rights of the Participant under such
Incentive Award to the extent that the Incentive Award has been earned but not
yet paid. In addition, any such amendment, suspension, discontinuance or
termination shall require shareholder approval to the extent necessary to
continue to qualify the payment or other settlement of Incentive Awards as
performance-based compensation within the meaning of Code Section 162(m) or to
the extent such shareholder approval would be required under the rules of the
national securities exchange or Nasdaq quotation or market system on which the
Company’s common stock is then traded. All determinations concerning the
interpretation and application of this Section 6.2 shall be made by the
Committee.

 

6.3.         Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments to be made following the Participant’s
death or legal incapacity. Such designation may be changed or cancelled at any
time without the consent of any such beneficiary. Any such designation, change
or cancellation must be made on a form provided for that purpose by the
Committee and shall not be effective until received by the Committee. If no
beneficiary has been named, or the designated beneficiary or beneficiaries shall
have predeceased the Participant, the beneficiary shall be the Participant’s
spouse or, if no such spouse shall survive the Participant, the Participant’s
estate. If a Participant designates more than one beneficiary, the rights of
such beneficiaries shall be made in equal shares, unless the Participant has
designated otherwise.

 

 

6.4.

Miscellaneous.

 

(a)          No Right of Continued Employment. Nothing in this Plan shall be
construed as conferring upon any Participant any right to continue in the
employment or other service of the Company or any of its subsidiaries or
Affiliates or any of their successors.

 

(b)          Nonalienation of Benefits. Except as expressly provided herein, no
Participant or his or her beneficiaries shall have the power or right to
transfer, anticipate, or otherwise encumber the Participant’s interest under the
Plan. The Company’s obligations under this Plan are not

assignable or transferable except to a corporation that acquires all or
substantially all of the assets of the Company or any corporation into which the
Company may be merged or consolidated. The provisions of the Plan shall inure to
the benefit of each Participant and his or her beneficiaries, heirs, executors,
administrators or successors in interest.

 

(c)          Severability. If any provision of this Plan is held unenforceable,
the remainder of the Plan shall continue in full force and effect without regard
to such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.

 

(d)          Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before any payments of
compensation are made to any Participant. If such approval is not obtained, the
Plan shall be deemed null and void and no compensation shall be payable to
Participants under the Plan.

 

(e)          Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, without reference to the
principles of conflict of laws.

 

(f)           Effective Date. The Plan shall be effective as of the first day of
the Company’s 2007 fiscal year; subject to the shareholder approval requirement
in Section 6.4(d) above. If shareholder approval is not obtained at the 2006
annual meeting of shareholders, the provisions of the Prior Plan shall continue
in effect.

 

(g)          Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of the
Plan.

 

(h)          Term of Plan. The Plan shall continue in effect until terminated by
the Board; provided, however, that the Plan shall terminate automatically if it
is not reapproved by the Company’s shareholders by the first annual meeting of
shareholders that occurs in the fifth year following the year in which
shareholders originally approve the Plan, as amended and restated hereby,
pursuant to Section 6.4(d) (the “Reapproval Date”). If such reapproval by
shareholders is not obtained, then the Plan shall terminate following the close
of the last Performance Period commencing immediately prior to the Reapproval
Date.

 

IN WITNESS WHEREOF, the Company has caused this Plan, as amended and restated,
to be executed as of the day and year first above written.

 

Dated:

July 11, 2006

RUBY TUESDAY, INC.

 

 

 

By: /s/ Samuel E. Beall, III

 

Title:

Chairman of the Board

 

Chief Executive Officer and President