UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 5, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12454
RUBY TUESDAY, INC.
(Exact name of registrant as specified in charter)
GEORGIA 63-0475239
(State of incorporation or (I.R.S. Employer identifi-
organization) cation no.)
150 West Church Avenue
Maryville, TN 37801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (865) 379-5700
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
31,007,635
(Number of shares of $0.01 par value common stock outstanding as of
January 14, 2000)
Exhibit Index appears on page 17
<PAGE>
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
DECEMBER 5, 1999 AND JUNE 6, 1999..............3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED
DECEMBER 5, 1999 AND DECEMBER 6, 1998..........4
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE TWENTY-SIX WEEKS ENDED
DECEMBER 5, 1999 AND DECEMBER 6, 1998..........5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.....................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................................7-12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK....................................N/A
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..............................13
ITEM 2. CHANGES IN SECURITIES..........................NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS...............................14
ITEM 5. OTHER INFORMATION..............................NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............15
SIGNATURES.............................................16
2
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
RUBY TUESDAY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 5, JUNE 6,
1999 1999
(UNAUDITED) (NOTE A)
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments.................. $ 9,884 $ 9,117
Accounts and notes receivable.................... 5,081 5,406
Inventories...................................... 9,932 9,522
Income tax receivable............................ 2,544
Prepaid expenses................................. 9,730 7,731
Prepaid income taxes............................. 1,635 2,165
Assets held for disposal......................... 23,573 15,725
Total current assets........................... 59,835 52,210
Property and equipment - at cost....................... 519,341 503,333
Less accumulated depreciation and amortization... (196,266) (185,842)
323,075 317,491
Costs in excess of net assets acquired................. 18,699 19,037
Other assets........................................... 42,893 42,077
Total assets................................. $444,502 $430,815
Liabilities & shareholders' equity
Current liabilities:
Accounts payable................................. $ 37,258 $ 27,605
Short-term borrowings............................ 8,720
Accrued liabilities:
Taxes, other than income taxes................. 10,984 11,256
Payroll and related costs...................... 12,892 13,283
Insurance...................................... 8,212 9,379
Rent and other................................. 14,887 13,789
Current portion of long-term debt................ 130 126
Total current liabilities.................... 84,363 84,158
Long-term debt......................................... 85,695 76,767
Deferred income taxes.................................. 5,561 6,653
Deferred escalating minimum rents...................... 12,407 12,025
Other deferred liabilities............................. 34,134 29,411
Shareholders' equity:
Common stock, $0.01 par value;(authorized 100,000
shares; issued 31,273 @ 12/5/99; 32,017 @ 6/6/99) 313 320
Capital in excess of par value................... 5,280 4,049
Retained earnings................................ 217,324 218,007
222,917 222,376
Deferred compensation liability payable in
Company stock................................... 3,347 2,887
Company stock held by deferred compensation plan. (3,347) (2,887)
Accumulated other comprehensive income........... (575) (575)
222,342 221,801
Total liabilities & shareholders' equity..... $444,502 $430,815
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
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<PAGE>
RUBY TUESDAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
DEC. 5, DEC. 6, DEC. 5, DEC. 6,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales and operating revenues $191,995 $174,689 $385,584 $352,016
Franchise revenues..................... 1,784 1,105 3,480 1,925
193,779 175,794 389,064 353,941
Operating costs and expenses:
Cost of merchandise.................... 52,389 47,887 105,381 96,875
Payroll and related costs.............. 62,346 57,175 123,962 113,921
Other................................ 40,249 37,218 80,634 74,379
Depreciation and amortization.......... 10,331 9,838 20,692 19,645
Selling, general and administrative.... 14,814 13,106 28,164 25,447
Interest expense, net.................. 499 916 919 1,862
180,628 166,140 359,752 332,129
Income before income taxes.................. 13,151 9,654 29,312 21,812
Provision for income taxes.................. 4,719 3,503 10,580 7,865
Net income.................................. $ 8,432 $ 6,151 $ 18,732 $ 13,947
Earnings per share:
Basic.................................. $ 0.27 $ 0.19 $ 0.59 $ 0.43
Diluted................................ $ 0.26 $ 0.18 $ 0.57 $ 0.41
Weighted average shares:
Basic................................. 31,171 32,386 31,576 32,525
Diluted............................... 32,224 33,748 32,682 33,882
Cash dividends declared per share....... $ 0 $ 0 $ 0.045 $ 0.045
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
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<PAGE>
RUBY TUESDAY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
DECEMBER 5, DECEMBER 6,
1999 1998
<S> <C> <C>
Operating activities:
Net income........................................ $ 18,732 $ 13,947
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 20,692 19,645
Amortization of intangibles..................... 365 361
Deferred income taxes........................... (25) (3,760)
Loss on impairment and disposition of assets.... 1,538 339
Changes in operating assets and liabilities:
Decrease/(increase) in receivables........... 555 (894)
Increase in inventories...................... (410) (650)
Decrease in prepaid and other assets......... 1,603 1,017
Increase in accounts payable,
accrued and other liabilities............... 13,560 240
(Decrease)/increase in income tax payable.... (1,053) 3,779
Net cash provided by operating activities....... 55,557 34,024
Investing activities:
Purchases of property and equipment............... (37,355) (39,463)
Proceeds from disposal of assets.................. 2,076 1,209
Proceeds from sale of restaurant properties
to franchisees................................... 9,930
Other, net........................................ (1,532) (1,178)
Net cash used by investing activities........... (36,811) (29,502)
Financing activities:
Proceeds from long-term debt...................... 9,000 16,000
Net change in short-term borrowings............... (8,720) (9,420)
Principal payments on long-term debt
and capital leases.............................. (68) (55)
Proceeds from issuance of stock, including
treasury stock.................................. 7,379 8,759
Stock repurchases, net of changes in the
Deferred Compensation Plan...................... (24,144) (13,867)
Dividends paid.................................... (1,426) (1,482)
Net cash used by financing activities........... (17,979) (65)
Increase in cash and short-term investments....... 767 4,457
Cash and short-term investments:
Beginning of year............................... 9,117 8,291
End of quarter.................................. $ 9,884 $ 12,748
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
5
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the thirteen and twenty-six week periods
ended December 5, 1999 are not necessarily indicative of results that may
be expected for the year ending June 4, 2000.
The balance sheet at June 6, 1999 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in Ruby Tuesday, Inc.'s Annual Report on
Form 10-K for the fiscal year ended June 6, 1999.
NOTE B - EARNINGS PER SHARE
Basic earnings per share are based on the weighted average number of
shares outstanding during each period. The computation of diluted
earnings per share includes the dilutive effect of stock options. Such
stock options have the effect of increasing diluted weighted average
shares outstanding by approximately 1.1 million and 1.4 million for the
twenty-six weeks ended December 5, 1999 and December 6, 1998,
respectively. The difference between basic and diluted weighted average
shares reflects the potential dilution from the exercise of stock
options.
NOTE C - COMPREHENSIVE INCOME
Comprehensive income for the thirteen and twenty-six week periods ending
December 5, 1999 was $8.4 million and $18.7 million, respectively, which
was the same as net income. Comprehensive income for the thirteen and
twenty-six week periods ending December 6, 1998 was $6.2 million and
$13.9 million, respectively, which was the same as net income.
NOTE D - OTHER DEFERRED LIABILITIES
Other deferred liabilities at December 5, 1999 and June 6, 1999 included
$12.2 million and $11.7 million, respectively, for the liability due to
participants in the Company's Deferred Compensation Plan.
6
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<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General:
The Company generates revenues from two primary sources: restaurant sales
(food and beverage sales) and franchise revenues consisting of franchise
royalties (based upon a percentage of each franchise restaurant's monthly
gross sales) and development and franchise fees (which typically total
$45,000 for each Ruby Tuesday domestic restaurant opened).
The Company reported net income of $8.4 million for the thirteen weeks
ended December 5, 1999 compared to $6.2 million for the corresponding
period of the prior year. Diluted earnings per share for the second
quarter was $0.26, a 44.4% increase over the diluted earnings per share
of $0.18 for the second quarter of fiscal 1999. Contributing to the
increase was a 2.8% increase in same store sales for Company-owned Ruby
Tuesday restaurants and a reduction, as a percent of revenues, of
operating costs and expenses as discussed below. The Company also
reported net income of $18.7 million for the twenty-six weeks ended
December 5, 1999 compared to $13.9 million for the corresponding period
of the prior year. Diluted earnings per share for the year-to-date
period was $0.57, a 39.0% increase over the same period of fiscal year
1999. As of December 5, 1999, the Company owned and operated 428
restaurants, including 360 Ruby Tuesday, 42 American Cafe, and 26 Tia's
Tex-Mex restaurants. Franchised operations included 91 domestic and six
international Ruby Tuesday restaurants.
Results of Operations:
The following table sets forth selected restaurant operating data as a
percentage of revenues, except where otherwise noted, for the periods
indicated. All information is derived from the unaudited condensed
consolidated financial statements of the Company included herein.
