MARCUS CORPORATION 
VARIABLE INCENTIVE PLAN
(VIP) 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 Variable 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 Variable
Incentive Plan, as amended, will become effective as of July 18, 2007 for plan years
ending May 2008 and beyond.  



Plan Year:  
A Plan Year is from
approximately June 1st to May 31st (coincides with The 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 the plan’s ministerial functions 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,
district or facility (“Business Unit”).  




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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.  



Target Incentive Opportunity:  
Each
participant’s target incentive opportunity will be expressed as a percentage of Base
Salary and will be recommended annually by the CEO and Division Presidents, provided,
however, that the target incentive opportunity for the Company’s named executive
officers shall be determined by the Committee. Target incentive awards will be earned if
relevant Company or Business Unit financial targets are achieved. In addition,
VIP-eligible employees will have a portion of their incentive opportunity based on the
achievement of individual strategic or business level goals other than the selected
financial targets.  



VIP incentive opportunities will be
communicated to employees by the CEO and Division Presidents after Company, Business Unit
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 Company and/or Business Unit financial performance can vary by level and
position within the organization. These weightings may be revised annually based on the
CEO’s discretion and The Marcus Corporation’s business objectives, provided,
however, that the weightings for the Company’s named executive officers shall be
determined by the Committee.  



Examples:  

An operating VP’s
incentive opportunity might be weighted 80% based upon achievement of financial
performance goals and 20% based upon achievement of individual goals, with the 80%
incentive opportunity based upon financial performance goals further weighted 80% based
upon achievement of his Business Unit goals and 20% based upon achievement of total
division and/or consolidated Company goals.  



A corporate staff member’s
incentive opportunity may be weighted 60% based upon achievement of consolidated Company
financial performance goals and 40% based upon achievement of Individual goals. 




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Financial Performance Goals:  
The
financial performance goals of the Company or a Business Unit shall be based on one or
more of the following objective financial measures, either in absolute terms or in
comparison to prior year performance or publicly available industry standards or indices:
revenues, gross operating profit, operating income, pre-tax earnings, net earnings,
earnings per share, earnings before interest, taxes, depreciation and amortization
(EBITDA), economic profit, operating margins and statistics, financial return and
leverage ratios, total shareholder return metrics or a Company-specific financial metric
(such as Adjusted EBITDA). Additional financial measures not named could be considered if
the Compensation Committee determined that the specific measure contributes to achieving
the primary goal of the VIP incentive program – sustained growth in long-term
shareholder value. The Compensation Committee retains the ability to consider whether an
adjustment of the financial goals for any year is necessitated by exceptional
circumstances. This ability is intended to be narrowly and infrequently used.  



Individual Performance Factors:  
A
portion of individual incentive amounts will be paid based on other individual
quantitative or qualitative performance factors, developed pursuant to the Company’s
or Business Unit’s operating plan or the Individual performance management process
for the Plan Year. In all cases, the Plan administrators reserve the right to not pay any
incentives based on individual performance measures if a previously identified financial
measure is below a predetermined level.  



Individual Performance:  
The
Compensation Committee, on its own or at the recommendation of the CEO, reserves 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.  



Incentive Award Calculation:  
The
first step in determining an incentive payment is to compare the actual Company or
Business Unit financial measure earned during the Plan Year to the applicable target
financial performance goal. If the actual financial performance equals the applicable
target financial performance goal, then 100% of the applicable individual’s target
incentive opportunity based upon achievement of the financial measure has been earned. If
the actual financial performance is equal to or less than a pre-determined Threshold
level of achievement, then 0% of the applicable individual’s target incentive
opportunity based upon the achievement of the financial measure will have been earned.
Conversely, if the actual financial performance is equal to or greater than a
pre-determined Maximum level of achievement, then 200% of the applicable individual’s
target incentive opportunity based upon achievement of the financial measure has been
earned.  




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The table below illustrates how the
“interval” created by this threshold and maximum level of achievement helps
determine the actual incentive payout applicable to the financial measure: 






		

	
	(Threshold) 
$__ million

or __% 
below target
	Target 
Financial 
Measure
	(Maximum) 
$__ million

or __% 
above target

	Incentive Earned	0% of target	100% of 
target	200% of 
target
	







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 the target and actual measure to the interval
and interpolating to arrive at the percentage of target incentive earned. 



The actual VIP incentive earned as a
percentage of salary is then calculated by multiplying the percentage of target award
earned (as calculated above) by the participant’s target award attributable to the
achievement of the financial metric, 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 incentive award attributable to
the achievement of their financial goal. 



A similar calculation is performed in
order to determine the participant’s incentive award attributable to the achievement
of the participant’s Individual performance factors. An overall achievement factor
ranging from 0% to 200% will be assigned to the achievement of these factors. 



Attachment A provides example
incentive award calculations. 



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



	• 	Be
actively employed for at least one month of the Plan Year; and 





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






Form and Timing of Payout:  
Amounts
earned 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.  




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Determination and Communication of
Performance Measures and Goals:   
Target financial measures for each Plan Year will be
determined for the Company and each applicable Business Unit as soon as practicable after
the financial results from the previous year are finalized. Individual performance
factors and goals will be determined by each Division President and approved by the CEO
and Compensation Committee, if required. 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 Company and Business Unit financial
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 VIP incentive plan if he/she meets the eligibility
and participation criteria and begins work at least one month 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 financial and
other performance goals and actual performance applicable to the participant’s
previous and new positions. 



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 financial and other performance goals and actual performance applicable
to the participant’s previous and new positions. 







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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, provided, however, that the Committee may award any portion of
such incentive as they deem appropriate.  



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.  



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.  



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. This payment will be made at the time that incentive awards are paid to active
participants, and will be based on actual goal achievement.  







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ATTACHMENT A:
ILLUSTRATION OF INCENTIVE AWARD CALCULATION  



Assumptions:  


	

				
	Base Salary			$50,000
	
 		% of Salary	Dollars
	Total Target Bonus Opportunity	10%	$5,000
		Based on Financial Measures (80%)	  8%	$4,000
		Based on Individual Factors (20%)	  2%	$1,000
	
Financial Measure Table - Threshold/Maximum
		Financial Measure (assumes EBITDA has 	% of Target 	% of Target 
		been selected as the applicable measure)	Measure	Bonus Earned
		EBITDA = $65,000,000 (Maximum)	130%	200%
		EBITDA = $57,500,000	115%	150%
		EBITDA = $50,000,000 (Target)	100%	100%
		EBITDA = $42,500,000	  85%	  50%
		EBITDA = $35,000,000 (Threshold)	  70%	    0%
	
Example 1:		Bonus Earned
		Actual EBITDA = $57,500,000		150% of target
		100% of Individual Factors deemed achieved		100% of target
	
Example 2:		Bonus Earned
		Actual EBITDA = $46,250,000	(interpolated)	75% of target
		50% of Individual Factors deemed achieved		50% of target
	








Calculation: 


	

			 
	Incentive Award Earned - Example 1:	 
		Financial Performance (150% of $4,000 target opportunity)	$6,000 
		Individual Performance (100% of $1,000 target opportunity)	       1,000 
		     Total Incentive Award	$7,000 
	
Incentive Award Earned - Example 2:	 
		Financial Performance (75% of $4,000 target opportunity)	$3,000 
		Individual Performance (50% of $1,000 target opportunity)	          500 
		Total Incentive Award	$3,500 
	








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