Twenty-six weeks ended
December 5, December 6,
1999 1998
Revenues:
Restaurant sales and operating revenues 99.1% 99.5%
Franchise revenues..................... 0.9 0.5
Total revenues....................... 100.0 100.0
Operating costs and expenses:
Cost of merchandise (1)................ 27.3 27.5
Payroll and related costs (1).......... 32.1 32.4
Other (1).............................. 20.9 21.1
Depreciation and amortization (1)...... 5.4 5.6
Selling, general and administrative.... 7.2 7.2
Interest expense, net.................. 0.2 0.5
Income before income taxes.................. 7.5 6.1
Provision for income taxes.................. 2.7 2.2
Net income.................................. 4.8% 3.9%
(1) As a percentage of restaurant sales and operating revenues.
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<PAGE>
The following table shows year-to-date Company-owned restaurant openings,
closings, and total Company-owned restaurants as of the end of the second
quarter.
Year-to-date Year-to-date Total Open at End
Openings Closings of Second Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
2000 1999 2000 1999 2000 1999
Ruby Tuesday 26 28 1 17* 360 326
American Cafe 0 0 3 1 42 45
Tia's Tex-Mex 3 1 0 0 26 22
The following table shows year-to-date Ruby Tuesday franchised restaurant
openings, closings, and total Ruby Tuesday franchised restaurants as of
the end of the second quarter.
Year-to-date Year-to-date Total Open at End
Openings Closings of Second Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
2000 1999 2000 1999 2000 1999
Domestic 13 19* 0 0 91 68
International 0 0 1 0 6 6
* Includes 13 units sold to franchisees
The Company estimates that 16 to 18 additional Company-owned Ruby Tuesday
restaurants will be opened during the remainder of fiscal 2000. The
Company expects domestic franchisees to open nine to twelve and
international franchisees to open three to five Ruby Tuesday restaurants
during the remainder of fiscal 2000. Also, as discussed in Known Events,
Uncertainties and Trends, the Company has plans to sell 41 Ruby Tuesday
restaurants to domestic franchise partners during fiscal 2000.
Revenues:
Company restaurant sales increased $17.3 million (9.9%) to $192.0 million
for the thirteen weeks ended December 5, 1999 compared to the same period
of the prior year. Restaurant sales increased $33.6 million (9.5%) for
the twenty-six weeks ended December 5, 1999. This increase is
attributable to positive same store sales for the Ruby Tuesday concept
and an increase in the number of units in operation offset by decreases
in same store sales for American Cafe and Tia's Tex-Mex.
Franchise revenues totaled $1.8 million for the thirteen weeks ended
December 5, 1999 compared to $1.1 million for the same period in the
prior year. For the twenty-six week period ended December 5, 1999,
franchise revenues were $3.5 million compared to $1.9 million for the
same period in the prior year. Franchise revenues are predominately
comprised of domestic and international royalties which totaled $2.8
million and $1.6 million for the twenty-six week periods ending December
5, 1999 and December 6, 1998, respectively.
Operating Profits:
Pre-tax income for the thirteen weeks ended December 5, 1999 was $13.2
million, an increase of $3.5 million (36.2%) over the corresponding
period of the prior year. For the twenty-six week period ended on that
same date, pre-tax income was $29.3 million, a $7.5 million (34.4%)
increase over the corresponding period of the prior year. The increase
in pre-tax income is the result of positive same store sales for the Ruby
Tuesday concept and the addition of new units coupled with the cost
changes discussed below.
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<PAGE>
Cost of merchandise increased $4.5 million (9.4%) to $52.4 million for
the thirteen weeks ended December 5, 1999 compared to the same period of
the prior year and $8.5 million (8.8%) for the twenty-six weeks ended
December 5, 1999 compared to the same period of the prior year. However,
as a percentage of Company restaurant sales, the cost of merchandise
decreased 20 basis points to 27.3% for the twenty-six weeks ended
December 5, 1999. This decrease is attributable to menu redesign during
the second quarter which features some of the Ruby Tuesday concept's more
popular combos as platters in addition to Combo and Fajita promotions and
the introduction of a 22 ounce beer during the first quarter. Also, the
implementation of a new American Cafe menu in October eliminated many
single use, high cost ingredients which has improved efficiency and
lowered costs.
Payroll and related costs increased $5.2 million (9.0%) and $10.0 million
(8.8%) for the thirteen and twenty-six weeks ended December 5, 1999, as
compared to the same periods of the prior year. However, as a percentage
of Company restaurant sales, these expenses decreased 30 basis points to
32.1% for the twenty-six week period ended December 5, 1999. The
decrease is due to reductions in training costs associated with lower
hourly turnover and a reduction in unit bonuses resulting from a more
performance-based evaluation system being placed in service during the
current year. During fiscal year 1999, under the prior evaluation
system, many managers maximized their bonus potential earlier in the
year.
Other operating costs increased $3.0 million (8.1%) and $6.3 million
(8.4%) for the thirteen and twenty-six weeks ended December 5, 1999, as
compared to the same periods of the prior year. As a percentage of
Company restaurant sales, however, these costs decreased 20 basis points
for the twenty-six week period ended December 5, 1999, from 21.1% to
20.9%. This decrease is due to the sale of units that had higher than
system average occupancy costs to franchisees beginning in the second
quarter of the prior year. Also, general liability insurance expense
decreased as a result of favorable claims experience. These decreases
are offset by additional rent resulting from increased use of the
synthetic lease program and increased asset impairment charges, primarily
associated with under-performing American Cafe units.
Depreciation and amortization expense increased $0.5 million (5.0%) and
$1.0 million (5.3%) for the thirteen and twenty-six weeks ended December
5, 1999, as compared to the same periods of the prior year. As a
percentage of Company restaurant sales, depreciation and amortization for
the twenty-six weeks decreased 20 basis points to 5.4%. The decrease
results from sales of units to franchisees beginning in the second
quarter of the prior year coupled with increased use of the synthetic
leasing program and higher average unit volumes.
Selling, general and administrative expenses increased $1.7 million
(13.0%) and $2.7 million (10.7%) for the thirteen and twenty-six weeks
ended December 5, 1999, as compared to the same periods of the prior
year. These expenses remained the same as a percentage of total
revenues.
Net interest expense decreased $0.4 million (45.5%) and $0.9 million
(50.6%) for the thirteen and twenty-six weeks ended December 5, 1999, as
compared to the same periods of the prior year. The decrease is due to
increased interest income associated with notes receivable from
franchisees.
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<PAGE>
Income Taxes:
The effective income tax rate was 35.9% for the thirteen weeks ended
December 5, 1999 compared to 36.3% for the same period of the prior year.
However, the effective income tax rate has remained flat at 36.1% for
the twenty-six weeks ended December 5, 1999 compared to the same period
of the prior year. Increases in income taxes resulting from a focus of
franchising (which produces taxable income but no credits) are offset by
savings in taxes associated with various tax planning strategies and
increased tax credits.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $55.6 million for the twenty-
six weeks ended December 5, 1999 as compared to $34.0 million for the
same period in the prior year. The increase over the prior year resulted
from increased earnings plus increased cash from the timing of
operational payments, particularly accounts payable, other accrued
liabilities and income taxes. Cash provided by operating activities for
the twenty-six weeks ended December 5, 1999 exceeded capital expenditures
by $18.2 million. Proceeds from the issuance of stock pursuant to stock
option exercises provided $7.4 million of cash. Pursuant to the
Company's financial strategy approved by the Board during fiscal 1994,
$24.1 million of the Company's common stock was reacquired during the
twenty-six weeks ended December 5, 1999. Additionally, dividends of $1.4
million were paid to shareholders during the first quarter of fiscal
2000.
The Company requires capital principally for new restaurants, equipment
replacement, and remodeling of existing units. Capital expenditures for
the twenty-six weeks ended December 5, 1999 were $37.4 million and
expenditures for construction of new units under the Company's synthetic
operating lease program were $16.4 million. Capital expenditures for the
remainder of fiscal 2000 are projected to be approximately $44.2 million
which the Company intends to fund with cash from operating activities.
Expenditures for units to be leased by the Company under synthetic
operating lease agreements are projected to be $26.9 million for the
remainder of fiscal 2000.
At December 5, 1999, the Company had committed lines of credit amounting
to $12.2 million available and non-committed lines of credit amounting to
$15.0 million available with several banks at varying interest rates.
These lines are subject to periodic review by each bank and may be
canceled by the Company at any time. In addition, the Company has a
$100.0 million, five-year credit facility of which $15.0 million was
available as of December 5, 1999. The Company's synthetic lease
agreements provide for a total of $125.0 million funding for the purpose
of leasing new free-standing restaurants and the Maryville Restaurant
Support Services Center. As of December 5, 1999, $31.0 million was
available for expenditures in accordance with these agreements.
To control future interest costs relating to borrowings under the above-
mentioned $100.0 million credit facility and the Company's $125.0 million
master operating lease agreements, the Company has entered into five
interest rate swap agreements with notional amounts aggregating $125.0
million. The swap agreements effectively fix the interest rate on an
equivalent amount of the Company's debt (including floating-rate lease
obligations) to rates ranging from 5.79% to 6.25% for periods up to
December 7, 2003.
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<PAGE>
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
Financial Strategy and Stock Repurchase Plan
The Company employs a financial strategy which utilizes a prudent amount
of debt to minimize the weighted average cost of capital while allowing
the Company to maintain financial flexibility and the equivalent of an
investment-grade (BBB) bond rating. This financial strategy sets a target
debt-to-capital ratio of no more than 60%, including operating leases.
The strategy also provides for repurchasing Company stock whenever cash
flow exceeds funding requirements while maintaining the target capital
structure. Pursuant to this strategy, the Company has repurchased 1.3
million shares as of December 5, 1999. The total number of remaining shares
authorized to be repurchased as of December 5, 1999 is 6.0 million.
Additional repurchases will be funded by additional borrowings on the
credit facilities and/or cash received in conjunction with the sale of
units to franchisees and excess cash from operations.
Cash Dividend
During fiscal 1997, the Board of Directors approved a dividend policy as
a means of returning excess capital to its shareholders. This policy
calls for payment of semi-annual dividends of $0.045 per share. The
payment of a dividend in any particular future period and actual amount
thereof remain, however, at the discretion of the Board of Directors and
no assurance can be given that dividends will be paid in the future as
currently anticipated. Dividends totaling approximately $1.4 million
were paid to shareholders during the first quarter of fiscal 2000. On
January 12, 2000, the Board of Directors declared a semi-annual dividend
of $0.045 per share, payable on February 11, 2000, to shareholders of
record at the close of business on January 28, 2000.
Refranchising
The Company has pending the sale of restaurants to 5 potential franchise
partners. Such pending transactions provide, among other things, for the
sale of 22 units in Michigan, seven in New York, nine in Illinois, and
three in Indiana. The closing of the sale of these units is expected to
occur by the end of fiscal 2000, and these units will be operated as Ruby
Tuesday restaurants under separate franchising agreements. The aggregate
sales price the Company expects to receive for these units is approximately
$58.3 million, of which approximately $39.8 million - $41.8 million is
expected to be paid in cash. The remaining amounts will be in the form of
notes payable to the Company and due through fiscal 2011 bearing interest at
a rate of 10.0% per year. The sales of these units are expected to result in
a pre-tax gain of approximately $6.6 million - $8.2 million. Of the units to
be sold, 40 were in operation as of December 5, 1999 and one was under
construction. Revenues from these 40 units for the thirteen and twenty-six
week periods ended December 5, 1999 totaled $18.9 million and $35.8 million,
respectively, with operating profits of $1.6 million and $3.1 million,
respectively.
Year 2000 Issue
The Company recognized the need to ensure that its operations, as well as
those of third parties with whom the Company conducts business, would not
be adversely impacted by Year 2000 software failures. Software failures
due to processing errors potentially arising from calculations using the
Year 2000 date were a known risk. The Company addressed this risk to the
availability and integrity of financial systems and the reliability of
operational systems through a combination of actions
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<PAGE>
including the implementation, upgrading, and enhancing of new financial,
payroll, and human resource software packages that are Year 2000 compliant
and a coordinated review of the Year 2000 readiness of key suppliers, financial
institutions and others with which it does business.
With regard to information technology, the Company implemented a new
client-server platform for its financial, payroll and human resources systems
at its support centers. The Company activated the financial system in
October 1998 and the payroll and human resource systems in March 1999. In
September and November 1999, the Company upgraded and further enhanced these
systems to a version certified to be Year 2000 compliant. In addition,
older systems in the individual restaurants were replaced by new systems
which are Year 2000 compliant.
The Company incurred approximately $6.6 million on converting, upgrading,
and enhancing systems which addressed, among other priorities, the Year
2000 issue. The majority of these costs related to the new financial,
payroll and human resource software packages. Funds were provided by
income from continuing operations. The computer systems in the individual
restaurants were scheduled to be replaced as a result of Company growth
and not as a direct result of Year 2000 issues.
The Company compiled a list of third party vendors who were monitored
regarding their compliance with Year 2000 issues. Although several
vendors did not acknowledge Year 2000 compliance, the Company has not
experienced, and does not anticipate, any material problems with its
major vendors.
The Company has not experienced any material issues as a result of the
Year 2000 issue. The Company cannot provide assurances, however, that
its suppliers and vendors have not been nor will not be affected in a
manner that is not yet apparent. As a result, the Company will continue
to monitor its own Year 2000 compliance and that of its suppliers and
vendors. Nonetheless, based on the actions taken as described above, the
Company believes that its operations will not be materially impacted by
the Year 2000 issue.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing section contains various "forward-looking statements" which
represent the Company's expectations or beliefs concerning future events,
including future financial performance and unit growth (both Company-
owned and franchised). The Company cautions that a number of important
factors could, individually or in the aggregate, cause actual results to
differ materially from those included in the forward-looking statements
including, without limitation, the following: consumer spending trends
and habits; increased competition in the casual dining restaurant market;
weather conditions in the regions in which Company-owned and franchised
restaurants are operated; consumers' acceptance of the Company's
development concepts; laws and regulations affecting labor and employee
benefit costs; costs and availability of food and beverage inventory; the
Company's ability to attract qualified managers and franchisees; the
state of Year 2000 readiness of third parties with which the Company does
business; changes in the availability of capital; and general economic
conditions.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
The Company is currently, and from time to time, subject to pending
claims and lawsuits arising in the ordinary course of its business. In
addition, the Company, as successor to Morrison Restaurants Inc.
("Morrison"), is a party to a case (Morrison Restaurants Inc. v. United
States of America, et al.), originally filed by Morrison in 1994 to claim
a refund of taxes paid in the amount of approximately $3,000 and
abatement of taxes assessed by the Internal Revenue Service ("IRS")
against Morrison on account of the employer's share of FICA taxes on
unreported tips allegedly received by employees. The IRS filed a
counterclaim for approximately $7,000 in additional taxes. The case was
decided by the U.S. District Court in favor of the Company in February
1996 on summary judgment. The IRS appealed the District Court's decision
and, on August 12, 1997, the U.S. Court of Appeals for the Eleventh
Circuit reversed the award of summary judgment and remanded the case to
the District Court for proceedings consistent with the Court's opinion.
In its reversal, the Eleventh Circuit upheld the IRS' enforcement policy
with respect to the employer's share of FICA taxes on allegedly
unreported tips. The Company subsequently petitioned the U.S. Court of
Appeals for a review of the matter by the full Court. Such petition was
denied. There are three additional lawsuits on this issue filed by other
restaurant companies pending in other U.S. federal courts. In September,
1998, the District Court in Northern California held in favor of the
taxpayer on the identical issue in Fior d Italia v. United States
("Fior"). The District Court rejected the holding of the Eleventh
Circuit holding, inter alia, that the Eleventh Circuit opinion was
rejected by recently expressed congressional intent. The IRS' motion for
reconsideration in light of the Federal Circuit's decision in The Bubble
Room v. United States (infra) was denied. The IRS has appealed the
district court's ruling on Fior. In October 1998, in a split decision,
the United States Court of Appeals for the Federal Circuit issued a
decision unfavorable to the taxpayer in The Bubble Room v. United States.
The taxpayer's petition for a rehearing En Banc was also denied. In
June, 1999, the United States District Court for the Northern District of
Florida, Pensacola Division, in Quietwater Entertainment, Inc. v. United
States, GA No. 3:98CV160, held in favor of the taxpayer notwithstanding
and distinguishing the controlling law in the Eleventh Circuit in
Morrison. The IRS has appealed the Quietwater decision forcing the
Eleventh Circuit to revisit the issue and the Morrison decision.
Although the amount in dispute is not material, it is possible that the
IRS will attempt to assess taxes in additional units of the Company (as
well as other restaurant companies). In such event, the Company believes
that a business tax credit would be available to the Company to offset,
over a period of years, a majority of any additional taxes determined to
be due. Moreover, the Company is a participant in an IRS enforcement
program which would eliminate the risk of additional assessments by the
IRS in return for a restaurant employer's proactive role in encouraging
employee tip reporting. In light of the proactive role of the Company,
the protection against additional assessment afforded by the agreement
should be available to the Company. In the opinion of management, the
ultimate resolution of all pending legal proceedings will not have a
material adverse effect on the Company's operations or financial
position.
13
</PAGE>
<PAGE>
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on September 30, 1999, the
shareholders of the Company elected Class I Directors to serve a three
year term on the Board. The results of the votes were as follows:
Authority
Director Nominees For Withheld
Dr. Benjamin F. Payton 25,495,040 580,325
James A. Haslam, III 25,641,961 433,404
The shareholders of the Company elected one additional Class III Director
to serve a two year term on the Board. The results of the votes were as
follows:
Authority
Director Nominees For Withheld
Elizabeth L. Nichols 25,632,115 443,250
The Directors continuing in office are: Samuel E. Beall, III, Dr. Donald
Ratajczak, Claire L. Arnold, Dolph W. von Arx and John B. McKinnon.
In addition to the above proposal, the shareholders voted on a proposal
to amend the Company's 1996 Stock Incentive Plan to increase the number
of shares available for issuance by 3,000,000. The results of the voting
were as follows:
12,526,963 shares FOR the Amendment
9,719,950 shares AGAINST the Amendment
95,430 shares ABSTAIN
Also, the shareholders voted on a proposal to reapprove the Company's
Incentive Bonus Plan for the Chief Executive Officer. The results of the
voting were as follows:
24,997,765 shares FOR the Plan
880,005 shares AGAINST the Plan
197,595 shares ABSTAIN
14
</PAGE>
<PAGE>
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are filed as part of this report:
Exhibit
No.
27.1 Financial Data Schedule
99.1 Employment Agreement dated as of June 19, 1999 by and
between Ruby Tuesday, Inc. and Samuel E. Beall, III*
99.2 Third Amendment to the Ruby Tuesday, Inc. 1996 Stock
Incentive Plan*
99.3 Seventh Amendment to the Ruby Tuesday, Inc. Executive
Supplemental Pension Plan*
* Management contract or compensatory plan or arrangement
REPORTS ON FORM 8-K
On December 10, 1999, the Company filed a report on Form 8-K
reporting the engagement of KPMG LLP as its new independent accountants.
The appointment of KPMG LLP was approved by the Company's Audit
Committee and Board of Directors on December 6, 1999. The Company also
reported that during the two most recent fiscal years and through the
date of the report, the Company had no disagreements with its former
accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which
would have caused the former accountants to make a reference thereto in
its report on the financial statements of the Company for such periods.
No financial statements were filed as part of that form.
15
</PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RUBY TUESDAY , INC.
(Registrant)
1/19/00 By: /s/ J. RUSSELL MOTHERSHED
DATE J. RUSSELL MOTHERSHED
Senior Vice President and
Chief Financial Officer
16
</PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
27.1 Financial Data Schedule
99.1 Employment Agreement dated as of June 19, 1999 by and
between Ruby Tuesday,Inc. and Samuel E. Beall, III*
99.2 Third Amendment to the Ruby Tuesday, Inc. 1996 Stock
Incentive Plan*
99.3 Seventh Amendment to the Ruby Tuesday, Inc. Executive
Supplemental Pension Plan*
* Management contract or compensatory plan or arrangement
17
</PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUBY TUESDAY, INC. AS OF AND FOR THE TWENTY-SIX
WEEKS
ENDED DECEMBER 5, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-04-2000
<PERIOD-END> DEC-05-1999
<CASH> 9,884
<SECURITIES> 0
<RECEIVABLES> 5,081
<ALLOWANCES> 0
<INVENTORY> 9,932
<CURRENT-ASSETS> 59,835
<PP&E> 519,341
<DEPRECIATION> 196,266
<TOTAL-ASSETS> 444,502
<CURRENT-LIABILITIES> 84,363
<BONDS> 85,695
0
0
<COMMON> 313
<OTHER-SE> 222,342
<TOTAL-LIABILITY-AND-EQUITY> 444,502
<SALES> 385,584
<TOTAL-REVENUES> 389,064
<CGS> 105,381
<TOTAL-COSTS> 225,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 919
<INCOME-PRETAX> 29,312
<INCOME-TAX> 10,580
<INCOME-CONTINUING> 18,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,732
<EPS-BASIC> $0.59
<EPS-DILUTED> $0.57
</TABLE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 19th day of June, 1999, by
and between RUBY TUESDAY, INC., a Georgia corporation, (the "Company") and
SAMUEL E. BEALL, III, a resident of the State of Tennessee (the "Executive").
RECITALS:
The Company desires to continue the employment of the
Executive as its Chief Executive Officer on the terms and conditions set
forth herein and the Executive desires to accept such employment.
In consideration of the above premises and the mutual
agreements hereinafter set forth, the parties hereby agree as follows:
1. Duties.
1.1 Positions. The Executive shall serve as the Chief
Executive Officer of the Company and, for all periods that the Executive
occupies a seat on the Board of Directors of the Company, shall serve as
the Chairman of the Board of Directors of the Company. In carrying out
his duties under this Agreement, the Executive shall report to the Board
of Directors of the Company.
1.2 Primary Responsibilities. The Executive shall lead the
Company in the development of goals and operating plans and policies and
shall be responsible for the successful implementation of programs that
support the objectives identified. The Executive shall coordinate the
activities of management according to the Company's business plan with a
focus on achieving desired levels of growth, profitability and return on
invested capital.
2. Term. Except as otherwise provided herein, the term of this
Agreement shall commence as of the Effective Date and shall continue until
June 18, 2006. The Agreement may continue for any subsequent renewal
periods agreed to by the Executive and the Company. The period described
herein, as the same may be renewed as provided for herein, shall be
referred to as the "Term".
3. Compensation. During the Term, the Executive shall receive the
following salary and benefits:
3.1 Base Salary. The Executive shall be compensated at a base
salary rate equal to $860,000. The base salary rate shall be adjusted
annually by an amount equal to the greater of (a) four percent (4%) of the
base salary then in effect, or (b) an amount determined by the Board of
Directors of the Company, or appropriate committee thereof, based upon
peer group competitive market data (as so adjusted from time to time, the
"Base Salary"). Base Salary shall be payable in accordance with the
Company's normal payroll practices.
<PAGE>
3.2 Incentive Compensation.
(a) The Executive shall be entitled to an annual bonus
opportunity pursuant to the terms of the Ruby Tuesday, Inc. Chief Executive
Officer's Incentive Bonus Plan, based upon performance criteria approved by
the Board of Directors of the Company, or appropriate committee thereof, with
a target bonus equal to fifty percent (50%) of Base Salary and a maximum
bonus equal to one hundred and twenty-five percent (125%) of Base Salary.
(b) The Executive shall also be entitled to participate in such
long-term incentive compensation programs as may be developed from time to
time for the senior management of the Company, including annual grants of
stock options under the Company's Executive Stock Option Plan. Such grants
shall be awarded to Executive according to the same criteria pursuant to
which such grants are awarded to other senior executives of the Company.
If target performance is achieved, Executive's annual grants are estimated to
be as shown on Schedule 3.2(b).
3.3 Benefits. The Executive shall be entitled both to such
additional pension and welfare benefits as may be provided from time to
time to employees generally and to such additional pension and welfare
benefits as may be provided only to executives generally.
3.4 Vacation. On a non-cumulative basis, the Executive shall be
entitled to four (4) weeks (or such greater time as may be agreed between
the Executive and the Company's Board of Directors) of vacation in each
successive twelve-month period during the Term, during which his
compensation shall be paid in full.
3.5 Life Insurance. The Company shall provide the Executive with
life insurance coverage providing a death benefit of not less than four
(4) times Base Salary, payable to such beneficiary or beneficiaries as the
Executive may designate. This obligation may be satisfied in whole or in
part by the Executive's participation in the Ruby Tuesday, Inc. Executive
Life Insurance Plan.
3.6 Reimbursement of Expenses. The Company agrees to reimburse
the Executive for all reasonable and necessary business (including travel)
expenses incurred by him in the performance of his duties hereunder;
provided, however, that the Executive shall, as a condition of
reimbursement, submit verification of the nature and amount of such
expenses in accordance with reimbursement policies from time to time
adopted by the Company and in sufficient detail to comply with rules and
regulations promulgated by the Internal Revenue Service.
3.7 Stock Options. The Company agrees to grant the Executive a
non-qualified stock option award to acquire 78,000 shares of the Company's
common stock under the Company's 1996 Stock Incentive Plan at a per share
exercise price equal to the fair market value of a share of the Company's
common stock determined as of the close of business on the day before the
Company and the Executive have executed this Agreement (the "1999
Option"). The 1999 Option shall vest on July 1, 2006 and shall expire on
December 18, 2008; provided, however, the 1999 Option shall expire earlier
immediately upon any termination of the Executive's employment, other than
a termination or resignation pursuant to Section 4.1, 4.2, 4.7 or 4.8
hereof. In addition, the Company agrees to grant the Executive a second
non-qualified stock option award to acquire a number of shares of the
Company's common stock under the Company's 1996 Stock Incentive Plan at a
per share exercise price equal to the fair market value of a share of the
Company's common stock determined as of the close of business on the day
before the date of grant determined as described
2
</PAGE>
<PAGE>
below, which shall be the date of the Board of Directors meeting that
immediately follows the regular annual meeting of shareholders to be held in
the year 2000 (the "2000 Option"). The 2000 Option also shall vest on July
1, 2006 and shall expire on December 18, 2008; provided, however, the 2000
Option shall expire earlier immediately upon any termination of the Executive's
employment, other than a termination or resignation pursuant to Section
4.1, 4.2, 4.7 or 4.8 hereof. Notwithstanding the foregoing, the 2000
Option shall not be granted if the Executive is no longer employed by the
Company as of the grant date, other than a termination or resignation
pursuant to Section 4.1, 4.2, 4.7 or 4.8 hereof, and its granting shall
also be conditioned upon the approval at the regular 2000 meeting of
shareholders of the Company of appropriate amendments to the 1996 Stock
Incentive Plan, including an increase of the per employee fiscal year
limit from 250,000 to not less than 350,000. The number of shares to be
included in the 2000 Option is intended to be the number of shares
necessary to create a present value, as of September, 1999, of $1,500,000,
when the 2000 Option is aggregated with the 1999 Option, using the Black-
Sholes model to calculate present value. In the event the aforementioned
amendments to the 1996 Stock Incentive Plan are not approved by the
Company's shareholders, the obligations of the Company under this Section
3.7 shall be extended from year to year until sufficient options have been
granted to create such present value. The Executive agrees not to
purchase any shares of the Company's common stock under the terms of the
Management Stock Option Program during fiscal 2000.
3.8 Withholding. The Company may deduct from each payment of
compensation hereunder all amounts required to be deducted and withheld in
accordance with applicable federal and state income, FICA and other
withholding requirements.
3.9 Existing and Future Stock Options. The Company and the
Executive agree that, subject to the approval by the Company's
Compensation and Stock Option Committee of the Board of Directors, options
previously granted to the Executive to acquire the common stock of the
Company shall be amended to provide, or shall provide if granted in the
future, that (a) such options which have not then vested shall vest in
full upon the death or Disability of the Executive; upon the involuntary
termination of the Executive's employment by the Company without Cause;
upon the Executive's retirement on or after satisfying the Rule of 90 set
forth in the Ruby Tuesday, Inc. Executive Supplemental Pension Plan; or
upon a Change of Control; and (b) the term within which vested options may
be exercised shall be the maximum stated term except as follows: such
option(s) shall expire no later than ninety (90) days following a
voluntary resignation by the Executive (unless the resignation qualifies
as a Qualified Termination) prior to Executive qualifying for the Rule of
90 under Company's Executive Supplemental Pension Plan; no later than
ninety (90) days following an involuntary termination of the Executive's
employment by the Company without Cause with respect to options which vest
prior to normal vesting as a result of such involuntary termination
without Cause or, with respect to the portion of any option which has then
previously vested, no later than one (1) year following any other
involuntary termination of Executive's employment, prior to a Change of
Control, without Cause; and no later than fifteen (15) days following an
involuntary termination of the Executive's employment by the Company for
Cause, or in each case the expiration of the stated term of such option,
whichever first occurs.
4. Termination. During the Term, the employment of the Executive under
this Agreement may be terminated only as follows:
4.1 Death. In the event of the Executive's death, this
Agreement shall terminate and the Company shall have no further
obligations hereunder except as follows: (a) immediate payment of any
obligations accrued but unpaid as of the date of death; (b) payment of
that portion of Base Salary payable through the end of the calendar month
in which the death occurs; (c) payment of earned but unused vacation
through
3
</PAGE>
<PAGE>
the end of the calendar month in which the death occurs; and (d) payment of a
pro rata portion of the annual bonus, if any, payable for the fiscal year in
which the death occurs with such pro rata portion paid when and as such
annual bonus would normally be determined. Payment of obligations under any
other employee benefit plans shall be determined in accordance with the
provisions of those plans.
4.2 Disability. In the event of the Executive's Disability,
this Agreement shall terminate and the Company shall have no further
obligations hereunder except as follows: (a) immediate payment of any
obligations accrued but unpaid as of the date of Disability; (b) payment
of that portion of Base Salary payable through the end of the calendar
month in which the Disability occurs; (c) payment of an amount equal to
thirty (30) days of sick pay; (d) payment of earned but unused vacation
through the end of the calendar month in which the Disability occurs; and
(e) payment of a pro rata portion of the annual bonus, if any, payable for
the fiscal year in which the Disability occurs with such pro rata portion
paid when and as such annual bonus would normally be determined. Payment
of obligations under any other employee benefit plans shall be determined
in accordance with the provisions of those plans.
4.3 Normal Retirement. In the event of the Executive's Normal
Retirement, this Agreement shall terminate and the Company shall have no
further obligations hereunder except as follows: (a) immediate payment of
any obligations accrued but unpaid as of the date of Normal Retirement;
(b) payment of that portion of Base Salary payable through the end of the
calendar month in which the Normal Retirement occurs; ( c) payment of
earned but unused vacation through the end of the calendar month in which
the Normal Retirement occurs; and (d) payment of a pro rata portion of the
annual bonus, if any, payable for the fiscal year in which the Normal
Retirement occurs with such pro rata portion paid when and as such annual
bonus would normally be determined. Payment of obligations under any
other employee benefit plans shall be determined in accordance with the
provisions of those plans.
4.4 Early Retirement. In the event of the Executive's Early
Retirement, this Agreement shall terminate and the Company shall have no
further obligations hereunder except as follows: (a) immediate payment of
any obligations accrued but unpaid as of the date of Early Retirement
except that no payment shall be made for any annual bonus that may have
been earned but remained unpaid as of the date of the Early Retirement;
(b) payment of earned but unused vacation through the end of the calendar
month in which the Early Retirement occurs; and( c) payment of that
portion of Base Salary payable through the end of the calendar month in
which the Early Retirement occurs. Payment of obligations under any other
employee benefit plans shall be determined in accordance with the
provisions of those plans.
4.5 Voluntary Resignation Prior to Early Retirement. In the
event the Executive resigns voluntarily prior to his eligibility for Early
Retirement, this Agreement shall terminate and the Company shall have no
further obligations hereunder except as follows: (a) immediate payment of
any obligations accrued but unpaid as of the date of resignation except
that no payment shall be made for any annual bonus that may have been
earned but remained unpaid as of the date of the resignation; (b) payment
of earned but unused vacation through the end of the calendar month in
which the resignation occurs; and (c) payment of that portion of Base
Salary payable through the end of the calendar month in which the
resignation occurs. Payment of obligations under any other employee
benefit plans shall be determined in accordance with the provisions of
those plans.
4.6 Involuntary Termination for Cause. In the event the Company
terminates the Executive's employment for Cause, this Agreement shall
terminate and the Company shall have no further obligations hereunder
except as follows: (a) immediate payment of any obligations accrued
4
</PAGE>
<PAGE>
but unpaid as of the date of termination except that no payment shall be made
for any annual bonus that may have been earned but remained unpaid as of
the date of the termination; (b) payment of earned but unused vacation
through the end of the calendar month in which the termination occurs; and
(c) payment of that portion of Base Salary payable through the end of the
calendar month in which the termination occurs. Payment of obligations
under any other employee benefit plans shall be determined in accordance
with the provisions of those plans.
4.7 Involuntary Termination other than for Cause. In the
event the Company terminates the Executive's employment other than for
Cause, this Agreement shall terminate and the Company shall have no
further obligations hereunder except as follows: (a) immediate payment of
any obligations accrued but unpaid as of the date of termination; (b)
payment of Base Salary then in effect for a period equal to twenty-four
(24) months (the "Severance Period"); (c) payment of annual bonuses (or
pro rata portion thereof), if any, payable for each of those fiscal years
that overlap, in whole or in part, with the Severance Period, with such
amounts paid when and as such annual bonuses would normally be determined;
(d) payment of earned but unused vacation through the end of the calendar
month in which the termination occurs; and (e) the provision of health,
life and disability coverages to the Executive and eligible dependents for
the Severance Period at active employee rates (or cash equal to the cost
of any such coverage to the extent such continued coverage can not be
provided pursuant to any underlying insurance policy then in effect or
where such continued coverage would have adverse tax effects to the
Executive or other plan participants). Payment of obligations under any
other employee benefit plans shall be determined in accordance with the
provisions of those plans. Company and Executive agree that the failure
of the Board of Directors of the Company to elect, or the action of the
Board of Directors to remove, Executive as Chairman of the Board shall, in
the absence of Cause, permit Executive to terminate this Agreement within
sixty (60) days of such event and such termination shall be deemed to
constitute an involuntary termination other than for cause by Company
pursuant to this Section 4.7.
4.8 Qualified Termination following a Change of Control. In the
event of a Qualified Termination of the Executive's employment following a
Change of Control, this Agreement shall terminate and the Company shall
have no further obligations hereunder except as follows: (a) immediate
payment of any obligations accrued but unpaid as of the date of
termination; (b) immediate payment of a lump sum amount equal to the
product of three (3), multiplied by the sum of (i) Base Salary then in
effect, plus (ii) the greater of (A) the target annual bonus for the
fiscal year in which the Qualified Termination occurs, or (B) the average
of the last three annual bonuses earned by the Executive; (c) immediate
payment of a pro rata portion of the target annual bonus for the fiscal
year in which the Qualified Termination occurs; and (d) the provision of
health, life and disability coverages to the Executive and eligible
dependents for a period of thirty-six (36) months at active employee rates
(or cash equal to the cost of any such coverage to the extent such
continued coverage can not be provided pursuant to any underlying
insurance policy then in effect or where such continued coverage would
have adverse tax effects to the Executive or other plan participants).
Payment of obligations under any other employee benefit plans shall be
determined in accordance with the provisions of those plans; provided,
however, that the Executive's accrued benefit under the Ruby Tuesday, Inc.
Executive Supplemental Pension Plan shall be determined by increasing the
Executive's actual years of "Continuous Service" (as defined therein) by
an additional three (3) full years.
Notwithstanding any other provision of this Agreement to the
contrary, if the aggregate amount provided for in this Agreement and any
other payments and benefits which the Executive has the right to receive
from the Company and its Affiliates (determined without regard to the
provisions of this paragraph) would subject the Executive to an excise tax
under Section 4999
5
</PAGE>
<PAGE>
of the Internal Revenue Code (or any successor federal tax law), or any
interest or penalties are incurred or paid by the Executive with respect to
such excise tax (any such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to an additional payment from the
Company as is necessary (after taking into account all federal, state and
local taxes (regardless of type, whether income, excise or otherwise) imposed
upon the Executive as a result of the receipt of the payment contemplated by
this Agreement) to place the Executive in the same after-tax position the
Executive would have been in had no Excise Tax been imposed or incurred or
paid by the Executive. Ernst & Young LLP (or its successor) or any other
certified public accounting firm agreed to by the Company and the
Executive shall determine the extent, if any, of the Company's obligations
pursuant to this paragraph after receipt of notice from either the Company
or the Executive that a payment has been made that may subject the
Executive to the Excise Tax. The accounting firm shall make its
determination within thirty (30) days after the receipt of any such
notice. The Company shall pay to the Executive in cash in a lump sum any
amount that the accounting firm determines is due pursuant to this
paragraph not later than five (5) business days prior to the date that the
Executive must file the Executive's federal income tax return which
reflects the payment that subjects the Executive to the Excise Tax.
4.9 Severance Amounts and the Executive Supplemental Pension
Plan. Notwithstanding any possible interpretation to the contrary, for
purposes of determining the Executive's accrued benefit under the Ruby Tuesday,
Inc. Executive Supplemental Pension Plan, no amounts payable to the
Executive pursuant to Section 4 hereof shall increase his "Annual Base
Salary" (as defined therein).
5. Confidentiality.
5.1 Ownership of Information. All Company Information received or
developed by the Executive while employed by the Company will remain the sole
and exclusive property of the Company.
5.2 Obligations of Executive. Executive agrees (a) to hold
Company Information in strictest confidence, and (b) not to use, duplicate,
reproduce, distribute, disclose or otherwise disseminate Company
Information or any physical embodiments thereof and may in no event take
any action causing or fail to take any action necessary in order to
prevent any Company Information from losing its character or ceasing to
qualify as Confidential Information or a Trade Secret. In the event that
Executive is required by law to disclose any Company Information,
Executive will not make such disclosure unless and until prior written
notice is given to the Company to enable it to seek protection against
disclosure, as the Company deems necessary. This Section shall survive
for a period of two (2) years following termination of this Agreement with
respect to Confidential Information, and shall survive termination of this
Agreement with respect to Trade Secrets for so long as the information
qualifies as a trade secret under applicable law.
5.3 Delivery upon Request or Termination. Upon request by the
Company, and in any event upon termination of his employment with the
Company, the Executive will promptly
6
</PAGE>
<PAGE>
deliver to the Company all property belonging to the Company, including
without limitation all Company Information then in his possession or control.
6. Non-Competition. The Executive agrees that during his employment
by the Company and for a period of two years thereafter, he will not
(except on behalf of or with the prior written consent of the Company),
within the United States, either directly or indirectly, on his own behalf
or in the service or on behalf of others, as a principal, partner,
officer, director, manager, supervisor, administrator, consultant,
executive employee or in any other capacity which involves duties and
responsibilities similar to those undertaken for the Company, engage in
any business which is the same as or essentially the same as the Business
of the Company. For purposes of this Section, the term "Business of the
Company" shall mean any multi-unit, multi-state foodservice business that
is of a character and concept similar to the restaurants operated by the
Company including, but not limited to, a casual dining restaurant business
with a generic, broad-based menu similar in concept to restaurants
operated by the Company (such as Ruby Tuesday, American Cafe, and Tia's),
serving soups, sandwiches, chicken, ethnic cuisine, health or fitness
oriented dishes and a full bar. Company and Executive expressly agree
that the restaurant concept know as "Truffles" (currently operating in
Hilton Head, South Carolina) is excluded from the covenants in this
Section 6 for so long as there are no more than five (5) units of such
restaurant concept.
7. Non-Solicitation of Employees. The Executive agrees that during his
employment by the Company and for a period of two years thereafter, he
will not, on his own behalf or in the service or on behalf of others,
solicit or recruit any employee of the Company with whom the Executive
worked or had dealings in the course of his employment with the Company.
8. Non-Disparagement. The Executive agrees that at any time during or
after his employment with the Company, he shall not make any disparaging
remarks to the public regarding the Company or otherwise attempt to cast
the Company in an unfavorable light.
9. Remedies. The Executive agrees that the covenants contained in
Sections 5 through 9 of this Agreement are of the essence of this
Agreement; that each of the covenants is reasonable and necessary to
protect the business, interests and properties of the Company; and that
irreparable loss and damage will be suffered by the Company should he
breach any of the covenants. Therefore, the Executive agrees and consents
that, in addition to all the remedies provided by law or in equity, the
Company shall be entitled to a temporary restraining order and temporary
and permanent injunctions to prevent a breach or contemplated breach of
any of the covenants. The Company and the Executive agree that all
remedies available shall be cumulative.
10. Severability. The parties agree that each of the provisions
included in this Agreement is separate, distinct and severable from the
other provisions of this Agreement and that the invalidity or
unenforceability of any Agreement provision shall not affect the validity
or enforceability of any other provision of this Agreement. Further, if
any provision of this Agreement is ruled invalid or unenforceable by a
court of competent jurisdiction because of a conflict between the
provision and any applicable law or public policy, the provision shall be
7
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<PAGE>
redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. Applicable Law and Choice of Forum. This Agreement shall be
construed and enforced under and in accordance with the laws of the State
of Tennessee. The parties agree that any appropriate state or federal
court located in Knox or Blount County, Tennessee, shall have exclusive
jurisdiction of any case or controversy arising under or in connection
with Sections 5 through 9 of this Agreement and shall be a proper forum in
which to adjudicate such case or controversy. The parties consent and
waive any objection to the jurisdiction or venue of such courts.
12. No Set-Off by the Executive. The existence of any claim, demand,
action or cause of action by the Executive against the Company, or any
Affiliate of the Company, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
13. Notice. All notices and other communications required or permitted
under this Agreement shall be in writing and, if mailed by prepaid first-
class mail or certified mail, return receipt requested, shall be deemed to
have been received on the earlier of the date shown on the receipt or
three (3) business days after the postmarked date thereof. In addition,
notices hereunder may be delivered by hand, facsimile transmission or
overnight courier, in which event the notice shall be deemed effective
when delivered or transmitted. All notices and other communications under
this Agreement shall be given to the parties hereto at the following
addresses:
(a) If to the Company, to it at:
Ruby Tuesday, Inc.
c/o General Counsel
150 West Church Avenue
Maryville, Tennessee 37801
(b) If to the Executive, to him at:
1443 West Miller's Cove
Walland, TN 37886
14. Assignment/Successors. Neither party hereto may assign or delegate
this Agreement or any of its rights and obligations hereunder without the
written consent of the other party hereto. This Agreement shall inure to
the benefit of and be binding upon the successors of the Company.
15. Waiver. A waiver by the Company of any breach of this Agreement by
the Executive shall not be effective unless in writing, and no waiver
shall operate or be construed as a waiver of the same or another breach on
a subsequent occasion.
16. Indemnification. During the Term, the Company shall maintain
directors and officers liability insurance coverage that covers the
Executive.
17. Arbitration. Except for matters contemplated by Section 11 above,
any controversy or claim
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<PAGE>
arising out of or relating to this contract, or the breach thereof, shall be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the parties and judgment upon the
award rendered by the arbitrator may be entered in any federal or state court
located in Knox or Blount County, Tennessee. The Company and the Executive
agree to share equally the fees and expenses associated with the arbitration
proceedings.
18. Entire Agreement. This Agreement embodies the entire and final
agreement of the parties on the subject matter stated in the Agreement.
No amendment or modification of this Agreement shall be valid or binding
upon the Company or the Executive unless made in writing and signed by
both parties. All prior understandings and agreements relating to the
subject matter of this Agreement are hereby expressly terminated.
19. Survival. The obligations of the Executive pursuant to Sections 5
through 9 shall survive the termination of the employment of the Executive
hereunder for the period designated under each of those respective
sections.
20. Definitions. Whenever used in this Agreement, the following terms
and their variant forms shall have the meanings set forth below:
20.1 "Affiliate" shall mean any business entity which
controls the Company, is controlled by or is under common control with the
Company.
20.2 "Agreement" shall mean this Agreement with any amendments
hereto made in the manner described in this Agreement.
20.3 "Cause" shall mean, with respect to termination of the
Executive's employment by the Company:
(a) the Executive's conviction of a felony;
(b) conduct by the Executive constituting a
willful refusal to perform any material duty assigned by the Board of
Directors of the Company;
(c) conduct by the Executive that amounts to
fraud against the Company or its Affiliates;
(d) a breach of the terms of this Agreement by
the Executive that is materially injurious to the Company or its Affiliates;
or
(e) conduct by the Executive that amounts to
willful gross neglect or willful gross misconduct resulting in
material economic harm to the Company or its Affiliate.
20.4 "Change of Control" means any one of the following events:
(a) the acquisition by any individual, entity or
"group" (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under such Act) of
voting securities of the Company where such acquisition causes any such
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<PAGE>
Person to own twenty-five percent (25%) or more of the combined voting power
of the then outstanding voting securities then entitled to vote generally in
the election of directors (the "Outstanding Voting Securities"); provided,
however, that for purposes of this Section 20.4, the following shall not
constitute a Change of Control: (i) any acquisition directly from
the Company, unless such a Person subsequently acquires additional
shares of Outstanding Voting Securities other than from the Company;
or (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Affiliate.
(b) within any twelve-month period (beginning on
or after the Effective Date), the persons who were directors of the Company
immediately before the beginning of such twelve-month period (the "Incumbent
Directors") shall cease to constitute at least a majority of the Board of
Directors of the Company; provided that any director who was not a director
as of the Effective Date shall be deemed to be an Incumbent Director if that
director was elected to the Board of Directors by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors; and provided further that no director whose
initial assumption of office is in connection with an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934) relating to the
election of directors shall be deemed to be an Incumbent Director;
(c) the approval by the stockholders of theCompany of
a reorganization, merger or consolidation, with respect to whichpersons who
were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty percent (50%) of the combined voting power entitled to vote
in the election of directors of the reorganized, merged or consolidated
company's then outstanding voting securities;
(d) the sale, transfer or assignment of all or
substantially all of the assets of the Company and its Affiliates to
any third party; or
(e) the liquidation or dissolution of the Company.
20.5 "Company Information" means Confidential Information
and Trade Secrets.
20.6 "Confidential Information" means data and information
relating to the Company or the business of the Company (which does not
rise to the status of a Trade Secret) which is or has been disclosed to
the Executive or of which the Executive became aware as a consequence of
or through the Executive's relationship to the Company and which has value
to the Company and is not generally known to its competitors.
Confidential Information shall not include any data or information that
has been voluntarily disclosed to the public by the Company (except where
such public disclosure has been made by the Executive without
authorization) or that has been independently developed and disclosed by
others, or that otherwise enters the public domain through lawful means.
20.7 "Disability" shall mean the total inability of the
Executive to perform his duties under this Agreement for the duration of
the short-term disability period (but not less than six [6] months) under
the Company's short-term disability policy then in effect as certified by
a physician chosen by the Company and reasonably acceptable to the
Executive.
10
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<PAGE>
20.8 "Early Retirement" shall mean a voluntary termination of
employment by the Executive on or after attaining age 55 but prior to
attaining age 65.
20.9 "Effective Date" means the date first set forth above.
20.10 "Normal Retirement" shall mean a voluntary termination
of employment by the Executive on or after attaining age 65.
20.11 "Qualified Termination" shall mean, during the Term,
any one of the following events: (a) an involuntary termination of the
Executive's employment by the Company other than for Cause; (b) a
resignation by the Executive for any reason within twelve (12) months
following a Change of Control; or (c) a resignation by the Executive
following a Change of Control for any one of the following reasons:
(i) a reduction in the Executive's then
current Base Salary or a reduction in the Executive's target bonus
opportunity, expressed as a percentage of Base Salary;
(ii) a failure to elect or reelect the Executive to
the positions of Chief Executive Officer and Chairman of the Board of Directors;
(iii) a material diminution in the Executive's duties
or responsibilities; or
(iv) a change in supervisory authority such that the
Executive no longer reports directly to the Board of Directors of the Company.
20.12 "Trade Secrets" means information, without regard to form,
which (a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by other persons
who can obtain economic value from its disclosure or use; and (b) is the
subject of efforts that are reasonable under the circumstances to maintain
its secrecy, including, but not limited to, formulas, patterns,
compilations, programs, devices, methods, techniques, processes, financial
data, financial plans or product plans.
11
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<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed
and delivered this Agreement as of the date first shown above.
COMPANY:
RUBY TUESDAY, INC.
By: /s/ J. RUSSELL MOTHERSHED By: /s/ DOLPH W. VON ARX
J. Russell Mothershed Dolph W. von Arx
Senior Vice President & Chairman,
Chief Financial Officer Compensation &
Stock Option
Committee
EXECUTIVE:
/s/ SAMUEL E. BEALL, III
SAMUEL E. BEALL, III
12
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<PAGE>
SCHEDULE 3.2(b)
FISCAL ESOP MSOP SPECIAL TOTAL ESOP ESOP
YEAR END(1) GRANT(2) GRANT GRANT (3) VESTING DATE EXPIRATION DATE
2000 172,000 0 78,000 250,000 10/02 4/05
2001 184,000 8,200 87,653(4) 279,853 10/03 4/06
2002 197,000 7,600 N/A 204,600 10/04 4/07
2003 211,000 7,200 N/A 218,200 10/05 4/08
2004 226,000 6,800 N/A 232,800 6/06 4/09
2005 242,000 6,400 N/A 248,400 6/06 4/10
2006 259,000 6,000 N/A 265,000 6/06 4/11
(1) Assumes stock option grants continue through year of
retirement.
(2) Assumes a 7% increase in the number of options granted each
year from ESOP.
(3) Assumes 250,000 limit on option grants in any fiscal year
is increased.
(4) To the extent the actual number of options necessary to
deliver the desired value is in excess of the new limit on
option grants, this option grant will not take the total
options granted over the limit in place at that time.
Rather, the Company will make an additional option grant in
fiscal year 2002 to deliver the remaining value.
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<PAGE>
THIRD AMENDMENT TO THE
RUBY TUESDAY, INC. 1996 STOCK INCENTIVE PLAN
THIS THIRD AMENDMENT is made as of September 30, 1999, by RUBY
TUESDAY, INC., a corporation organized and existing under the laws of the
State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Ruby Tuesday, Inc. 1996
Stock Incentive Plan (the "Plan").
WHEREAS, the Company wishes to amend the Plan to reflect the
wishes of certain institutional shareholders.
WHEREAS, the Board of Directors of the Company has duly
approved and authorized these amendments to the Plan in resolutions dated
September 30, 1999.
NOW, THEREFORE, the Company does hereby amend the Plan,
effective September 30, 1999, as follows:
1. By adding the following to the end of Section 2.2:
"Notwithstanding any other provision in the Plan, five percent (5%)
of the shares of Stock reserved for issuance hereunder, subject to
adjustment in accordance with Section 5.2, may be granted hereafter
without regard to those provisions of the Plan that became
effective on September 30, 1999."
2. By deleting the first sentence of Section 2.4 and by substituting
therefor the following:
"Stock Incentives may be granted only to officers, directors, and
employees of the Company or an affiliate; provided, however, that
directors of the Company who are not also employees of either the
Company or an affiliate shall not be eligible to receive Stock
Incentives under the Plan."
3. By deleting Plan Section 3.2(a) in its entirety and by substituting
therefor the following:
"(a) Option Price.
(i) Subject to adjustment in accordance with Section 5.2
and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of Stock purchasable under any
Option shall be as set forth in the applicable Stock Incentive
Agreement. With respect to each grant of an Option to a
Participant, the Exercise Price
<PAGE>
per share shall not be less than its Fair Market Value on the
date the Option is granted. Notwithstanding the immediately
preceding sentence, with respect to each grant of an Incentive
Stock Option to a Participant who is an Over 10% Owner, the
Exercise Price per share shall not be less than 110% of its Fair
Market Value on the date the Option is granted.
(ii) For purposes of this Section 3.2(a), the Fair Market
Value of the Stock shall be determined (1) as of the date all of
the material terms of an Option are determinable, or (2) if the
Option is awarded pursuant to a formula under a then existing
program established by the Committee, as of a date no earlier than
the later of sixty (60) days prior to the date all of the material
terms of the Option are determinable or sixty (60) days following
the date the program is established.
(iii) Notwithstanding any other provision of this Section
3.2(a), the Committee may continue to maintain the existing
Management Stock Option Program as in effect on September 30, 1999
or in any modified form; provided, however, that no such modified
form shall contain pricing terms more favorable than those as in
effect under the Management Stock Option Program on September 30,
1999.
(iv) Notwithstanding any other provision in the Plan,
following the grant of an Option, no amendment shall be made to
reduce the price of the Option, except an adjustment as described
in Section 5.2, without the prior approval of the stockholders of
the Company."
4. By deleting Section 3.4 in its entirety and by substituting
therefor the following:
"3.4 Terms and Conditions of Stock Awards.
(a) The number of shares of Stock subject to a Stock
Award and restrictions or conditions on such shares, if any, shall
be as the Committee determines, and the certificate for such
shares shall bear evidence of any restrictions or conditions.
Subsequent to the date of the grant of the Stock Award, the
Committee shall have the power to permit, in its discretion, an
acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares awarded to
a Participant. Subject to Subsections (b) and (c) below, the
Committee may require a cash payment from the Participant in an
amount no greater than the aggregate Fair Market Value of the
shares of Stock awarded determined at the date of grant in
exchange for the grant of a Stock Award or may grant a Stock
Award without the requirement of a cash payment.
(b) Any Stock Award containing forfeitability provisions
shall vest over a period of no less than three (3) years.
(c) Any Stock Award that does not contain forfeitability
provisions shall be granted only in lieu of salary or cash bonus
otherwise payable to a Participant and may be
2
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<PAGE>
granted at up to a fifteen percent (15%) discount to the Fair
Market Value of the Stock as of the date of grant only if the
Stock is subject to material restrictions on transferability."
5. By deleting Section 5.8 in its entirety and by substituting
therefor the following:
"5.8 Termination and Amendment of the Plan. The Board of
Directors may, at any time, amend or terminate the Plan without
stockholder approval; provided, however that the Board of Directors
shall condition any material amendment on the approval of the
stockholders of the Company. No such termination or amendment
without the consent of the holder of a Stock Incentive shall
adversely affect the rights of the Participant under such Stock
Incentive."
Except as specifically provided herein, the Plan shall remain in
full force and effect as prior to this Third Amendment.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to
be executed on the day and year first above written.
RUBY TUESDAY, INC.
By: /s/ SAMUEL E. BEALL III
Samuel E. Beall, III
Chairman and Chief Executive Officer
Attest:
By: /s/ DANIEL T. CRONK
Daniel T. Cronk
Secretary
[CORPORATE SEAL]
3
</PAGE>
SEVENTH AMENDMENT TO THE RUBY TUESDAY, INC.
EXECUTIVE SUPPLEMENTAL PENSION PLAN
THIS SEVENTH AMENDMENT is made as of this 19th day of June,
1999, by RUBY TUESDAY, INC. (the "Primary Sponsor"), a corporation
organized and existing under the laws of the State of Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Ruby Tuesday, Inc.
Executive Supplemental Pension Plan (the "Plan"), which was established
by indenture effective as of June 1, 1983, and which was last amended and
restated by indenture effective June 1, 1986.
WHEREAS, the Primary Sponsor desires to amend the Plan to
provide an enhanced early retirement benefit opportunity to one or more
employees as may be designated from time to time by the Board of
Directors of the Primary Sponsor.
WHEREAS, the amendments effected hereby have been approved by
the Board of Directors of the Primary Sponsor.
NOW, THEREFORE, the Plan is hereby amended, effective as of
June 19, 1999, as follows:
1. By adding new Section 2.01(c1), as follows:
"(c1) The term `Cause' shall mean, with respect to a Subsection
(c) Participant's termination of employment with the Company
or any of its subsidiaries:
(1) the Participant's conviction of a felony;
(2) conduct by the Participant constituting a willful
refusal to perform any material duty assigned by the
Board;
(3) conduct by the Participant that amounts to fraud
against the Company or any entity which is controlled
by or is under common control with the Company;
(4) a breach of the terms of any employment agreement
between the Participant and the Company or any entity
which is controlled by or is under common control with
the Company; or
(5) conduct by the Participant that amounts to willful
gross neglect or willful gross misconduct resulting in
material economic harm to the Company or any entity
which is controlled by or is under common control with
the Company."
<PAGE>
2. By redesignating existing Section 2.01(f1) as Section 2.01(f2) and
by adding new Section 2.01(f1), as follows:
"(f1) The term `Disability' shall mean the total inability of
the Participant to perform his duties for the duration of the
short-term disability period under the Company's short-term
disability policy then in effect as certified by a physician
chosen by the Company and reasonably acceptable to the
Participant."
3. By deleting Section 2.01(k) in its entirety and by substituting
therefor the following:
"(k) The term `Participant' refers to any Eligible Employee upon
his entry into the Plan. An Eligible Employee shall become
a Participant as of the January 1st immediately following
the date the eligibility criteria stated in Section 2.01(h)
are satisfied. Upon retirement, termination of employment
or cessation of the accrual of Continuous Service in
accordance with Section 2.01(f), a Participant's status
shall become that of a former Participant. Except as the
context may otherwise require in Section 4.02, the term
'Participant' shall encompass any Subsection (b) Participant
and any Subsection (c) Participant."
4. By deleting Section 4.02 in its entirety and by substituting
therefor the following:
"4.02 Early Retirement.
(a) Actuarially Reduced Early Retirement Benefit. Before a
Participant is eligible for normal retirement pursuant to
Section 4.01 above, the Participant may retire from service
with the Company or any of its subsidiaries prior thereto and
commence receiving benefits pursuant to this Subsection (a)
if the Participant has attained age 55 while in the service
of the Company or any of its subsidiaries. The Accrued
Benefit determined under Section 3.01, but payable pursuant
to this Section 4.02(a), shall be reduced by multiplying the
Accrued Benefit amount by the applicable early retirement
reduction factor indicated in the table below:
Number of Years until Eligible
For Unreduced Retirement Benefit Early Retirement Factor
1 .93
2 .86
3 .79
4 .72
5 .65
6 .62
7 .59
8 .56
9 .53
10 .50
2
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<PAGE>
(b) Unreduced Early Retirement Benefit. A Participant
identified in Appendix B to the Plan, as Appendix B may be
amended from time to time by action of the Board (a
Participant so identified on Appendix B is referred to
hereafter as a `Subsection (b) Participant') may retire from
service with the Company or any of its subsidiaries prior to
reaching his Normal Retirement Date and commence receiving
benefits from the Plan pursuant to this Section 4.02(b) if:
(i) the Subsection (b) Participant attains age 60 prior to
termination of employment from the Company or any of
its subsidiaries; or
(ii) at the time of retirement from service with the
Company or any of its subsidiaries, the Subsection (b)
Participant is at least age 55 and the sum of the
Subsection (b) Participant's age and years of
Continuous Service equals or exceeds ninety (90)
(referred to herein as the "Rule of 90").
The Accrued Benefit, as determined in Section 3.01, but
payable pursuant to this Section 4.02(b), will not be subject
to actuarial reduction.
(c) Special Early Retirement Benefit. A Participant
identified in Appendix C to the Plan, as Appendix C may be
amended from time to time by action of the Board (a
Participant so identified on Appendix C is referred to
hereafter as a `Subsection (c) Participant') may retire from
service with the Company and its subsidiaries prior to
satisfying the Rule of 90 and commence receiving benefits
from the Plan pursuant to this Section 4.02(c) if the
Subsection (c) Participant (i) is involuntarily terminated
(other than for Cause) by the Company and its subsidiaries;
or (ii) experiences a termination of employment from the
Company and its subsidiaries due to a Disability.
The Accrued Benefit, as determined in Section 3.01, but
payable pursuant to this Section 4.02(c), will be either:
(1) determined without the actuarial reduction provided for
in Section 4.02(a) with such Accrued Benefit payable
commencing as of the date the Subsection (c) Participant
would have satisfied the Rule of 90 had his employment not
terminated; or (2) multiplied by the reduction factor of .93
with such adjusted Accrued Benefit payable commencing at age
55. A Subsection (c) Participant may elect whether payment
shall be made pursuant to Clause (1) or (2) of the
immediately preceding sentence, if the Subsection (c)
Participant irrevocably so elects in writing at least one (1)
year prior to the date that the Accrued Benefit becomes
payable. If the Subsection (c) Participant fails to make a
timely election as so provided in the immediately preceding
sentence, payment shall be made pursuant to Clause (1) or (2)
as elected by the Participant, but only with the approval of
the Chairman of the Compensation and Stock Option Committee
of the Board or the approval of a majority of the members of
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<PAGE>
either the Board or the Compensation and Stock Option
Committee of the Board present at a meeting duly called and
convened at which a quorum is present.
In determining any Accrued Benefit under this Section 4.02, the
amount of any offset under Section 3.01(C) shall be calculated as
the retirement benefit payable in the form of a single life annuity
to the Participant under the Morrison Restaurants Inc. Retirement
Plan at the Participant's Normal Retirement Date (as defined
therein). Any amounts that become payable pursuant to Section
4.02(c) to a Subsection (c) Participant who experiences a
termination of employment due to a Disability shall be reduced by
the amount of disability payments actually paid to the Subsection
(c) Participant under a long-term disability plan maintained by the
Company or any of its subsidiaries. Such offsets shall occur only
as and when disability payments are paid to the Subsection (c)
Participant by the insurer of the disability benefits so provided;
provided, however, that if the Subsection (c) Participant's Accrued
Benefit is paid in the form of a lump sum, there shall be no offset
applied on account of the receipt of disability benefits."
5. By deleting second paragraph of Section 5.02 in its entirety
and by substituting therefor the following:
"A benefit payable under the Plan shall be paid in the same form
and at the same time as any retirement benefit payable to the
Participant under the Morrison Restaurants Inc. Retirement Plan.
If a Participant does not have an accrued benefit under the
Morrison Restaurants Inc. Retirement Plan, the benefit payable
under the Plan shall nevertheless be subject to the same
distribution rules as provided under the Morrison Restaurants Inc.
Retirement Plan, as the same may be amended from time to time;
provided, however, that the selection of the form and timing of the
benefit shall be subject to the approval of the Company. Except as
otherwise expressly provided herein, if a benefit payable under
this Plan is paid other than as a life annuity, the amount of the
benefit when paid in such other form shall be determined by using
the then applicable actuarial equivalence factors of the Morrison
Restaurants Inc. Retirement Plan."
"Notwithstanding the foregoing, the Accrued Benefit of a Subsection
(c) Participant may be paid in a lump sum. In determining the
amount of the lump sum payment, the Accrued Benefit shall be
discounted by the then current FAS 87 discount rate and by applying
the applicable FAS 87 mortality table. The Accrued Benefit of a
Subsection (c) Participant will be paid in a lump sum (1) if the
Subsection (c) Participant irrevocably elects in writing to receive
a lump sum payment from the Plan at least one (1) year prior to the
date that the Accrued Benefit becomes payable; or (2) if the
Subsection (c) Participant fails to make a timely election as
provided in Clause (1), with the approval of the Chairman of the
Compensation and Stock Option Committee of the Board or the
approval of a majority of the members of either the Board or the
Compensation and Stock Option Committee of the Board present at a
meeting duly called and convened at which a quorum is present."
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<PAGE>
6 . By deleting Paragraph (1) of Section 8.05 in its entirety and by
substituting therefor the following:
"(1) If to the Company, in care of its Chief Financial Officer,
150 West Church Avenue, Maryville, Tennessee 37801."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this Seventh Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
Seventh Amendment to be executed as of the day and year first above
written.
RUBY TUESDAY, INC.
By: /s/ SAMUEL E. BEALL III
[CORPORATE SEAL] Samuel E. Beall, III
Chairman and Chief Executive Officer
ATTEST:
/s/ DANIEL T. CRONK
Daniel T. Cronk
Secretary
5
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APPENDIX C
The following person(s) have been designated as "Subsection (c) Participant(s)":
Samuel E. Beall, III
